There’s a growing sense that we have reached a tipping point on corporate action on climate change. It has become a global issue. Briefing provides an outline of what’s been in the news.
As we go to press, the UN Climate Change Convention is meeting in Kenya, struggling to find a post-Kyoto framework that includes countries such as China and India. Tackling global warming clearly goes beyond the capacity of any one government. So what hope for any one company or indeed one function within a business trying to get the attention of colleagues?
Well, two developments give us some cause for optimism at Briefing – where assiduous readers will know our line has long been: “It’s the consumer, stupid!” By that we simply mean, NGOs and politicians who love to beat up on companies should recognise companies respond to market signals. Ultimately, it’s not Exxon or BP that are causing global warming, but their customers who buy and burn their products.
So, it’s good that the first significant shift is observable in the market place, where these big global sustainability issues are now seen as a current commercial opportunity, not just a doom-and-gloom theoretical risk. This is evidenced in the consumer products we report above – and also in big names like DuPont following in the steps of GE and identifying whole new segments of business built on sustainability issues; in DuPont’s case $6bn annually. The second significant shift we’ve spotted in the last six months or so is the number of CSR managers reporting that their colleagues in marketing or senior management are saying, really for the first time “we’re not good at this, are we? We’ve not got our act together. We really need to up our game”. (CSR managers could be forgiven a weary exclamation:”That’s what I’ve been trying to tell you for years!”)
So we think we’ve reached a tipping point on corporate action. That said, if countries like India and China don’t come on board, individual companies are just moving the proverbial deckchairs on the Titanic. Back to Kenya, then, and the need for governments to get the framework right.
RELATED NEWS
Billions in change
Business opportunities arising from global warming could be worth £30bn by 2010, according to a new report, Opportunities for Innovation: The business opportunities for SMEs in tackling the causes of climate change. Commissioned by Shell Springboard, the company’s funding programme for
low-carbon ideas, the report encourages SMEs to take advantage of the business opportunities offered by the movement to resist global warming.
The authors of the report suggest that a series of prizes could provide incentives for innovation. Modelled on the Longitude Prize – which was established by parliament in 1714 and was a prize offered for the precise determination of a ship’s longitude – businesses would be encouraged to find solutions to particular technical problems. James Smith, chairman of Shell UK said: “Our small businesses and the scientific depth in our universities are going to be vital contributors.” Vivid Economics carried out the research for Shell Springboard. www.vivideconomics.com
Plane policies
Unless the UK changes its attitude toward air travel, it will not meet its goals on climate change, according to a damning report by researchers at Oxford University – Predict and Decide: Aviation, Climate Change and UK Policy.
Even though the government has pledged to cut 60% of carbon emissions by 2050, the expansion of airports and the Aviation White Paper undermine this, the report said. The white paper aims to more than double passenger movements by 2030. Aviation accounts for 6% of national carbon emissions and the amount is on the rise.
Brenda Boardman, project leader at the Environmental Change Institute at Oxford, said: “The government has to confront the contradictions in its policies. Unless the rate of growth in flights in curbed, the UK cannot fulfil its commitments on climate change.” The government has defended itself by citing its push to have aviation included in the EU Emissions Trading Scheme. But the report authors believe that taxing passengers is the quicker and more efficient way. www.eci.ox.ac.uk/index.php
Companies fail to control their carbon
Most of the world’s 500 biggest companies do not have any target-focussed programme in place to reduce their carbon emissions, according to a new report by the Carbon Disclosure Project. CDP Report 2006: Global FT500 found that the worst performers were PepsiCo, Nintendo, AmericanExpress and BAESystems. Awareness levels were high, but that this was not matched with action, which would require better risk management for companies. For investors it means integrating climate risk research into stock selection and portfolio construction.
“Awareness alone will not drive the changes in investment and corporate strategy needed if disastrous climate change is to be avoided. For that investors will have to put the CDP data to work,” said James Cameron, chairman of CDP. 360 companies provided information in the study: 87% acknowledged the risk of climate change but 52% had not set targets to minimise this risk. Honda, Apple, GoldmanSachs, Google and Kellogg were among the 140 businesses that did not provide any data. CadburySchweppes and HSBC were among the top performers in their sectors. www.cdproject.net
Climate offsets
EDF Energy, the domestic energy supplier owned by EDF of France, is offering its customers the chance to be carbon neutral through its climate balance tariff. Customers will pay about £40 more each month to offset their carbon emissions. EDF will then invest this money in carbon-reduction projects around the world.
