A new survey from the Carbon Trust Standard Company indicates that climate change is still not seen as a strategic value driver by many finance heads.
The Carbon Trust Standard Company recently surveyed 200 UK finance heads to gather their views on the transition to the low carbon economy.
The survey focused on companies with at least 500 employees in the retail, professional services, financial services, technology, fast moving consumer goods and leisure and entertainment sectors.
The headline results were encouraging, with the majority of the respondents stating that they expect that their firms will have to report on their greenhouse gas emissions and pay for these emissions over time.
Yet, the study also indicated that finance heads seem singularly ill-prepared in terms of their understanding of the implications of these changes for their businesses.
For example, 64% of respondents stated either that their company did not have a corporate greenhouse gas emissions reduction target or that they did not know whether their company had such a target.
It was also striking that many saw climate change as tomorrow’s problem.
The UK government will shortly decide on whether or not to introduce mandatory reporting in 2012. We are just a few weeks away from the registration deadline for the Carbon Reduction Commitment (CRC) Energy Reduction.
Despite this, just 15% of the survey respondents expected mandatory carbon reporting to be introduced within the next five years, and only 16% expected all businesses to have to pay for their greenhouse gas emissions within the next five years.
These findings go some way to explaining one of the prevailing paradoxes in the business and climate change debate, which is that, despite the commitments to action on climate change that have been made by many corporate leaders, most companies continue to increase their total greenhouse gas emissions.
While CEO commitment is a necessary starting point for corporate action on climate change, CEOs are not the only decision-makers within organisations.
Finance heads have a critical role to play in sanctioning capital investments, and their views on the operational and strategic relevance of climate change are likely to be a key influence on whether companies make investments in areas such as energy efficiency and renewable energy.
The survey leads to three important conclusions. The first is that public policy makers must ensure that communications and consultation are an integral part of all their activities.
While the government’s communications and outreach on both mandatory carbon reporting and the CRC have been exemplars of how to conduct these types of consultations, the survey findings are a salutary warning against complacency.
It is clear that the government needs to continue to communicate and consult on these initiatives long after the relevant regulations have been adopted.
Second, investors have a role to play in ensuring that the companies in which they invest are properly prepared for the introduction of this type of legislation.
This requires that investors go beyond asking whether or not the company has a policy on climate change and look at whether the company has an implementation strategy (and the quality of the strategy), what resources have been allocated for the implementation of the strategy and how the strategy is being implemented.
Investors should also use their meetings with finance heads to explore issues such as their views and understanding of climate change and the assumptions they are making about the implications of climate change for their business.
Third, there is an important lesson for companies themselves. Far too often, climate change is seen as being about corporate brand and reputation, with much of the day-to-day management left in the hands of the corporate responsibility manager.
This can result in other key decision-makers not having a sufficiently robust understanding of the significance of the issues in question, which may in turn affect their organisation’s ability to respond effectively to the regulatory pressures they will face in coming years.
For further information on the Carbon Trust Standard Company’s survey, see: www.carbontruststandard.com
Rory Sullivan is Head of Responsible Investment at Osmosis Investment Management, and a member of the Ethical Corporation Advisory Board.