Climate change is going to transform the way businesses operate and it’s a change that will happen globally. That was the theme of a round-table meeting of key company executives organised by the Carbon Trust as part of its mission to accelerate the move to a low-carbon economy.
Neville Isdell, chief executive of Coca-Cola, told senior executives from companies including Cadbury Schweppes, Centrica, Boeing and Marks & Spencer that climate change is a scientific reality and the answer will be driven by the relationship between government, civil society and business. “There are really three things we can do,” he said. “I stole this from Professor John Holdren of Harvard… One is mitigation. The other is adaptation. And the final one, which is not really an option, is suffering. It’s up to us to modulate how we react along those three different planes.
“We all know the case that’s been made with regard to climate change. We all know what the overall impact of this issue can be.” The response requires global government action, Mr Isdell said. But he believes business has a key role to play in engaging with civil society and governments to help make sure it is the right sort of action. “What we need to focus on is as holistic a view as we can of all the related issues. One of the problems we have if we only look at governmental intervention is that we see people looking for simple solutions to what is essentially a very complex problem.”
Mr Isdell is encouraged that relationships are being established between government, business and civil society through mechanisms such as the United Nations’ Global Compact, of which Coca-Cola is a signatory, and the Bali Communiqué.
“Because the case is being made, we’re able to engage as business with civil society in a way that we could never have engaged 10 years ago,” he said. “We have a whole plethora of relationships, with organisations like Greenpeace and the World Wildlife Fund, where they see business as part of the solution. “We know that they can give us the skills, knowledge and expertise, and also part of the social license, as well, in order to be able to implement what we need to do.”
Klaus Schwab of the World Economic Forum has identified five stages business needs to master with regard to its general involvement in society. The first three are corporate governance, corporate engagement, corporate social responsibility, but Mr Isdell said the next two – corporate entrepreneurship and global corporate citizenship – were the most interesting.
Corporate entrepreneurship, he said, pertains to how corporations start funding small-scale and large-scale entrepreneurial enterprises to bring about the sort of change needed. Moreover, he believes global corporate citizenship is starting to make a comeback. “We’re starting to do it again as business leaders,” he said. “For a while, with the likes of Enron, business leaders removed themselves from it and put their heads below the parapet. But once again we’re engaging in global issues.”
The caveat, said Mr Isdell, is that a company’s corporate citizenship efforts need to be relevant to its business. In Coca-Cola’s case, the relevance is the usage of water, which he believes has a very clear nexus with climate change. The chief executive announced at a World Wildlife Fund conference in Beijing that Coca-Cola aims to reach a stage of “complete water neutrality” in its operations so that they will not impact the world’s water supply.
“On carbon and climate protection, what we want to do is to grow our business and not the carbon as our initial target, so they have to be issues that are relevant to the business,” he said. “Otherwise, you eventually will not have the support of your shareholders.
“How do you stand before your shareholders and say that you’re making investments in these areas? What is the return? Well, the return is very simple. The return is that you are working to build functioning societies and functioning communities around the issues where you’ve got a footprint and where you have an impact. “If you don’t do that; if we don’t have viable communities, then we don’t have viable businesses.”
Mr Isdell’s comments come as the Carbon Trust warns that many international organisations lack direction and vision on climate change and carbon emissions. In a study carried out by business advisers PricewaterhouseCoopers, more than two-thirds of international chief executives surveyed said they are not concerned about climate change in the short term, given that there is a possible global economic downturn on the horizon.
About the same proportion said they were waiting for governments to step up to galvanise action in business.
However, experts say there are real opportunities for the UK to become a world leader in climate change mitigation technologies such as wave and tidal stream power, offshore wind energy plants and third generational photovoltaics – solar power technology that converts light from the sun directly into electricity. In addition, by cutting carbon, businesses can reduce energy bills, as well as improve market share by responding to consumer pressure for low-carbon products and services.
Mr Carson, chief executive of precious metals and chemicals group Johnson Matthey, believes there is a genuine competitive advantage to be gained from taking action on climate change.
“There are two thrusts of this in our company,” he says. “The first is to do with our own footprint and with making the business more efficient. “The second is the enormous opportunity for new products that tackle carbon dioxide emissions and help our customers tackle them.
“We are focused on research and development is these areas now. It’s a business opportunity and the earlier you grapple with it, the bigger opportunity you have to gain competitive advantage over your rivals. There is real competitive advantage here that will create a whole new industry.”
Vincent de Rivaz, chief executive at EDF Energy, the French-owned electricity supplier to London and the south of England, also believes there will be competitive advantage to be gained – and not only from developing the right new technologies for a low-carbon future.
“Competitiveness is not only to be given by the price of carbon,” he says. “You also have to have the right technologies with the right operators and the right skills.” Above all, however, he believes that action on carbon emissions is the right thing for business to do. “You cannot say that carbon dioxide emissions are going to destroy the planet and do nothing about it,” he says.
