Companies Admit Climate Change Is Not a Distant Threat, It’s Now

Companies are increasingly focused on climate change, not only to prevent negative business impacts but to build goodwill with employees, shareholders and customers as more attention is being paid to ESG issues.

By Paul Bergeron November 18, 2021
Companies Admit Climate Change Is Not a Distant Threat, It’s Now

About half of the lower 48 states in the U.S. today are under drought conditions. So, when 5.44 inches of rain fell in Sacramento and throughout much of Northern California on October 24, it seemed a blessing. 

Farmers and the reservoirs were pleased, but others pointed to the record-rainfall as yet another in a string of disturbing incidents caused by climate change over the past decade.
 
The frequency of catastrophic weather events today seems to be matched only by the frequency that such headlines are inducing boardroom chatter and concern.
 
Companies have become increasingly focused on climate change, not only to prevent negative business impacts but to build goodwill with employees, shareholders and customers as more attention is being paid to environmental and social issues.
 
According to research from SHRM, 72% of business leaders say that social, political or environmental issues influence their organization's business strategy. Company values/policies (66%), interaction with the community (57%) and company brand strategy (46%) are the top three factors most strongly influencing organizational stances on social, political or environmental issues.

Over two-thirds of business leaders agree that it is increasingly difficult for organizations to remain neutral on social, political or environmental issues in today's environment (67%).

A 'Robust, Coordinated Effort with Sound Policy' Required

The Business Roundtable a year ago issued a statement that addressing climate change and its impacts demands a robust, coordinated effort with a sound policy portfolio.

"Business Roundtable CEOs are calling for a well-designed market-based mechanism and other supporting policies to provide certainty and unleash innovation to lift America toward a cleaner, brighter future," the group said.

"Unchecked, climate poses significant environmental, economic, public health and security threats to countries around the world, including the United States. While the United States has made significant progress toward reducing greenhouse gas (GHG) emissions as a result of private sector innovation and supportive state and federal policies, the existing patchwork of federal and state regulations, tax incentives, subsidies and other policies is inefficient and has negatively impacted the long-term investment strategies of many U.S. companies by creating regulatory uncertainty. It is time for a new approach."

Business Roundtable believes corporations should lead by example, support sound public policies and drive the innovation needed to address climate change. To this end, the United States should adopt a more comprehensive, coordinated and market-based approach to reduce emissions. This approach must be pursued in a manner that ensures environmental effectiveness while fostering innovation, maintaining U.S. competitiveness, maximizing compliance flexibility and minimizing costs to business and society. International cooperation and diplomacy backed by a broadly supported U.S. policy will be the key to achieving the collective global action required to meet the scope of the challenge and position the U.S. economy for long-term success. 

Who Will Commit

In the United States, less than half (42.8%) of Russell 1000 companies have publicly committed to reducing emissions, according to an analysis by JUST Capital. Just over one-tenth of companies have committed to Net Zero by 2050.

What's worse, JUST's report states that only 6.7% of those company commitments match the scenario of global warming being limited to 1.5 degrees above pre-industrial levels, and just 9.3% are aligned with the less-onerous 2-degree scenario outlined in the Paris Agreement.

The U.S. Chamber of Commerce's Center for Capital Markets Competitiveness (CCMC), in partnership with Nasdaq, Nareit, The Real Estate Roundtable, National Investor Relations Institute, TechNet, BIO, and Silicon Valley Leadership Group, in August 2021 released results from a climate change/environmental, social and governance (ESG) survey.

CCMC said in a release that survey findings show that most companies are regularly communicating with their shareholders and disclosing more information regarding the evolving risks of climate change.

"Since the Securities and Exchange Commission (SEC) issued its 2010 guidance on climate change disclosure, 59% of companies said they are disclosing more information regarding climate change," according to the report. "When it comes to shareholder communication, nearly two-thirds (63%) of companies are communicating with their shareholders regarding the evolving risk of climate change and 46% have increased the level of detail in climate change reporting due to shareholder input."

The survey also finds companies overwhelmingly support (89%) scaling disclosure for companies based upon size and/or type of registrant, and 74% support phasing in any new disclosure requirements for all public companies.

"We believe communication between businesses and their investors is critical, and today's survey results show that companies are doing their part to talk with their shareholders to better understand important issues and increase the amount of information they are disclosing," U.S. Chamber CCMC Executive Vice President Tom Quaadman, said in a release.

The SEC is expected in the coming months to issue rulemakings that create new mandates for ESG disclosure and to update guidance on the issue. An overwhelming majority (84%) of companies support a flexible approach to disclosure and agree that any climate change disclosure rules adopted by the SEC should reflect the difference between various industries.

Supply Chain a Keen Corporate Focus

West Monroe on October 1, 2021, published its Quarterly Executive Poll, which included thoughts on climate change and sustainability.

Christina Galoozis, head of public relations and executive poll lead at West Monroe, commented on the results, "25% of executives cited they are currently not taking any action on sustainability at this time, which means 75% of the C-suite are taking at least one type of action."

She said that the supply chain is a key focus. "The most popular initiatives being taken include setting supply-chain standards, increasing use of renewable energy and setting standards for partners and vendors," Galoozis said. "In fact, setting supply chain standards is the hottest sustainability item on the agenda right now, with 39% of executives citing this is a new action for their organization."

The West Monroe poll said that large companies are 4x as likely to offset their carbon footprint, 3x as likely to increase their electric fleet, and 1.5x times as likely to increase use of renewable energy.

Andrew Dillon, an innovation fellow in energy and utilities at West Monroe, added, "Faced with customer expectations, regulatory drivers and financial reporting requirements, C-suite executives and companies alike are increasingly driven to reduce their carbon footprint."

"Access to capital, competition with peer companies announcing carbon reduction targets, and satisfaction of SEC reporting requirements on carbon footprint all create conditions for this 4X increase in intention to offset carbon footprints," Dillon added.

Dillon said that top methods to do so include renewable energy to lower the carbon intensity of their electricity fuel supply, and electrifying vehicle fleets to transition from gas and diesel to clean electricity as fuel.

"Methods such as transportation electrification are not only a great way to reduce carbon, but are very popular in the eyes of customers, as can be seen by major announcements by Amazon, Fedex and Walmart to electrify delivery and shipping fleets – a surveyed three-fold growth in plans to do so," Dillon said.

"The move to reduce carbon footprints has moved from just niche behavior to the mainstream of corporate responsibility, market differentiation, compliance as well as a rise to be stewards of a cleaner society."

Emphasizing Sustainability During Recruiting

Business leaders see that climate change is no longer a distant threat. According to The Business Roundtable, nearly 30% of executives say their organizations "already feel the operational impacts of climate-related disasters and more than a quarter are facing a scarcity of resources due to climate change. In the midst of these direct impacts, the majority of business executives acknowledge that the world is now at a tipping point to act if we are to mitigate the effects of climate change."

As companies continue to grapple with how and how much to address climate change, even internal processes will change. In research compiled by SHRM, around 40% of HR professionals agree that it is important for both employee recruitment AND employee retention that organizations take clear positions on certain social, political or environmental issues (40% and 38% respectively).

In February 2020, a survey by Blind, a network on which professionals anonymously discuss workplace issues, suggested that companies that take a stand on climate might do better at attracting talent. Nearly half of the 629 employees surveyed at leading tech companies said that a company's efforts toward climate change affect where they want to work.

Industry Dive reported that many companies are aware of the impact their operations are having on the environment, and those that choose to address climate change through policy changes could be in a better position to compete for talent.

Paul Bergeron is a freelance writer.