The term ‘climate change’ generally refers to changes in climate patterns and has been identified as the most serious threat facing modern society.
Climate change is often called ‘global warming’ and is the net increase in global temperature caused by high atmospheric concentration of greenhouse gases (GHG), particularly carbon dioxide CO2.
Our work
See the resources section for details of our work in this area including Convening the debate, Asking the Right Questions and Turning Questions into Answers
This increase in GHG levels is mainly attributed to anthropogenic (man-made) carbon emissions from the combustion of fossil fuels.
In 2006, the total amount of CO2 added to the atmosphere through human activity was 26 billion metric tonnes. There has been a 0.6o C rise in average global temperature over the past century (King, 2004) and over the next 100 years, a rise of 1.5o – 5.0o C is predicted if the current trend continues (Meyer, 2000).
The impact of global climate change could be catastrophic in socio-economic terms, with the insurance giant Munich Re forecasting costs of some $300bn per annum (Manji, 2008).
Implications for business: risks and opportunities
“How companies respond (to the risks, opportunities and challenges of climate change) will have important consequences for their competitiveness, profitability and even their very survival”. – Mindy Lubber, President of Ceres and Director of the Investor Network on Climate Risk.
Risks
Adverse impacts on business activity
This is due to an increase in the frequency and severity of extreme weather events like droughts, storms and floods. This will result in higher operational costs, eg insurance, staff health, infrastructure maintenance etc.
Regulations aimed at limiting carbon emissions can constitute a risk to businesses that engage in energy-intensive operations.
For example: the EU currently has a cap-and-trade carbon emissions trading programme designed to reduce GHG emissions, while major economies like Japan and China have also set targets for emission reduction. These regulatory frameworks will affect businesses of all type and sizes.
Businesses face heightened risks from litigation and reputation damage by failing to reduce carbon-intensive activity.
For example: In 2005, the five largest electricity utilities in the US faced lawsuits related to their contribution to global warming.
In order to maintain competitive advantage, companies need to be prepared for climate risks. The ability to utilise and produce climate-friendly products and services will be a key driver in the competitiveness of companies.
For example:
Toyota Corporation currently dominate the hybrid car sector through the timely introduction of their Prius model.
General Electric’s ‘ecomagination’ programme generated sales of $12 billion in 2006 with $50 billion worth of back orders for climate-friendly products such as diesel-electric hybrid locomotives, components for hydrogen power and energy-efficient LED bulbs.
Opportunities
Global climate change has created new business opportunities arising from increased demand for adaptation products, services and strategies.
These include:
- Carbon trading
- Carbon-offsetting
- Consultancy
- Product innovation etc
Cost savings can be achieved through the implementation of emission-reduction schemes and strategies.
For example, Dupont cut carbon emissions by 70% between 1990 and 2004 while increasing productivity by 33% saving over $2 billion over the same period.
Emission reduction strategies can lead to an increase in productivity.
For example, retail giant WalMart has reported a potential gain of $50 million per year from improving the fuel efficiency of its vehicle fleet by just one mile per gallon.
Resources
- Convening the debate
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Sustainability conferences, roundtables, seminars and discussions hosted by us to spark new ideas
Event: Investment Opportunities for a Low Carbon World
We hosted the launch of an important new book Investment Opportunities for a Low Carbon World edited by Will Oulton, FTSE's Director of Responsible Investment, on 9 June 2009, introduced by Martin Hagen, President of ICAEW. A panel of expert speakers debated the Challenges and Investment Opportunities arising from a Low Carbon Economy.
Speakers included Philip Wolf, CEO Renewable Energy Association UK, Mark Thompson, MD, Tiptree Investments, Louise Moore, Head of Environment, Health & Safety, Herbert Smith, Tony Ward, Partner and UK Head of Climate Change and Sustainability Services, Ernst & Young, Hylton Murray-Philipson, Special Adviser, The Prince's Rainforest Project.
Event: The Business of Climate Change: Creating a Low Carbon Britain?
In February 2008 we hosted a conference in Nottingham with the ICAEW East Midlands regional office which examined how economic growth could be carried forward on a basis that it is sustainable for our climate.
Our keynote speaker was Jame Murdoch, CEO and Chairman of News Corporation in Europe and Asia and Non Executive Chairman of BskyB and the conference chair was Lord Whitty, the Chair of the National Consumer Council.
Event: Roundtable on carbon trading
In October 2007 we hosted a roundtable for HM Treasury exploring the business and accounting issues relating to carbon trading. The event was opened by Kitty Ussher, Economic Secretary to the Treasury. We produced a discussion paper highlighting the key issues from the Carbon Trading roundtable, outlining the major accounting issues, to feed into their policy work.
- Asking the Right Questions
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Advancing theory and practice on sustainability through research
Research: Managing Greenhouse Gas Emissions
A total of 866 ICAEW members were interviewed between 19 August and 30 October 2009 about their organisations’ management of carbon emissions.
They were asked whether they feel their organisations are sufficiently well informed about how to reduce greenhouse gas emissions, what actions they are taking, how they are measuring their emissions and what could encourage their organisations to do more to reduce them.
It finds that many UK businesses say that they have enough information on reducing emissions. Many say they have programmes in place. But some are clearly not motivated to make a commitment to reducing emissions despite saying they have the necessary information.
- Turning Questions into Answers
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High quality guidance on sustainability for our members and the wider business community
Guide: Carbon Reduction Commitment – A Guide for Finance Directors
Read our guide to the CRC specifically written for financial directors. In conjunction with The Carbon Trust Standard, the guide covers financial and accounting issues FD’s need to prepare for.
FD’s Guide to the CRC to understand:
- How to profit from early action
- The value at stake
- The financial implications
- The accounting issues
- The next steps to take