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Can we still go green as we head for the red?
The environmental organisation has suggested that companies who fail to tackle climate change could be taking a hit on the value of their business. It reckons that while firms could boost their market value by taking steps to tackle emissions, there are risking potentially hefty losses if they don't. With a shift in regulation around the corner, it's probably true. Trouble is, will anyone be listening?
The Kyoto protocol is set to change next year, which may force companies to take climate change more seriously if they want to avoid falling foul of legislation. This means that, to compound the pressure that many businesses are experiencing right now - of getting hammered by loss of credit and consumer confidence - they may soon be taking a beating from failing to do their bit to save the planet too. It's like watching an unemployed banker carrying his possessions home in a box, and then having a go at him for not recycling the cardboard.
The Carbon Trust's research, which covered firms worth £3.8trillion globally, looked at six sectors of the economy - including car manufacturing, brewing and consumer electronics, and concluded that automotive firms stood to gain the most by adopting greener strategies, in its case hybrid and electric technology. But the car sector also risked the taking the biggest hit if they failed to make the changes needed to meet ever more ambitious emissions targets.
It's a good time for the Carbon Trust to point this out. As we head into what looks like a recession, profit boosting (and avoiding losses) sits very much at the top of the business agenda. Anything that can help is probably worth a punt. Trouble is, the whole CO2 issue is still contentious. While most companies have now jumped on the bandwagon, few people seem to know exactly where it's heading. Companies may be looking to boost profit and cut costs in much more tangible ways. When you're trying to put food on your employees' table, noble tasks like saving the planet from a distant apocalypse unfortunately tend to take a backseat. And any changes based on legislation will be met with a grumble.
Bruce Duguid, head of investor engagement at the Carbon Trust said: ‘The financial risks of inaction are just too vast to ignore.' That may be so. But is the financial reality of the next few months going to make them even harder to stomach?
Comments
Jeremy Hammant - 22-Sep-08
Whilst there is agreement on the impact of carbon emissions on climate change the science of emissions calculations still leaves a lot to be desired - with numerous "standards" and no agreed methodology for defining the scope of measurement (where the supply chain starts and finishes, how to account for the carbon emissions from existing infrastructure etc). The impetus for the development of supply chain management was the awareness that local optimisation often resulted in a suboptimal total supply chain performance. The same is true for environmental performance improvements in supply chains. The national target is to reduce emissions by 60% by 2050. In order to meet this target business leaders talk about "Plan A because there is no Plan B". But the unanswered question is how will "Plan A" deliver the emissions target whilst enabling businesses to continue to deliver shareholder value?
Organisations need to be able to confidently identify their current carbon footprint and then develop reduction strategies based on a firm understanding of the cost vs carbon trade-off. This is critical for the success of any carbon reduction programme as I believe that the most effective way of approaching carbon management is to apply business principles to the environment, not environmental principles to business.
Jeremy Hammant, Partner, LCP Consulting
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