Climate Change Practicality

More Corporations are Preparing

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 ~ While some politicians are, with growing shrillness, insisting that climate change is a mere theory, unproven, a conspiracy, a hoax, or nothing to worry about, corporations all over the world are preparing for its inevitable consequences. 81% of the world's 500 largest corporations responded to the Carbon Disclosure Project survey, and 65% of those have implemented climate change strategies, up from 35% in 2010.

The Carbon Disclosure Project, which has been conducting the S&P 500 report for 10 years, marks this year as the first time that a majority of companies recognize the opportunity to gain strategic advantage from addressing climate change.

Increasing investor pressure, uncertain fuel prices, extreme weather events, recognition of new revenue and product opportunities are the drivers for corporate attention to climate change, says the Carbon Disclosure Project.

Listening to the Wingnut Wurlitzer one might be forgiven for thinking that business so hates uncertainty that they are unable to act unless government instills some mythic level of confidence. The requisite business confidence, we are repeatedly told, can only occur if government removes regulations that protect the environment. So why are businesses acting now, despite the alleged uncertainty?

There's growing board-level awareness of the link between energy efficiency and increased profitability.

In addition, the correlation between climate strategies and higher stock market performance over time is now well established.

Investors in companies with a strategic focus on climate change received double the average return on their shares from January 2005 to May 2011.

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Contrary to conventional wisdom that presumes long payback periods for emissions reduction and energy efficiency programs, respondents say over 60% of projects have a payback of three years or less.

Our changing climate is also changing the economic climate, as corporate boards are clearly figuring out. It's good for the bottom line, as well as the environment. Good corporate social responsibility (CSR) is good for profits and for shareholder value. It also mitigates fiduciary and reputational risk. Boards that ignore this, for ideological or other reasons, are seeing their companies under-perform.

CSR, of which addressing environmental needs and risks is a key part, is very good for business:

The results of the Harvard Business School Corporate Social Responsibility and Access to Finance working paper suggest that superior corporate social responsibility (CSR) performance causes lower capital constraints, lower capital costs, greater access to capital and improved earnings. Lower capital constraints lead to an improvement in CSR performance, thus creating a vibrant cycle of mutual benefits.

While the strength of the report and its meaning may not be all one might wish for, the trends are encouraging, especially that corporations increasingly recognize that ignoring the problem makes them less competitive in both their markets and with consumers and investors. More specifics from corporations matter, but the work of the CDP legitimizes the practical relevance of taking climate change seriously, and provides exactly the right frame for talking to deniers and others. Climate change is not a joke to large successful businesses. The joke is only how our supposed leaders make our country look to the rest of the world.