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Here we want to answer a question we hear very often in our discussions with business leaders:"Why, in addition to my personal desire to combat global warming, should I commit my company to reducing its emissions? And how can I do this?"
Indeed, any business owner must legitimately ask himself whether reducing his emissions will be beneficial to the company he is in charge of running. Some will no doubt criticize this "return-on-investment" approach, when the good of humanity is at stake. But let's not be fooled: apart from a few individuals who are very committed to the subject and whose companies are running smoothly, the majority of managers today devote little or no resources to it , for 3 main reasons:
- These initiatives are perceived as non-generative for business, highly resource-intensive and risky for the company's competitiveness.
- They have their heads in the sand.
- They simply don't know how to go about it.
It's hard to blame them, since the benefits of reducing emissions are so little publicized. And yet, if you dig a little deeper, committing to emissions reduction today can become a crucial competitive advantage for a company.
Here are the top 5 reasons why reducing your emissions can be strategic for your business:
1. To remain attractive to investors
Paradoxically, finance has a key role to play in encouraging companies to move towards a low-carbon economy. Clichés may be hard to believe, and you may find it hard to imagine a financier taking an interest in the fate of the planet (in principle, you're not wrong ;)), but the financial world is in full swing when it comes to climate risk.
This is because environmental commitment has a huge impact on its investment portfolio.
Why?
1. Reminder: A financier invests in companies to earn dividends and capital gains on their valuation.
2. Given the criticality of the subject, you don't need to be Einstein to understand that climate-related regulation is likely to get tougher, and that Madame Michu will prefer low-carbon products/services.
3. Conclusion: when a financier invests in a company, it's in his or her best interest to check whether the company is capable of adapting to a sudden change in regulations/customer behavior.
Ask the airlines, they know all about it :)
So if you run a business and want to remain attractive to investors, demonstrating your ability to track and reduce your carbon emissions has to be one of your priorities (really).
2. Because your customers are going to put pressure on you - or simply leave.
The few studies on the subject that have recently sprung up tend to confirm our intuition: customers will increasingly turn to low-carbon companies.
There are 2 possible scenarios:
A. Your customers are companies
In this case, the pressure from your customers will vary greatly depending on the type of industry in which you operate. If your customers manufacture fighter jets, you'll probably slip through the cracks. On the other hand, if your customers operate in a B2C environment, such as consumer goods, luxury goods, cosmetics or textiles, then you'll need to react very quickly, as industry leaders are already holding their suppliers to account.
Zalando or Fnac Darty, for example. It's a safe bet that this trend will become widespread in most fields, especially if it concerns private individuals or is a high-carbon emitter.
B. Your customers are private individuals
There's no need for long dissertations here, as the first surveys on this subject and consumer behavior over the last 10 years are clear: consumers will prefer sustainable products with a low impact on the climate.
This trend has been going on for 10 years, with the boom in organic, vegan, "locally produced" products, etc... Low-carbon products will be the new darling of consumers.
3. Managing the risks associated with carbon regulations
Here's a little chart to sum up where we stand:
As host of COP 21, France wants to shine as Europe's first carbon-neutral country. And Europe the first carbon-neutral continent. But given the targets for 2050 and the current state of emissions, we can see that we're way behind schedule.
2 conclusions to be drawn from this brilliant analysis:
1/ If we are to realign ourselves with the 2050 target, Europe and its member states will have to put in place very strict regulations and colossal financial resources to support businesses.
2/ If we give up, then there's no need to hurry. But the economic impact of global warming will be so great that Europe and its member states will still have a vested interest in delaying it as long as possible, and therefore in introducing very strict regulations and colossal financial resources to support businesses.
In short, it's absolutely certain that carbon regulations will get tougher in the years and months ahead.
In what we can imagine as the most likely short-term regulation:
- Mandatory carbon footprint for all companies
- Frequency of carbon reporting annual (vs. every 4 years today)
- Scope 3 now mandatory for all companies.
- Increase in domestic carbon tax (now frozen following the Yellow Vests crisis) and introduction of a carbon tax at EU borders(MACF).
Of course, there will be a transition period for companies to adapt, but as always, those who have anticipated will come out ahead.
4. You will reduce certain cost items
Investing today means reducing your bills tomorrow. If you optimize your transport and energy consumption, for example, you will mechanically reduce both your GHG emissions and your costs.
Here are a few initiatives that are quite effective in reducing your emissions and your costs:
- Invest in the insulation of your buildings
- Invest in a modern, efficient air-conditioning system
- Use videoconferencing instead of transport, if possible
- Develop teleworking
5. Involve your employees in your emissions reduction objectives
Another feedback we regularly receive from company heads is that of employee pressure. Given the importance and current media coverage of the subject, it's a safe bet that your company's employees are talking to each other about it, and have already started thinking about concrete initiatives.
Beyond doing a good deed and pleasing your employees, launching an emissions reduction project can be a unifying force. Indeed, it's a cross-company cause that can bring all your employees together to work on a common project.
What's more, and this is important to stress, global warming is secular, apolitical, global and impacts all social strata. It shouldn't create internal divisions (except, of course, for a few unconditional refuseniks), and will enable you to really bring everyone together.
In conclusion:
If you're running a company today, it's a safe bet that there's currently no obligation to initiate an in-house long-term project to reduce CO2 emissions.
It's sad, and that's why the majority of SMEs and ETIs, even if they recognize the problem, haven't yet taken any real steps in this direction.
However, hidden behind the sensational media coverage of global warming, a massive transition is taking place in silence.
This transition is being driven by 3 engines that will have a crucial impact on your business tomorrow:
- The world of finance, the heartbeat of the corporate world, has understood that tomorrow's business will either be ecological or it won't be, by integrating climate risk into their models.
- Regulations, which are almost certain to become stricter in the near future. The Citizens' Convention is there to remind us of this.
- We, the customers, who are adopting an increasingly "responsible" behavior by favoring low-emission companies.
And given current climatic events, it's hard to see how this trend can be reversed.
So, even if they are under no obligation to do so, decision-makers and business leaders need to take the measure of the change that awaits them over the next decade, and start today to launch a number of prerequisite projects:
1. Carry out an initial carbon audit to identify your main emission sources.
2. Based on this assessment, define an action plan to reduce emissions.
3. Conduct a "climate risk" analysis for your company.
Of course, Traace can help you with all these steps. To find out more about our support solutions, click here.
