As awareness of global heating rises, so does scrutiny of businesses’ climate footprint.
Public perception of a brands’ climate impacts has moved up companies’ agenda, and for a good reason: if firms continue to operate at the expense of planet and people, they risk going out of business, new public opinion research released last week shows.
Companies that fail to become carbon neutral within this decade will fall behind their competitors as soon as 2030 as governments adopt more stringent emissions regulations and consumer expectations grow, believes the majority of sustainability experts polled for the study titled The Climate Decade: Ten Years to Deliver the Paris Agreement.
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A lack of progress on corporate emissions targets could mean businesses will suffer a declining reputation among investors and customers, financial vulnerability and lack of access to capital, shows the report, by Toronto-headquartered research consultancy GlobeScan and international strategy consultancy SustainAbility.
The 550 experts surveyed from the worlds of business, government, non-governmental organisations and academia in 70 countries still see national governments as performing the most important role, but they are closely followed by companies and investors.
Expectations of companies, and indeed of those who regulate them, are reaching new highs.
Eric Whan, director, GlobeScan
“Our latest research confirms that the expectations of companies, and indeed of those who regulate them, are reaching new highs. The pressure is on for 2020, and experts are pointing fingers at both good and bad,” said Eric Whan, director at GlobeScan.
The study identifies several companies that experts recognise as corporate role models—based on the ambition of sustainability and climate targets, scale of effort and climate-saving technological solutions, among others—with consumer goods giant Unilever topping the list, followed by other consumer-facing and tech firms which include Patagonia, Tesla, IKEA and Google.
“Today, corporate climate action is fast becoming a requirement,” said Wander Meijer, director at GlobeScan. “More and more governments introduce regulations and consumers are asking for it. Rather than being reactive, it is better to have a plan and be prepared. The longer companies wait, the more costly it will get to shift to more sustainable practices later.”
Only two per cent of experts surveyed believe there will be no negative financial consequences of corporate climate inaction, the study shows.
Besides pressure from governments and consumers, firms need to worry about brand appeal internally.
“Employees increasingly expect their companies to help tackle climate change. If they fail to act, these companies might face difficulties as they look to attract or retain top talent,” Meijer told Eco-Business.
Across industries, corporate climate action is already gaining momentum. RE100, a club of firms committed to powering their entire operations with renewables that has been joined by over 200 companies globally, including Apple, DBS, Decathlon, Dell, Facebook and H&M, is only the latest example of corporate climate initiatives.
But in climate-vulnerable Asia, companies are dragging their heels on climate action.
The vast majority of Southeast Asian banks, for instance, continues to ignore climate change threats in their lending portfolios. Only a handful of Asian banks in Singapore, Japan and Hong Kong have moved to quit coal power lending.
Recently, Singapore property giant City Developments Limited (CDL) was the only Southeast Asian company recognised for its efforts to cut emissions in a corporate climate action ranking by international non-profit CDP, formerly known as the Carbon Disclosure Project.
Averting climate catastrophe that will impact the cost of doing business is reason enough for climate action, but, increasingly, there is a business case for doing so.
As the costs of wind and solar drop, sourcing clean energy could eventually save companies money, while genuine sustainability initiatives have marketing potential through which corporates could show their values align with those of climate-aware customers.
To shrink their environmental footprint, firms can source renewable power, ramp up energy efficiency, electrify logistics, divest fossil fuel assets, cut water use or adopt circular business models to reduce raw material consumption.
Companies are also increasingly expected to advocate for climate change policies, support large-scale reforestation and influence consumer sustainability, reads the new report.
The fallout of lacking corporate sustainability strategies is already impacting businesses today. Three years ago, American consumer goods firm Kraft Heinz was rebuffed in its bid to buy Unilever, and part of the reason was Unilever’s concerns over Kraft Heinz’s poor sustainability performance, Meijer noted.
“Companies need to position themselves as sustainability leaders today. They need clear targets and tangible impacts. It is important to set a roadmap, communicate it to your stakeholders and be transparent about it as you reach the different milestones,” he said.