Lower carbon impact can be good for business, says Dexter Galvin, Global Director of Corporations and Supply Chains at CDP Carbon Disclosure Project, one of the Science Based Targets Initiative partners.
A new business survey has shown the increasing influence of climate issues on financial directors and other top executives. From textiles to telecoms, and from retail to real estate, the survey of major companies signed up to the Science Based Targets initiative found that one in five executives expect all their products to be low carbon within 10 years.
Not only that, but ‘the environment’ was seen as the second biggest factor influencing future business growth, second only to technological change and ahead of economic policy.
As the economy transforms, more and more companies are seeing the challenge of improved carbon performance as an opportunity, and are adopting ‘science-based’ targets to reduce emissions. These are tough targets that align a company’s emissions reductions with the requirements of the Paris Agreement to keep global warming under 2°C. Already, 430 major corporations, including the likes of Tesco, IKEA and McDonald’s, have committed to, or have already set, science-based targets.
By helping companies to reduce their carbon footprint and avoid the worst effects of climate change, these ‘science-based’ targets are undeniably good for the planet. But this week’s survey also reveals the business benefits that companies such as Acciona, Ericsson and Philips have experienced through adoption of these targets.
The companies say they have boosted profitability, investor confidence and innovation. It’s becoming increasingly evident that those companies without proper carbon reduction targets will struggle to see around the next corner.
Almost one third of executives surveyed (29%) are already seeing bottom-line savings thanks to environmentally-ambitious commitments. Their operations are becoming more lean and efficient and are less reliant on fossil fuels, which are becoming increasingly expensive and risky. Unilever reports that their ‘Sustainable Living’ brands grew 46% faster in 2017 than the rest of the business and delivered 70% of the company’s turnover growth.
Companies are also finding their customers affected by climate issues. In total, 79% of executives surveyed found a strengthened brand reputation to be one of the most significant business benefits for their company from committing to the Science Based Targets initiative.
Financial directors will also be interested in feedback showing investor demand for science-based targets. Some 52% of executives say their science-based target commitment has boosted investor confidence in their business. One example is multinational retailer Tesco, which says that setting a science-based target allowed it to “demonstrate their seriousness in tackling climate change both to investors and other stakeholders”. The Neuberger Berman Socially Responsive Fund says that a lack of environmental targets suggests a general lack of positive management in the company.
In terms of innovation, almost two thirds (63%) of respondents say setting a science-based target is also driving innovation within their company. Leading technology firm Sony says its tough targets have driven it to develop a new plastic, SORPLAS, made up of 99% recycled material, which helps to reduce CO2 emissions by nearly 80% during manufacture.
The transition to a low-carbon economy is underway and accelerating globally. Every sector in every market will be transformed. Financial directors can get on track now for low carbon and future-proof growth by committing to a science-based target today.
To involve themselves companies must submit a commitment letter to develop a target to be independently verified against a set of criteria developed by the Science Based Targets Initiative. They join a growing global community of leading businesses seizing the opportunities of the low carbon transition and benefiting their own business by gaining investor and public backing.
The initiative allows companies to reduce their environmental impact while providing opportunities for innovation and greater economic prosperity. Savvy executives are seeing science as a profitable way forward.
