Climate change leaps up the corporate agenda

Issue demands strategic change. 

Climate change is rocketing up the corporate agenda, according to research by the Institute of Business Ethics.

In its 2007 Company Use of Codes Survey, the IBE asked companies for the first time: ‘In what ways is climate change being addressed specifically as part of your ethics/corporate responsibility programme?’

Only five respondents out of 67 gave no answer to this question which suggests it is a hot topic. 22 mentioned the policy framework that addressed climate change:

• two answered that climate change was part of an ethics policy
• 15 said that it was addressed as part of other policies of which nine were corporate responsibility policies; four sustainability or environmental policies - and two were other policies or not stated
• five stated that climate change had not been considered.

Most comments related to how the companies were tackling climate change issues. The replies of the 42 companies mentioning this could be grouped as follows:

• energy efficiency and environmental impact reduction activities (for example, reduced travel, recycling)    21
• membership of associations/groups, external recommendations/partnerships     9
• embedded in business/long-standing commitment  9
• staff/stakeholder engagement and awareness raising 8
• KPIs/monitoring of company progress    7
• carbon neutrality: actual and explicit target   5
• led by a board or a leadership team    5
• under revision/development      15.

Improved energy efficiency is the most common action. But for many companies climate change is an aspect of policy that is under review. According to the IBE, this reflects the speed with which climate change has become a significant business concern over a short period. Also interesting is that carbon neutrality, a relatively new target for business, is mentioned by five companies.

Global agenda

In October 2006 the Stern Review provided an economic perspective on climate change and since then events have moved rapidly.

At the second UN Global Compact Leaders Summit in June 2007 chief executives of 153 companies urged the government to agree on climate market measurements to replace the Kyoto Protocol when it expires in 2012. Progress was made at the UN conference in Bali in December 2007 and further talks took place in Bangkok at the end of March 2008. An agreed outcome is expected at UN talks in Copenhagen in 2009.

From 1 October 2007, the Companies Act 2006 has required companies to disclose material environmental impacts in Business Reviews using key performance indicators. FTSE All-Share companies now have to report on significant environmental issues as KPIs and include them in Business Reviews within Annual Reports and Accounts.

UK directors’ duties have been extended to take account of the impact of a company’s operations on the environment. Shareholders now have the right to sue directors for negligence and other defaults regarding environmental matters. In a survey by McKinsey, CEOs identified increasing environmental concerns as the most important trend influencing public expectations of business, followed by limited supply of natural resources.

Companies are increasingly looking at ways to reduce emissions contributing to their carbon footprint. The Carbon Disclosure Project, which works to standardise emissions measurement, found that 38% of the UK’s FTSE 350 companies have implemented an emissions reduction programme with targets. This is likely to increase as further carbon trading programmes come into effect.

The UK Government has been consulting on the implementation of the ‘Carbon Reduction Commitment’ which will apply mandatory emissions trading to non energy intensive UK companies that are not currently covered by the EU Emissions Trading Scheme.

Organisations are also starting to see the benefits of taking action in response to climate change. A study of 50 companies that produce sustainability reports using the Global Reporting Initiative Guidelines, found that 90% of companies are disclosing more information on the positive business opportunities arising from climate change (such as new products) while only 20% are publishing on the risks (such as rising energy bills).

Climate change calls for strategic change

CIMA has released a short paper that encourages the board, the wider management team and management accountants to work together to integrate climate change issues into their organisation’s strategy and day-to-day business life. We propose a list of ten action points to help with this. Download a copy of ‘Climate change calls for strategic change’ from our sustainability web page.

We would be interested to receive your comments on this paper, together with any insights gained from your experience of dealing with this issue or implementing any of the ten action points suggested. Please contact us on +44 (0) 20 8849 2275 or innovation.development@cimaglobal.com.

We are also working with the IBE on a survey of our members about responsible business. The results are due to be published in the summer of 2008.

For further information on the IBE's Company Use of  Codes Survey, go to the IBE website.

May 2008

Back to Insight front page

What did you think of this article? Email tim.cooper@cimaglobal.com.