Interview: Carbon Trust CEO Tom Delay
Business has to be at the forefront of the global efforts to tackle climate change, believes Carbon Trust chief executive Tom Delay. “It’s only business that can build a low-carbon economy,” he says, “because only business has the entrepreneurship, the ingenuity, and indeed, the straight capital resources to make the investments required to make a low-carbon economy a reality. Carbon action is all about taking action.”
Mr Delay says such action has become increasingly international in the past few years. The drivers are three-fold: businesses around the world are worried about the physical risks of climate change to their businesses.
They are also concerned about the increasing burden of complying with the weight of new environmental regulations, and they fret that their reputation may suffer or that their business may be damaged by failing to take enough action or falling out of step with their customers on the issue.
The Carbon Trust works with more than half Britain’s FTSE100 companies and its chief executive says their leaders believe that if they can understand their exposure to these three risks, they can turn the situation on its head by making it an opportunity.
Mr Delay says the companies taking action on climate change are usually either from regulated industries, are involved in industries such as aviation and energy which have clear environmental impacts, or are in sectors such as financial services and retailing and see opportunities to enhance their reputations by taking action on climate change.
The problem, he says, is that most business taking action on climate change don’t have a genuine long-term vision of it. “They’re not taking a transformational approach,” he says. “If they could see what a low-carbon economy is going to look like in 20 years’ time they could be a lot more transformational.”
Some companies, oil groups for instance, have a good understanding of the long-term trends but don’t communicate them because they perceive the downside risk as being too transparent.
Others only discover the full vision as they get more involved in climate change programmes, while a third group cannot come to terms with seeing a low-carbon economy that’s 30 years out because of the cost implications of replacing current infrastructure.
Mr Delay believes that the rapid emergence of developing economies where there is little existing technological infrastructure to replace is one answer to this problem. Another is the development of whole new industries, like the mobile telephony world that has sprung up over the past decade. Either way, he believes that business has to grasp the reality of what needs to be done and to start doing it now.
Coca-Cola’s action on its carbon footprint
Coca-Cola studied its carbon footprint and concluded that the group’s operations impacted climate change in four main ways: drink dispensing equipment, packaging, manufacturing and transportation. Here’s how the world’s biggest soft drinks group is tackling each.
1. Cold drink equipment
Coca-Cola has more than eight million machines dispensing its drinks – a number that is increasing all the time. It is taking action to reduce their carbon footprint in three main ways.
One is through reducing their energy use with a new energy-management system for its refrigerators which reduces energy consumption by about 35pc by modulating the cooler when it doesn’t need to be on. The other is by changing the refrigeration equipment to a climate-friendly refrigerant gas. Coca-Cola is this year to deploy about 30,000 new coolers that use carbon dioxide, rather than hydro-fluoro-carbons (HFCs). All of the company’s equipment at this year’s Beijing Olympics will have the new CO2 technology
Two-thirds of direct HFC emissions in Coca-Cola’s coolers were from the insulation that they used so the company has now also taken HFCs out of insulation. Some 98pc of its new coolers will use HFC-free insulation, removing two-thirds of the direct emissions.
Chief executive Neville Isdell says these initiatives benefit customers too. The new energy management system, for example, is more efficient to run and so saves customers money.
“If you really focus on these things, there are so many benefits for the business that are going to come out,” he says.
2. Packaging
Coca-Cola is introducing a new “Ultra Glass” version of its iconic 330ml glass bottles that’s 20pc lighter than its predecessor, reducing the company’s use of glass by 3,500 tons a year and saving 2,200 tons of CO2 emissions.
“It’ll cost less because there’s less glass,” says Mr Isdell, “and it will have fewer carbon emissions.
The company has also changed how it recycles polyethylene terephthalate (PET) plastic bottles. Recycled PET was going into secondary uses, such as carpets and the like. The company has recently announced a $60m (Ã??30m) investment in a package of recycling efforts, including funding for a plant in Spartanburg, South Carolina, which can recycle old plastic PET bottles into new bottles.
3. Manufacturing
As Coca-Cola strives to meet its goal of growing its business but not its carbon footprint, it is changing its manufacturing processes. The company is now using solar power in a number of its operations, and is exploring the use of wind power.
4. Transportation
Coca-Cola is tackling energy use and emissions from transportation. In a number of geographical areas, including New York, it is trying out hybrid-powered trucks. And just by upgrading its logistics, the company saved about 300,000 transportation miles in the UK distribution operations last year. Mr Isdell believes a combination of these efforts will help reduce Coca-Cola’s carbon footprint.
“It’s at the macro level, it’s at the micro level, but it’s also in terms of overall collaboration. Unless we tear down some of these barriers, we do not use it as a real competitive advantage and we’re not going to get to the solutions that we need.”