- On average, companies in Germany and Europe earmark more than a quarter of their total investment portfolio (CAPEX) for environmental sustainability investments in 2023
- Only about a quarter of increasing expenditure in the sustainability area can be passed on to customers – making government subsidies more important
Against the backdrop of scarce resources, tightening regulatory requirements and progressive climate change, greater corporate commitment to sustainability is crucial throughout Europe. Accordingly, investments in this area are increasing, as a recent pan-European survey of 150 top executives conducted by the management consultancy Horváth shows. According to the study, more than a quarter of total investments in 2023 are earmarked for sustainability (27 percent). This is an increase of 16 percent compared to the previous year. Large companies with annual sales of at least five billion euros increased the share by 20 percent.
Broken down by region, almost two-thirds of the investments in sustainability made by European companies remain in the European market (63 percent). The companies still have to cover the increasing expenditure in the sustainability area themselves, because according to the respondents, a maximum of one-third of these costs can be passed on to end customers, depending on the industry. For this reason, the companies are making use of all subsidy options. Across all industries, around 80 percent state that they are aware of all the sustainability subsidies available to them and that they check them in advance for specific projects. Seven out of ten European companies also deliberately cooperate with partners to fully exploit subsidy options.
Customers' willingness to pay is underestimated
"Investments in sustainability do not pay off immediately, but customers' willingness to pay for an increase in sustainability is often underestimated – fluctuations in energy prices in particular have shown that increased costs can be passed on to a significant extent," says Matthias Deeg, Partner and Green Transformation expert at Horváth. According to Matthias Deeg, industrial companies have an advantage that they should and can exploit: their customers' dependence on raw materials and supplies. Moreover, the investments pay off directly into the future viability of the companies: "The competition for sustainable procurement sources, technologies and partners has long since begun. Those who act hesitantly now will lose out later," says Matthias Deeg. "We expect a clear signal from the EU following the U.S. Inflation Reduction Act. This is where the Net Zero Industry Act is expected to provide the greatest leverage for the Green Deal in Germany and the EU."
Innovative lead is important motive for ecological commitment
Many companies have now recognized that a head start in sustainability can bring enormous competitive advantages. When asked about the most important motives for their ecological sustainability commitment, the aspect of "new impetus for innovations and future technologies" is already in third place behind an improvement in energy efficiency and the idealistic goal of "preserving habitats". The motivation is different for companies in the food, retail and consumer goods sector. Here, meeting customer expectations ranks first among the motives. "The activities in the consumer goods sector are diverse. While large retail chains and consumer goods manufacturers are very active in the area of sustainable products as well as logistics chains and energy supply, many other market participants are rather cautious due to current low margins and only implement what is necessary," says Horváth expert Matthias Deeg.
About the study
For the current Horváth study "Investing in Sustainability", 150 top managers throughout Europe were surveyed, 100 of them from Germany. The managers come from companies with at least 100 million euros in annual sales, across all industries. The interviews were conducted in December 2022.
