There have been phases of activity when it comes to global and national climate action, dating back to the 1980s. However, until recently, it never resulted in the action and impetus needed for organisations to make real change, and recognise their essential role in combating climate change.
Earth Day 1991 seemed to be a turning point, with major global leaders behind it. But businesses set to lose the most from climate change were quick to act, slowing down progress. The Kyoto Protocol in 1997 was a big milestone, and things started to progress in the 2000s, peaking in 2007, but the financial crisis stopped it in its tracks for the best part of a decade.
Then came the Paris Agreement and the Intergovernmental Panel on Climate Change (IPCC) report on the effects of 1.5 degrees of global warming. That led to the ambition to achieve net zero emissions by the middle of the century. It meant that, unlike in the previous phases, all businesses must address their emissions to some extent. “It really changed the conversation,” says Tim Crozier-Cole, Head of Aim for Zero Corporates for consultancy firm Verco.
His colleague, Head of Aim for Zero Real Estate, Adam Smith, agrees. “It produces this incredibly simple, clear message that no one is left behind. Everyone is on this net zero journey. The market is beginning to understand that it needs to absorb and reflect the financial and commercial implications of climate change. That's been driven by people like Mark Carney, in his time as Bank of England governor, for the last four or five years. This is having quite a transformative effect in a lot of sectors that we operate in, where the normal ways of accounting for value are starting to change.”
It is quite a challenge to attempt to quantify the transitional and physical risks that climate change poses to normal business practices, and the opportunities that it might create. Verco works with a wide range of businesses, from real estate to manufacturing to professional services. It also works with professional bodies and has helped ICAEW develop its plan to achieve net zero. “In all of those sectors, there's a growing effort to think about how climate change specifically affects an individual company, and how much value-at-stake that represents to those businesses,” says Smith.
There’s a spectrum of progress when it comes to businesses’ efforts to achieve net zero, Crozier-Cole explains. It isn’t sector-specific, but there are some geographic differences.
“I get the sense that some businesses are realising that what they've previously committed to doing on climate change has been quite tokenistic and not really representing a full and frank assessment of the real dangers that climate change poses to them as a business,” adds Smith. “A lot of businesses are starting to understand how fundamentally they will need to change how they operate.”
For some businesses, climate change represents a major threat. But it also represents significant opportunities for the diversification of products and services, accessing new parts of the market and becoming more resilient to future market changes.
In Smith’s view, a good proportion of publicly listed companies now have a Head of Sustainability or ESG, or at least some operational capacity to deal with sustainability as an issue. The topic is slowly moving its way up the management structure to the point where company directors are responsible for sustainability.
Board-level conversations are taking place. It is starting to be seen on an equal footing with finance, operations and other business concerns. “It’s perhaps even seen as one of the top risks,” says Crozier-Cole. “Once you recognise it as a risk, it brings with it a host of corporate governance requirements.”
The World Economic Forum's Annual Risk Review has listed climate change and extreme weather as one of the highest risks in terms of frequency and severity in recent years. This is an indicator that it is being taken seriously.
There's a need for support and advice on what the actual detailed recommendations are, explains Smith. Energy use may not represent a significant operational cost for a company, for example, so they may never have considered cutting it. Now, the conversation has gone beyond that to the entire supply chain. It’s incredibly complex.
“We're often getting contacted by businesses that have a sense that they need to do something,” says Smith. “Investors are telling them that they need to act, but they're not clear on what that means in practice and how to do it in a cost-effective way. More and more businesses are looking for answers to these complicated questions. And depending on their level of sophistication, and how much capacity they have in-house to deal with it, that drives what they can do themselves and how much organisations like Verco can step in to support them.”
ICEAW’s net-zero journey
“We had reduced our emissions by 20% before we commenced our carbon neutral project, which itself involved building a roadmap that set out our next stage carbon reduction initiatives,” says Caroline Kearns, who was Strategic and Program Manager to the previous Chief Operating Officer and oversaw ICAEW’s move to net-zero last year. “I’ve been surprised by the number of organisations who aren’t measuring their carbon footprint, don’t know where their emission hotspots are and haven’t started to think about or implement serious emission reduction measures across their operations.”
All businesses need to have executive-level conversations about climate and sustainability, and they need to be happening now, she advises. Organisations should understand the carbon impact of their value chain and to address that, whether they undertake forensic level analysis in-house, or with external help. ICAEW took a third option, adopting a combination of both.
Learn more about ICAEW’s journey to carbon neutrality by visiting the dedicated hub at www.icaew.com/carbonneutral
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Are you professionally ready to mitigate the risk and maximise the opportunity of climate change? Find resources, information and inspiration on the ICAEW Climate Hub.