Here we want to answer a question we hear very often in our discussions with business leaders:"Why, in addition to my personal commitment to fighting global warming, should I commit my company to reducing its emissions? And how can I do this? »
Indeed, any boss 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 it is for the good of humanity. But let's not be fooled: apart from a few individuals who are very committed to the subject and whose company is doing well, the majority of managers today give little or no attention to it for 3 main reasons:
- These initiatives are perceived as non-generative for the business, highly resource-consuming and risky for the company's competitiveness.
- They have their heads in the sand.
- They simply don't know how to go about it.
The benefits of reducing emissions are not well public ized. However, if you dig a little deeper, committing to emissions reductions 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 driving role to play in encouraging the commitment of companies to a low-carbon economy. If the clichés are hard to believe and you find it difficult to imagine a financier taking an interest in the fate of the planet (in principle you are not wrong ;)), the financial world is nevertheless in the midst of a change of direction regarding climate risk.
This is because environmental commitment has a huge impact on its investment portfolio.
1. Reminder: A financier invests in companies to earn dividends and to realise a capital gain 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 become more stringent and that Mrs Michu will favour low-carbon products/services.
3. Conclusion: When a financier invests in a company, it is better to look at whether the company is capable of adapting to a sudden change in regulation / customer behaviour.
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 must be a priority (really).
2. Because your customers will put pressure on you - or simply leave
The few studies on the subject that have recently flourished tend to confirm our intuition: Customers will increasingly turn to low-carbon companies.
There are two possible scenarios:
A. Your customers are companies
In this case, the pressure from your customers will vary greatly depending on the type of industry you are in. If your customers make fighter jets, you should be able to slip through the cracks. On the other hand, if your customers are in a B2C environment such as consumer goods, luxury goods, cosmetics or textiles, then you will have to react very quickly because the leaders of the sector are already asking their suppliers to be accountable.
For example Zalando or Fnac Darty. It is likely that this trend will become widespread in most areas, especially if it affects the individual or if it is highly carbon intensive.
B. Your customers are individuals
There is no need for long dissertations here, the first surveys on this subject and consumer behaviour over the last 10 years are clear: consumers will favour sustainable products with a low impact on the climate.
This trend has been going on for the last 10 years, with the boom in organic, vegan, "locally produced", etc... The low carbon product will be the new darling of consumers.
3. Controlling the risks associated with carbon regulation
Here is a small graph to summarise where we are:
As the host country of COP 21, France wants to shine and be the first carbon neutral European country. And Europe the first carbon neutral continent. But if we look at the targets for 2050 and the current state of emissions, we can see that we are way behind.
2 conclusions to be drawn from this brilliant analysis:
1/ If we want to meet the 2050 target, Europe and its member states will have to put in place very strict regulations and colossal financial resources to support companies.
2/ If we give up, then there is no need to hurry. But the economic impact of global warming will be so strong that Europe and its member states will still have an interest in delaying it as much as possible, and therefore in putting in place very strict regulations and colossal financial resources to support businesses.
In short, it is absolutely certain that carbon regulations will become more stringent in the coming years and months.
In what we can imagine as the most likely in the short term regulation:
- Mandatory carbon footprint for all companies
- Frequency of carbon reporting annually (vs. every 4 years today)
- Scope 3 now mandatory for all companies.
- Increase of the domestic carbon tax (now frozen following the yellow vests crisis) and introduction of a carbon tax at EU borders
Well, there will surely 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 will reduce your bills tomorrow. If you optimize your transportation and energy consumption, for example, you will mechanically reduce both your GHG emissions and your costs.
Here are some fairly effective initiatives to reduce your emissions and your costs:
- Invest in the insulation of your buildings
- Invest in a modern and efficient air-conditioning system
- Favour videoconferencing to transport, if possible
- Develop teleworking
5. Engage your employees in your emission reduction targets
Another feedback we regularly receive from company managers is the pressure from employees. Given the importance and current media coverage of the subject, it is likely that your employees are talking about it among themselves and have already thought about the first concrete initiatives.
Beyond doing a good deed and pleasing your employees, launching a project to reduce emissions can be a unifying factor. Indeed, it is a cross-company cause that can bring together and make all your employees work together on a common project.
Moreover, and this is important to underline, global warming is secular, apolitical, global and impacts all social strata. It should not generate internal divisions (except of course for a few unconditional refractory people) and will allow you to really gathereveryone.
If you are running a company today, it is unfortunately very likely that you are not currently obliged to initiate a long-term project to reduce CO2 emissions internally.
It's sad, and that's why the majority of SMEs or ETIs, even if they recognize the problem, have not yet taken any real steps in this direction.
However, hidden by the "sensational" aspect of global warming that the media exposes to us, a massive transition is taking place in silence.
A transition driven by 3 engines that will have a crucial impact on your business tomorrow:
- The financial world, a heart system of the corporate world, which by integrating climate risk into their models has understood that tomorrow's business will be ecological or not.
- Regulations, whose upcoming tightening is a virtual certainty. The Citizens' Convention is there to remind us of this.
- We, the customers, who are adopting an increasingly "responsible" behaviour by favouring low emission companies.
And given the current climatic events, it is difficult to see how the trend could be reversed.
Thus, even if they are not obliged to do so, decision-makers and business leaders must take the measure of the change that awaits them over the next decade and start today to launch some prerequisite projects:
1. Carry out an initial carbon assessment 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, please here.