Pressure is on for companies to rapidly address climate change
Experts around the world agree that there will be financial repercussions for companies that don't adequately address climate change, according to a new global study.
This is the decade for climate action, a decisive point where we need to take meaningful action to get climate change under control and get on track toward meeting the 1.5 degrees Celsius temperature goal of the Paris Agreement.
Results from the newly released report by GlobeScan and SustainAbility, "The Climate Decade: Ten Years to Deliver the Paris Agreement" (PDF), show that two-thirds (67 percent) of experts across 66 countries say that companies need to become carbon neutral by 2030 or sooner to remain competitive. Around one in three experts (32 percent) say companies need to be carbon neutral no later than 2025.
More than 550 sustainability professionals from North America, Europe, Asia-Pacific, Latin America and Africa — representing business, government, NGOs, academia and media — responded to the survey. The resulting report draws comparisons between current findings and data collected in previous surveys on the same topic.
Experts across all regions and sectors, emphasizing the almost universal recognition of climate action as an urgent priority for business, largely agree on this timeframe. Experts also agree that there will be financial repercussions for companies that do not adequately address climate change, with only 2 percent of experts globally as well as in North America believing that inaction will have no negative impact on revenue, profit or growth.
When asked to pick the two most significant consequences from a range of options that will have the largest negative impact on companies’ revenue, profits and long-term growth, experts mostly anticipate reputational harm among key stakeholders. This is followed by negative outcomes as a result of increased physical and financial vulnerability to climate-related impacts, as well as a lack of access to capital and divestment. In terms of the financial impacts, higher operational costs due to inefficiencies and difficulty in attracting and retaining the best people are viewed as tertiary effects of inaction.
So, what do experts say companies should do to adequately address climate change and avoid the negative impacts of inaction?
Experts continue to believe that increasing renewable energy use is the most effective strategy for companies trying to act on climate change, with most experts globally (86 percent) as well as those in North America (84 percent) agreeing that this is an effective strategy. When asked the same question in 2015 and 2017, a similar proportion of experts promoted increased renewable energy use as an effective way to make progress.
Pursuing science-based emissions goals in line with a 1.5 degrees C target and carbon neutrality are also considered particularly effective approaches, both of which are consistent with directly reducing emissions from operations. In contrast, indirect approaches such as direct air capture, carbon offsetting or using carbon capture and storage are considered to be effective by relatively small proportions of sustainability professionals. Compared to 2015 and 2017, experts increasingly say that pursuing science-based emissions goals that align with 1.5 degrees C is an effective strategy, emphasizing the growing urgency of acting quickly on science-based recommendations.
When it comes to providing inspiration and leadership for other companies that want to tackle climate change, Unilever is again chosen by experts globally as a clear climate leader, followed by Patagonia, Tesla, IKEA and Alphabet/Google.
In North America, experts are equally likely to mention Unilever and Patagonia as the leader on climate change. It is notable that the group of companies most recognized for their climate leadership by sustainability experts has changed substantially compared to a decade ago, when the question was first asked.
Experts mostly recognize scale as the factor that most influences their reason for choosing a leading company. Other principal elements are the goals and targets set by the company and the technological solutions that it brings. Engaging in advocacy and pressuring for public policy, or raising public awareness, are less influential reasons for recognized climate leadership. However, executives speaking out in favor of action on climate change is noted as a driver of leadership by a larger proportion of experts, suggesting that this may be a more effective strategy.
To achieve carbon neutrality in the next 10 years, companies need to learn from experts and peers to make the most effective decisions in order to avoid falling behind and having to face dire consequences to their reputations and their bottom lines. Those that make efforts at scale and with the most ambitious targets will be recognized by stakeholders, as well as by a public increasingly worried about climate change. There is still significant work to do, and we need all corporations, not just current leaders, to take immediate and rapid steps toward a low-carbon future.