Institute For Sustainable Innovation

Opinions

18.03.2020

Business and climate change: threats and opportunities

Despite the fact that the topic of climate risks is becoming increasingly urgent, many companies do not have a clear idea of the extent of the problem and of the potential financial consequences. Do companies ask themselves: Are any of my products or processes at risk from Paris Agreements? What are the largest sources of emissions in my value chain? How can we integrate international climate policies and national commitments into business strategies, supply chains, or supplier search strategies? 

Meanwhile it’s necessary to understand that climate change creates both new risks and new opportunities for businesses. And nowadays with all the uncertainties and volatility around, the companies that adapt to new conditions faster than others will get competitive advantages. 

When it comes to climate and environmental risks, a business evaluates the three most likely sources of expenses:
A. Management of pollution consequences.
B. Responsibility for industrial incidents. .
C. Compliance risks (risk of legal sanctions and losses due to non-compliance with laws, standards, rules). 

In addition, climate risks:
D. Lead to changes in legislation (taxes on greenhouse gas emissions, the introduction of obligations to use new technologies, the ban on certain activities and certain substances).
E. Create a threat to reputation and reduce investors’ interest in industries and companies with high carbon footprints. 

The sympathies of investors and financial institutions are already changing in favor of companies with the smallest carbon footprint. About 800 institutional and more than 50 thousand private investors around the world, controlling assets worth more than $ 5.6 trillion, including the world's largest banks, have decided to abandon investment in fossil fuels and sell related assets. 

To this date, 189 Parties have ratified the Paris Agreement, the largest global initiative to combat climate change. Governments and national banks all over the world strive to improve the climate risk management processes and promote the development of responsible investment tools. 

Companies that are considering lowering their carbon footprint should start by accounting greenhouse gas emissions. For this purpose, you need to: 

1. Estimate the amount of greenhouse gas emissions. Carbon footprint management begins with the annual calculation of emissions and the disclosure of this information in public reporting platforms. This calculation includes accounting for both direct and indirect emissions. 

2. Identify key risks and opportunities. Climate change may increase raw material costs, capital expenditures and asset insurance costs or result in additional tax liabilities. The effectiveness of climate risk management will determine how investors evaluate the company's prospects. 

3. Set measurable goals and develop a strategy to reduce climate impact. These strategies combine such features as accounting of specific aspects (economic growth rate, technologies, regulatory environment); analysis of financial consequences (expenses, income, value of assets); description of the company's sustainability factors (such as launching new products on the market, lowering production costs). 

4. Improve corporate management and disclose more information in reports. In order for the climate strategy to be implemented, it is especially important to monitor the implementation of goals and to report results regularly. Of particular relevance is the CDP reporting system - the most reliable data aggregator in the field of greenhouse gas emissions and other environmental problems; CDP reporting is a global disclosure system for investors, companies, cities and regions that enables them to manage their environmental footprint. 

Resources and Consulting has much experience in the field of greenhouse gas emissions accounting and climate reporting, we closely work with relevant international consultants on CDP reporting and climate management. We help our clients achieve the best results: along with preparing information about the organization’s activities in the climate sector, filling out reporting blocks, translating them and placing them in the CDP system, we develop climate strategies for enterprises that take into account CDP requirements and investors’ expectations. Climate strategies that we offer are integrated into the business strategies, rely on efficient processes for collecting information, monitoring and verifying data, and include measures to reduce greenhouse gas emissions, information on the climate change risks and opportunities. 

We agree that managing climate risk is difficult, and we understand that climate risk directly affects the financial results of businesses. The expected reduction in demand for coal, oil and gas, toughening the requirements of world stock exchanges - all these are risk factors that companies have to work with. And the sooner they reorient their processes towards a low-carbon development, the more chances they have to turn risks into opportunities. 

We are open for any questions and ready to help you solve the most outstanding tasks.


Back to the list

STC "Resources and Consulting" 2021   |