Tuesday, April 19, 2016

Why Corporations are Embracing Sustainability

Never before has there been more interest in corporate sustainability. While this trend is already huge we are only at the beginning of what is sure to be one of the largest economic opportunities the world has ever seen.

There was a time in the recent past when sustainability was a great way to reduce costs and stand out from the competition with distinctive branding. Now sustainability is a matter of keeping up with the competition and preventing your brand from falling behind.

Almost every corporation on earth has embraced sustainability. They are flocking to sustainability to reap the savings from efficiencies, preserve reputations, best the competition and get ahead of forthcoming regulation. They realize that sustainability is a megatrend that is here to stay.

The economics of climate action make a strong case in support of sustainability. Self-interest is driving corporations to mitigate against risks like extreme weather. It is also enticing them to capitalize on the vast return potential.

Sustainability in now an imperative for businesses and investors alike. In addition to the incentives afforded by the opportunity there are also risks associated with being a sustainability laggard.

What was once the domain of forward looking visionaries is becoming the new normal. As explained in the CDP Global Climate Change Report 2015:

"The case for corporate action on climate change has never been stronger and better understood. With the scientific evidence of manmade climate change becoming ever more incontrovertible, leading companies and their investors increasingly recognize the strategic opportunity presented by the transition to a low-carbon global economy."

The growing importance of sustainability can be measured in a number of ways. CPS’s 2015 Climate Change Report found that 90 percent of the almost two thousand companies surveyed are working to decrease their carbon emissions and 94 percent of these companies had a member of their board of directors or senior management dedicated to working on climate change. Three quarters of these companies offer incentives for improving climate performance. Over the last five years cuts to the intensity of the GHGs of the companies surveyed have more than doubled.

Sustainability is proving to be an increasingly important issue for consumer as well. It has been shown that almost 6 in 10 consumers consider a company's impact on the environment to help them make their buying decision.

Research also bears out other advantages that are provided by sustainability. This includes benefits to the brand image, cost reduction and increased productivity. Benefits also include attracting and retaining employees, diminished footprints and a host of competitive advantages. These companies are also well positioned to survive inevitable regulatory changes and mitigate against risk. All of these factors make sustainability very attractive.

In the US corporations that have invested in renewable energy are welcoming the Clean Power Plan this includes companies like Apple, Google, Amazon and Microsoft, Ikea and Mars. The Clean Power Plan will actually reduce electricity costs. This is the argument filed in court briefs on April 1.

The growing invovement of governments in the wake of the Paris Climate Ageement will propel sustainability to new heights. The word"s two largest carbon emitters, the US and China, have announced plans to ratify the Paris Climate Agreement on Earth Day, April 22.

“This is really an example of how climate change is a mainstream thing businesses need to pay attention to,” MIT professor Noelle Selin said in an interview with Environmental Leader. “Of course, Paris is agreed to by countries but businesses have to go home and implement it.”

“If you’re planning strategically, you need to take climate change into account because it will affect you,” Selin says. “It’s a management of risk. Businesses that are out in front of this will see benefits because they will be able to compete better.”

Like an unstoppable freight train climate change policy is coming. Sustainability is now synonymous with good governance and good business practices.

Companies are already reducing their emissions consistent with the science based targets in the COP21 climate deal. This includes companies like Coca-Cola Enterprises, Dell, Enel, General Mills, Kellogg, NRG Energy, Procter & Gamble, Sony, Thalys, Pfizer, Coca-Cola Hellenic Bottling Company AG and International Post Corporation.

Sustainability has reached a tipping point. However a new report by Trucost on behalf of the Economics of Ecosystems and Biodiversity (TEEB) program sponsored by United Nations Environmental Program, suggests that business, investors and governments will have to do considerably more to tackle climate change.

The gap between where we are and where we need to be is huge. This also implies that the size of the opportunity is equally massive.

Rather than asking why corporations are embracing sustainability, it is more prescient to ask how there can still be a few who are not yet on-board.

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