A recent survey of corporate executives published in the latest McKinsey Quarterly indicates that though climate change is considered important and awareness is high, relatively little is being done in terms of building climate change mitigation, energy usage and emissions reduction into corporate decision-making or operational processes. And yet while a large majority expect some form of regulation coming in their home countries, one-third see opportunities and risks equally balanced and more than one-third believe the effect on profits will, to varying degrees, be positive on the whole.
Sixty percent of respondents view climate change as an important consideration in determining overall strategy and nearly 70% consider it important for managing corporate reputation and brands. Yet 44% responded that climate change isn’t a significant item on their agendas. Moreover, many stated that their companies consider climate change only occasionally when managing corporate reputation and brands, developing new products or even managing environmental issues, according to the report.
Climate Change & the Corporation
McKinsey surveyed global executives from a range of industries in compiling the report. Forty percent were split evenly between finance and manufacturing and another 8% work in energy, transport or mining.
Of the 60% that say climate change is an important factor in making overall corporate strategy, most of those who responded thus are in Asia (71%), China (68%) and Europe (65%).
Corporate reputation, media attention to climate change and customer preferences were cited most frequently as influencing factors among companies that take climate change into consideration.
Nearly 70% of respondents say that climate change is somewhat or very important in managing corporate reputation and brands. A majority say that climate change is a somewhat or very important factor when considering environmental management, developing new products and planning investments. Nearly half said that this is also true for purchasing and supply chain management.
Climate change is emphasized at only 29%, however. Energy company execs, those working for publicly owned companies and companies with revenues greater than $1 billion are likewise more likely to say so, according to the survey. Yet 36% said that their companies seldom or never account for climate change when making strategy, and 40% say their companies seldom or never account for it when developing new products, planning investments, developing regulatory strategy or in purchasing.
While equal percentages of respondents reported that either C-level executives, corporate level strategists or business unit or functional managers were responsible for climate change issues, the majority also said that their companies didn’t employ organizational performance targets related to climate change. More than 70% said that their companies don’t include formal targets in relevant executives’ performance dialogues or reviews.
Moreover, few companies set emissions targets. More than 60% of respondents working for companies consider environmental management at least somewhat important say that their companies haven’t set greenhouse gas emissions targets; another 15% do not don’t know if their companies do or don’t.
Nonetheless, more than half said that their companies take climate change into consideration somewhat well at best, and more than one-third believe the effects of climate change policies, regulations and other initiatives will be somewhat or very positive should their companies continue to manage them as well as they do today.
About one-third of respondents see climate change as representing an equal balance of opportunities and risks versus being skewed to one side or the other. Sixty-one percent view associated issues as having a positive effect on profits if managed well.
More than 80% expect climate change regulation in their home countries within five years, and relatively few think that any such actions will prompt responses on their organizations’ part – up and moving operations, for instance.
Six out of ten expect new technical standards related to climate change coming. Nearly five in ten expect to see either a carbon cap-and-trade system or carbon tax. Whatever comes, there was broad agreement that the effects would be negative, though a larger percentage – some 40% – expect there will be no material effect.