The Co-operative Group has also joined the movement by becoming the first high-street retailer to offer carbon offsetting to customers. Its Travelcare outlets are offering carbon offsets on flights. The cost of offsets depends on the distance travelled and all the payments will go towards supporting the group’s climate care projects. But environmental groups are starting to feel uneasy about the efficiency of carbon-offset schemes. Mike Childs, head of campaigns at Friends of the Earth, said: “If companies are genuinely concerned about climate change they should focus their attention on cutting their emissions and using clean sources of energy.” Lack of regulation was highlighted when Scottish & Southern Energy was ordered to stop distributing leaflets outlining its carbon-offset project. www.edfenergy.com; www.co-op.co.uk
B&Q boosts energy saving
Taking action in the home has been made easier, thanks to B&Q, the home improvement and garden centre owned by Kingfisher. B&Q has made it possible to buy solar panels, wind turbines and other energy saving products off the shelf. Ian Cheshire, chief executive of B&Q, said: “People are still unclear of the benefits of using energy-efficient products, particularly in generating savings, so we’ve provided an accessible energy efficiency guide to help answer questions and provide helpful advice and information in stores, making it easier for them.” www.diy.com
Climate risks for insurers
The insurance industry needs to take significant action to combat climate change. Such is the verdict of Climate Change and Insurance: An Agenda for Action in the United States that was published by the insurance provider Allianz Group and the WWF. Climate change alters global weather patterns and could result in damage such as that seen during Hurricane Katrina, holding massive consequences for insurance providers. Through the report, the WWF and Allianz plan to engage the industry, governments and others to manage the effects of climate change.
Insurance companies that have already taken action are Travelers, which offers owners of hybrid cars a 10% discount, Fireman’s Fund (a unit of Allianz) will cut premiums on buildings that emit fewer greenhouse gases and will also suggest that damaged buildings are repaired using ‘greener’ materials, and Marsh, which is offering a programme at Yale University that will teach directors how to manage
the risks. www.dgardiner.com
Climate Change Bill
The UK government announced on November 15 a set of measures designed to put in place a long-term target for carbon dioxide emissions reduction. The Climate Change Bill, announced by the Queen in her speech to parliament, is designed to address the issues raised by economist Nicholas Stern in his October 30 report. It will:
put the government’s long-term goal to reduce carbon dioxide emissions by 60% by 2050 into statute
establish an independent body – the Carbon Committee – to work with government to reduce emissions over time and across the economy
create enabling powers to put in place new emissions reduction measures needed to achieve our goals
improve monitoring and reporting arrangements, including how the government reports to parliament
David Miliband, environment secretary, said that the legislation outlining a long-term goal and the framework for achieving it provided business with certainty over this government and future government’s intentions. Miliband was taking part in the UN climate change conference in Kenya.
Critics said the bill will be ineffectual without a commitment to annual reductions in emissions. It was reported that almost two-thirds of MPs, including more than 200 from Labour, signed an Early Day Motion calling for targets to be set on an annual basis.
The Stern Review concluded that climate change has potentially large and irreversible effects. Stern found that the cost of mitigation will be lower than the cost of inaction, outlining the expected cost of cutting emissions consistent with a 550 parts per million CO2 emissions prediction for 2050 would be 1% of GDP. Mitigation could also lead to business opportunities in the field of renewable energy and other carbon-reducing technologies. www.defra.gov.uk; www.sternreview.org.uk
Climate Change in Brief
Yale is to offer training to company directors in the potential business risks and opportunities posed by climate change. Marsh, a risk and insurance services firm, Yale University and Ceres, are teaming up to offer expertise in the field of global warming. http://environment.yale.edu/climate/
The Trucost Carbon Counts Awards acknowledged the most carbon-efficient investment funds in the UK in September. The main UK investment and mutual funds are ranked according to the carbon intensity of the investments they make. Scottish Widows Investment Partnership, Lazard Investment Fund as well as Norwich Union’s UK Growth Fund and Standard Life’s UK Ethical Fund were among the winners. www.trucost.com
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