E&Y: Enterprise Climate Change Spending On Rise

by | May 25, 2010

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Global executives believe that the climate change agenda will significantly impact business performance and strategy over the next few years, according to a new survey by Ernst & Young: Action amid uncertainty: the business response to climate change. Three hundred global corporate executives from 16 countries with at least $1b in annual revenue participated in the survey conducted during spring 2010.

The report highlighted several trends among executives. Over 90 percent of those interviewed said that climate change governance was an issue that required leadership from C-level executives. Fifty-five percent of respondents said their organization has a board member or C-level executive as the head of their climate change strategy.

Two-thirds of respondents have launched an enterprise-wide climate change program and a further 16% expect to do so in the next two years, according to the report. Almost 40 percent consider their organizations to be climate change leaders in their industry, while only 15 percent described their strategy as limited to achieving compliance with regulations.

Ninety-two percent identified energy costs as a leading driver in the next year. Perhaps as a result of this, investing in energy efficiency was the top climate change initiative senior executives plan to undertake in the next 12 months. Almost half said they will invest 0.5% to 5% of their revenue on climate change initiatives. Changing consumer demand was also cited as a major factor in climate change initiatives, particularly in the automotive, consumer products and technology sectors, as was the cost of carbon.

The use of new technology is expected to revolutionize some industries and provide direct opportunities to reduce energy consumption and greenhouse gas emissions.

“As a communications company, we need to take energy conservation as a responsibility and a challenge. This will require us to develop new, green technology to satisfy the demands of society. We can use green technology in our video communications business,” according to one participant.

Increasingly, equity analysts and institutional investors are taking a hard look at climate change as a strategic business issue. Forty-three percent of responders said analysts covering their companies have already started factoring climate change considerations into their valuation models.

Meanwhile, investor organizations from the U.S., U.K. and Australia joined forces to develop new climate disclosure guidelines for the oil and gas sector, calling on oil and gas companies to strengthen their reporting on climate change and sustainability risks and opportunities, as well as any impact from evolving regulation.

The Copenhagen climate conference appeared to have little effect on most responders. Two thirds said they would continue with their current strategies, while 31 percent said they would increase investments in climate initiatives as a result of the conference. However, 70 percent of Chinese companies participating in the survey said they would increase their investments in climate change initiatives.

While survey participants said they have a strong desire to see regulatory uncertainties disappear, most are not waiting on governments to decide on new rules before implementing their own initiatives.

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