Rather than waiting for regulatory conditions to solidify, leading companies are taking their cues from the market by investing in climate change initiatives, reporting on their performance and leaning on their supply chains to reduce emissions.
Those are some of the dominant themes of a new survey from Ernst & Young on C-suite attitudes toward climate change. The report, Action Amid Uncertainty: The business response to climate change, probed 300 global executives from corporations with annual revenue of $1bn or more on how they are responding climate challenges.
"Why would companies be increasing their spend in this uncertain regulatory environment?" said Steve Starbuck, Ernst & Young's Americas leader on climate change and sustainability services. "The point is that even without carbon legislation of any kind in the US and it delayed globally, they're still taking action because of initiatives that are going to help their bottom line and help them manage risks."
The survey found that 70 per cent of these executives from 16 countries and 18 different industry sectors intend to increase investment in climate change initiatives such as energy efficiency and product development over the next two years. For nearly half of those in the survey, the expenditure will equal between 0.5 per cent to more than five per cent of their revenue.
Ernst & Young conducted the survey to gain an understanding of how executives view the current environment around climate change and learn about the overall climate change frameworks in place at their companies.
It discovered five factors driving climate change initiatives that respondents rated higher in importance than regulation: energy reduction, changing consumer demands, the development of new products or services, competitive threats, and stakeholder expectations.
"Even with the uncertain regulatory environment, it's not the threat of reg ulatory actions, but actions that are going to make them money, save them money, helps them stay relevant to customers, and avoid risk," Starbuck said in a phone interview Monday.
Interestingly, companies are increasing viewing their supply chains as attractive opportunities to reduce emissions. Thirty-six percent of respondents said they were working directly with suppliers with the expectation that they would reduce their carbon footprint, while another 30 per cent have started discussing climate change initiatives with their suppliers.
"Customers are putting pressure on their suppliers to reduce the carbon content and the energy costs that are built up in the entire supply chain," Starbuck said.
Interestingly, 43 per cent of respondents believe that equity analysts are including climate change factors in their valuations; thirty per cent anticipate climate change factors to find their way in these analyses in the next five years.
And highlighting the need for reporting and transparency among companies, although 40 per cent of those in the survey called themselves industry leaders for their climate change performance, only 28 per cent admitted they benchmark their performance against their peers.
Other findings include:
• Thirty per cent of companies have an individual managing their climate change initiatives full-time.
• Climate change governance rests with C-suite executives or board members for more than 90 per cent of respondents.
• Just one per cent of respondents said they would slow down their climate change initiatives following the less-than-hoped-for result from the Copenhagen climate change conference, compared to 66 per cent who said they would continue with their existing strategy, and 31 per cent that said investment would increase.
• More than 70 per cent expect that executing their climate change strategies, creating climate goals, and climate governance would be c hallenging.
• Nearly two-thirds of respondents communicate their greenhouse gas emissions data in an annual sustainability report. Of those, 62 per cent have data verified by a third-party to meet increasing demands for transparency.
