As the Copenhagen climate talks approach, the opportunities and liabilities around climate change are evident
Despite the economic climate, corporate response to climate change has grown slightly from 2008 to 2009. Numerous organizations are using emission reduction goals as an opportunity to differentiate themselves from the competition, lower costs, and lure investors.
“There’s an increase in companies that are seeing opportunities instead of risk around climate change,” says Sonal Mahida, Vice President of the Carbon Disclosure Project (CDP). “We are seeing this trend globally.” Excelling in the area of climate change mitigation can offer a strategic edge.
“The global recession has provided good opportunities for companies to recover consumer trust and investors’ confidence by reducing their climate change impact,” says Mark Robertson, Communications and Development Manager, Experts in Responsible Investment Solutions (EIRIS). “The economic downturn brings a number of risks and opportunities. There are risks associated with near-frozen capital markets as well as uncertainty and opportunities linked to government stimulus packages focused on energy efficiency, cleaner technologies, renewable energies, taxation, and forest protection.”
EIRIS released a report entitled Climate Change Compass: The Road to Copenhagen in August 2009, which examines the 300 largest global companies and their response to climate change. The findings indicate that many companies do have a commitment to mitigate climate change, but often lack strategy or specific emission targets, particularly in companies classified as having a high or very high climate impact.
Among these companies, 99% have a climate change commitment, up f15% from 2008. Only, 55% however have short-term targets for greenhouse gas emissions, up 7% from 2008.
In many cases, an inventory of emissions opens the door for effective mitigations strategies to follow. It is an effective first step in developing a climate change strategy.
“Measurement of emissions leads to management,” says Mahida. “It is very difficult to manage your climate change risks, opportunities and emissions if you don’t know exactly what they are.”
This is an area where the majority of the global 300 excel. Of high and very high impact companies, 91 percent disclose absolute greenhouse gas or carbon dioxide emissions, up from 73 percent in 2008. Less than 12 percent of the global 300 have no or limited disclosure on climate change, down from 29 percent in 2008. In addition, almost half of the companies analyzed use an external source to verify disclosed data. Once quantitative data has been collected, opportunities can be prioritized.
A good first initiative for a climate change strategy in many cases is energy efficiency. “Emissions are often driven by energy use,” says Mahida. “If you are cutting down emissions, very often you are cutting down your energy usage. There are very tangible cost savings attached to that.”
The business case for energy efficiency is compelling regardless of the cost of carbon, particularly for energy intensive industries. “If all your competitors are much more efficient, they’re going have better margins than you or have a better price point than you,” says Mahida.
Increasingly an affective climate change mitigation strategy and cost savings go hand-in-hand. Depending on the outcome of climate talks and legislation later this year, many companies that don’t take voluntary action may be saddled with a climate liability. During an economic climate that shuns risk, this impact looks less appealing than ever.