Will your response to climate challenge create reputational advantage?
Only 20% UK CEOs see climate change as an opportunity for new products and services – i.e. growth. Yet a whopping 74% UK CEOs believe responding to the climate threat will create a reputational advantage*. With just 6%** putting their money where their mouth is, Barcanet Director, Ian Yates asks, "Is it good enough to want a PR story, or should execs be driving a commercial sector sustainability revolution?"
Be Green and Mean It
In the UK this year, thousands more businesses will be required to comply with the government's new Streamlined Energy and Carbon Reporting (SECR) regime, meaning their annual reports will need to include a greater level of detail on energy usage, energy efficiency and greenhouse gas emissions.
And with consumers and employees increasingly making their buying decisions and career choices, based on ethics – ensuring transparency and action, rather than words, makes good business sense.
That's not to mention, of course, that the commercial sector has the power to make a sizeable difference to carbon reduction efforts, in the face of heightened urgency for change.
With the dawn of a new decade, tackling climate change is firmly on the international agenda. This was the message coming through loud and clear at the recent World Economic Forum (WEF) summit in Davos, Switzerland.
For the first time in the 15-year history of the WEF's annual global risk report, released in the lead up to the summit, the top five risks considered to be facing the world right now were all climate related.
The WEF highlighted that global carbon reduction targets are far from being realised – with emissions levels still increasing annually, rather than reducing in a manner that will enable the world to be carbon neutral by 2050. According to the Intergovernmental Panel on Climate Change (IPCC), global C02 levels need to be at net zero by this time, if we want to ensure a 'safe' limit of 1.5C on global warming.
To help address the situation, all businesses attending the WEF summit were called upon to do their bit by setting net-zero targets and strategies, in line with the 2050 deadline.
The impetus on the commercial sector to implement meaningful environmental policies has never been greater. With the introduction of the new SECR rules, businesses are entering a new era of transparency, that will guard against 'green-washing', where companies claim to be more environmentally friendly than they actually are.
Expect More Pressure from the Regulators
The UK was the first major economy in the world to pass laws to end its contribution to global warming by 2050, and this year will see the landmark Environment Bill progress through Parliament – designed, Ministers say, to ensure that, 'environmental ambition and accountability are placed more clearly than ever at the heart of government'. A key provision of the Bill is the creation of an Office for Environmental Protection, which will scrutinise all government policy to ensure the environmental agenda is at the centre of decision making.
Regulatory pressure is unlikely to abate then. Being able to demonstrate that sustainability – one of the key tenets of corporate social responsibility (CSR), runs through the DNA of your business is essential. And yet, a recent survey by the Vlerick Business School found that only 6% of UK chief executives have financial incentives and bonuses tied to environmental strategies and performance across the business practice.
So, while the majority of UK businesses recognise sustainability as a priority (almost half of UK companies plan to boost their environment-related spending between now and summer 2021 according to HSBC's recent Made for the Future Report), they're not yet incentivising executive ownership of the sustainability agenda.
A truly sustainable culture needs to be championed at the top level. But for executives/leadership teams looking to get a proper handle on things, it can be difficult to know where to start and how best to invest your 'green' spend.
Take Steps to Transformation
There's a lot that businesses can be doing to identify the changes that will have the greatest impact though. And we're not just talking about helping to protect the environment for future generations here. Putting the right sustainability strategy in place can dramatically reduce operating costs, keep you ahead of the regulators, help to boost your appeal to customers, satisfy investors and give you an edge over the competition when it comes to attracting talent.
A good place to begin the journey towards market-leading sustainability is with an audit of your current 'green' performance – to benchmark how you're aligning with the values your customers feel are important, gauge how you're faring against your competitors, and establish where carbon efficiency could be improved.
But why stop there? Sustainability is just one element of CSR. Customers and regulators want to see companies applying transparency to other aspects, such as diversity and pay equity. Businesses that blaze a trail here by introducing positive initiatives to drive change, are being noticed.
By measuring current performance, you can set priorities for action, in accordance with the findings of the data dive, and can share your progress against those priorities. Demonstrating the results of any sustainability/CSR drive will be vital – to evidence real change.
Applying this approach across the CSR spectrum will act as a catalyst for business transformation that really speaks to your stakeholders and has a positive impact.
2020 could prove to be watershed year for corporate sustainability, but that will require inspirational leadership and a demonstrable long-term commitment to change from CEOs, and their senior teams, across the land.
Ian Yates – Director, Barcanet
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