C-Suite Advisory

CEOs Must Heed The Winds Of Change On Climate

Last month, Hurricanes Florence and Michael ripped through the US becoming the latest climate-related weather events to blow a hole in the US economy and impact hundreds of thousands of people. These Hurricanes followed a year of other extreme weather, from snow in the Sahara to wild fires in Europe. The costs of climate change are escalating too, in 2017 where extreme weather events cost the US over $300bn.

These events serve as a powerful reminder to CEOs working in all sectors of the need to plan for, and manage, climate-related risks and opportunities.

Environmental reporting and the bottom line

The fundamental first step for any CEO wanting to get ahead on climate action is to commit to measure and report on their company’s environmental risks and impacts. Over 7,000 large companies are already doing so using CDP’s disclosure platform – and are reaping the benefits.

By measuring and disclosing their environmental impacts, companies can identify where risks and opportunities lie. Only with this crucial information can CEOs navigate a path for their business which responds to growing environmental concerns alongside the need for economic competitiveness and profitability. And this doesn’t have to come at a cost.

In fact, CDP’s supply chain report showed disclosing companies achieved emissions reductions of 551 million metric tonnes of CO2, resulting in US$14 billion in cost savings.

Meanwhile, research from Oxford and Maastricht Universities found that businesses that disclose their emissions are likely to benefit from a lower cost of capital, saving on average up to US$1.2 million each year in interest payments.

Unlocking innovation with climate goals

Corporate environmental reporting also shows that progressive action on climate can lead to improved innovation and more resilient business models. In a recent survey of business executives committed to setting ‘science-based’ targets (SBT), forward looking emissions reduction targets in line with or below a 2°C  pathway,   almost two thirds (63%) of respondents said that their commitment is helping drive innovation.

Kellogg’s and Sony are two of almost 500 companies that have committed to set an SBT, and innovated as a result. Kellogg’s engineers have established fuel cell technology at a facility in San Jose, which generates electricity while making waffles. Likewise, Sony has developed a new plastic, SORPLAS, made up of 99% recycled material, which helps to reduce CO2 emissions from manufacturing by nearly 80%.

As more companies see the business benefits, the momentum behind setting SBTs is growing, with over 130 new corporates making SBT commitments since the start of 2018, a 39% increase from the previous year.

Environmental reporting comes of age

It’s fair to say that we have seen exponential progress on environmental reporting since CDP launched eighteen years ago. Over this period, we have tracked an almost 30-fold increase in the number of companies disclosing to us – not just on climate, but on the interrelated issues of water security and deforestation too.

And it isn’t just companies that are reporting, more than 750 global cities, states and regions are now disclosing their climate data through CDP as well.

This movement has gained even more momentum over the last year with the launch of the recommendations of the Financial Stability Boards, Task Force on Climate-related Financial Disclosures (TCFD). The TCFD is pushing climate change further up board’s agenda, and making environmental disclosures mainstream, with the recommendation that this information should be included in companies’ financial reports. The TCFD now has the backing of 513 organisations and the alignment of CDP’s disclosure platform with the TCFD should support more widespread adoption going forward.

Business as usual is no longer an option

Despite all this progress, the urgent need to step up action has never been clearer. Just last week the Intergovernmental Panel on Climate Change (IPCC) released a landmark report stating that limiting global warming to 1.5°C (the more ambitious goal of the Paris Agreement) is the new guard rail for safety on climate. To achieve this goal, unprecedented and transformational corporate action is needed.

It is clear that the next ten years will be crucial in scaling up action to limit the most dangerous impacts of global warming. We can’t just rely on the vanguard – we need all companies to be on board. For those worried about their bottom line, inaction can no longer be justified, as evidence shows that environmental action can save money and build business resilience.

Against the backdrop of the Paris Agreement and the upcoming UN Climate Change Conference (COP24), CEOs can expect higher standards and environmental regulation around the corner. Business leaders that act with the urgency and ambition needed now are the ones that will thrive in our rapidly changing world.
Have you read?

# How climate risk went from the boiler room to the Board room by Paul Simpson.
# Use Your Professional Knowledge to Create a New Business by Travis Rosser.
# Best CEOs In The World 2018: Exceptional Chief Executives.
# Revealed: Top 50 Colleges In The United States, 2018.

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Paul Simpson
Paul Simpson is Chief Executive Officer of CDP. As the CEO of CDP, Paul Simpson has been at the forefront of the non-profit's expansion since its inception in 2000. Paul Simpson is an opinion columnist for the CEOWORLD magazine.