Companies are setting aside more budget for energy and environmental sustainability as investors, consumers and boards will only increase their expectations for these efforts. That’s just one of the findings of an innaugural survey from Honeywell — which will be shaped into a comparable quarterly index — out this week.
Survey results that will feed the Honeywell Environmental Sustainability Index show that companies are giving priority to making their operations less wasteful and they’re trying to broadly cut down on extraneous energy use. They’re still aiming for, though with less gusto than efficiency efforts, creating more recycling and circularity when it comes to operations, the findings show.
The report, which Honeywell
suggests is the first multi-industry and multi-regional index on corporate sustainability efforts, points to executive confidence about past progress toward “greener” operations, but less optimism about short- and long-term future goals. The survey queried 600 executives that are, or function as, sustainability officers.
Other reports, including a survey of board decision-making by PwC, revealed that near-term risks such as Russia’s invasion of Ukraine roiling energy markets
and nerves around inflation and recession mean some companies are putting climate-change efforts on the back burner, at least for now.
Read: A surge in coal and oil emissions was expected with Russia’s war and a COVID recovery — here’s what actually happened
Evan van Hook, chief sustainability officer at Honeywell, said it wasn’t clear in the Honeywell research if these specific factors clouded the outlook among respondents. But, he said, answers show that cost saving via energy efficiency can directly impact bottom lines, and that business leaders understand this.
“I think there’s sort of a progression from when you say, we are going to commit to sustainability targets because we feel very strongly that climate change is a very significant problem, and because customers are demanding it, or shareholders are demanding it, to a whole series of motivations that can be specifically tied to the economy,” he told MarketWatch.
“Really interesting in the data was how much at present there’s a focus on behavioral and procedural changes… that can really drive very significant [cost] reductions,” he said. “The ROI on sustainability activities is very high because essentially most climate-related sustainability activities are offsetting energy costs.”
Darius Adamczyk, chairman and CEO of Honeywell, said the company is in a unique position to gauge the big questions on sustainability by its customers and the business community at large considering that last year, over 60% of its annual revenue was from business lines such as sustainability software, chemical catalysts that turn old plastic into new, electric battery breakthroughs and other instrumentation geared for environmentally-sound practices. Plus, approximately 60% of Honeywell’s R&D spend was directed toward ESG innovation. ESG is a broad label that includes Environmental, Social and Governance metrics, often lauded by corporations or investment management firms.
Notably, some two-thirds of the S&P 500
has set greenhouse gas (GHG) emission reduction targets to some degree, according to an August report from the Harvard Business Review.
Related: Honeywell has a mile-high use for the leftover ethanol as EVs replace gas cars
The Honeywell report revealed that 90% of respondents are generally optimistic about overall success with prior 12-month goals across sustainability categories including energy evolution and efficiency, emissions reduction, pollution prevention and circularity/recycling. However, forward-looking perceptions are less confident, with just 67% of respondents optimistic about achieving goals for the coming 12 months.
Additionally, only 63% are optimistic about achieving their goals by 2030, an anchor deadline year for regulatory reporting requirements. The Securities and Exchange Commission is deep into the approval process requiring more stringent climate risk data from publicly traded companies. And 2030 is the marker set by the Biden Administration for the U.S. to halve its total emissions across the economy, on the way to net-zero emissions by 2050.
Other findings in the survey:
Approximately 97% of organizations plan to increase current year budgets in at least one sustainability category with nearly three quarters planning to increase current year budgets in all four categories and just over a third expecting to increase budgets by over 50% in at least one category.
Respondents indicated prioritization, progress and optimism in reaching goals across four sustainability categories: energy evolution and efficiency, emissions reduction, pollution prevention and circularity/recycling. Improving energy evolution and efficiency was the top priority across all geographies, with 73% of respondents noting it as first or second priority. The lowest prioritization was given to circularity/recycling, with only 28% of respondents noting it as first or second in importance.
On average across all four sustainability categories, 62% of respondents noted they will achieve their goals for the next 12 months primarily by modifying or eliminating operational processes or business behaviors. Alternatively, only 16% noted they will achieve their near-term goals primarily through technology-driven changes such as upgrading or replacing existing systems with newer, more efficient or more sustainable technologies.
Honeywell itself committed in April 2021 to become carbon neutral in its operations and facilities by 2035 through a combination of further investment in energy savings projects, conversion to renewable energy sources, completion of capital improvement projects at its sites and in its fleet of vehicles, and utilization of credible carbon credits where needed.