Business Can and Must Do More to Address Climate Change
Business action and climate risk
From hurricanes to wildfires, the U.S. felt the impacts of climate change in 2017. While President Trump’s administration continues to deny climate change is even occurring, businesses are taking action. But is their action enough given the risks?
Two recently released reports can shed light. One of them is by CDP and Climate Disclosure Standards Board. For the report, 1,681 companies in 14 countries and 11 sectors were surveyed on climate risk disclosure. It looked at four key areas of climate risk disclosure: governance, strategy, risk management and metrics and targets.What it found is that most companies (83 percent) acknowledge that there are financial risks for their business with climate change.
Despite the fact that most companies acknowledge the financial risks of climate change, most are not providing enough oversight to address those risks. Board members in eight out of 10 companies are taxed with providing oversight in climate change. Only one in 10 of the companies surveyed provide incentives for board members linked to progress in meeting climate-related targets. Companies in North America have even fewer incentives, with two percent in Canada and four percent in the U.S.
The U.S. needs to pick up the pace
U.S. companies lag behind their European counterparts in other areas. Companies in France, the UK and Germany lead the way in climate risk disclosure across three out of the four areas highlighted by the report.
Carbon pricing is in its infancy, the report acknowledges, but is “quickly becoming a widely-used tool.” Twenty-one percent of companies are using carbon pricing and another 16 percent say they plan to do so in the next two years. This is another area where U.S. companies are behind European companies. U.S. companies have the lowest proportion using and preparing to use carbon pricing.
“Overall, we see there is a surface level of preparedness from companies globally to have board-level oversight of climate risk and opportunity,” said Jane Stevensen, Task Force Engagement Director at CDP, in a statement.
A look at 600 of the largest publicly traded U.S. companies
A report by Ceres found that more companies are increasingly understanding that materiality assessments are important. The Antea Group defines materiality assessments as “formal exercises aimed at engaging stakeholders to find out how important specific environmental, social and governance (ESG) issues are to them.” While only 32 percent of the companies assessed conduct materiality assessments, which is a seven percent increase from 2014. Only six percent of companies publicly disclose how materiality assessments guide their strategic planning and decision making.
The Ceres report assessed the progress of over 600 of the largest publicly traded U.S. companies in meeting the 20 specific expectations of the Ceres Roadmap. Only 31 percent of the companies assessed have formally integrated sustainability into board committee charters. There is some good news. Over half (65 percent) of the companies assessed hold senior-level executives accountable for sustainability performance, an increase from 42 percent in 2014.
Despite the Trump administration’s withdrawal from the Paris agreement, businesses are still committed to it. The “We Are Still In” movement includes governments, universities, and companies representing $6.2 trillion of the U.S. economy. Those companies need to go beyond a mere commitment to the Paris agreement and back it up with real targets, as the report indicates. Only 32 percent of the companies assessed have committed to increasing their sourcing of renewable energy, and only 10 percent have set time-bound targets. Half of those targets are science-based.
The time has come for a turning point, as Amy Augustine, senior director of the Ceres Company Network, and co-author of the report pointed out:
“The time has come for bold and scalable solutions, not just from a few leading companies, but from companies in all sectors and of all sizes who need to transition from making commitments to taking concrete actions,” she said in a statement.
Image credit: Ron Mader, courtesy Flickr