Firms Start to See Climate Change as Barrier to Profit
Monday, September 21, 2009
As the real-world impacts of climate change begin to materialize and regulation of greenhouse gases appears more likely, corporate America has begun to grapple with a challenging question: How do you quantify the risks associated with climate change?
The answer depends on one's perspective. But companies are beginning to show increased willingness to disclose the extent to which they're contributing to global warming and what they're doing to keep it from harming their business.
"If we don't move now, it just becomes more expensive, more complicated and a bigger risk," said Brad Figel, director of government affairs at Nike, at a Capitol Hill briefing last week sponsored by Oxfam America.
On Monday, the Carbon Disclosure Project is set to release a report surveying the climate policies of the majority of the S&P 500, in which 52 percent of respondents said they've set emissions-reduction targets for the companies, compared with 32 percent last year. Many of these groups also see global warming as a threat to their bottom lines -- including 84 percent of financial-sector respondents -- citing concerns including a potential shortage of raw materials and supply-chain disruptions because of severe weather.
When it comes to climate, corporations "are demonstrating they are willing, ready and able to engage with it," said Carbon Disclosure Project chief executive Paul Dickinson. "We are moving, without any doubt, into a carbon-constrained world," he added.
The Chamber of Commerce and the National Association of Manufacturers say that some of the prescriptions to address climate change, such as the climate bill passed by the House in June, present more risks to the economy than global warming does.
But a number of companies have split with the chamber to back the House bill and are taking steps to curb their own carbon footprints.
Anna Walker, senior manager for worldwide government affairs and public policy at Levi Strauss, said 95 percent of her company's offerings are made from cotton. Climate-related water shortages threaten cotton supplies, to say nothing of the tornadoes and floods that could threaten the company's cut-and-sew operations in Bangladesh, Cambodia, Vietnam and other countries.
"This is very practical and happening for us," Walker said. "We really do get it."
Companies that depend heavily on the goodwill of both consumers and their employees are also sensitive to the issue.
"Climate is top of mind for our customers right now," said Jim Hanna, Starbucks's director of environmental impact, who added that the company is aware that its workers are also eyeing its business practices and public policy positions. "For us to attract the best talent coming out of college, and for us to retain that talent over time, we've got to operate that way."
But calculating a firm's emissions, as well as how much of a risk climate change may pose to the business in the future, can be complicated. Dickinson's group -- which represents 475 institutional investors that manage $55 trillion in funds -- is working with the world's four biggest accounting firms to establish the Climate Disclosure Standards Board, which aims to make greenhouse-gas reporting more uniform.