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Ready or Not: Are Companies Prepared for Climate-Related Risks and Opportunities?

April 4, 2018

Ready or Not: Are Companies Prepared for Climate-Related Risks and Opportunities?

April 4, 2018

New reports indicate that companies struggle to act on climate-related risks and opportunities even when correctly identifying them.

Reports by  CDP,  the Climate Disclosure Standards Board (CDSB), and Ceres show that companies are slow to act on environmentally related opportunities and risks.

According to the Environmental Leader's recent article by Alyssa Danigelis,  the CDP and CDSB's  recent reports focused on providing "voluntary, consistent climate-related financial risk disclosures for use by companies in providing information to investors, lenders, insurers, and other stakeholders." After providing the key decision makers with this information, they assessed each company's ability to provide board member incentives to manage these climate-related risks and opportunities.  Their report found that on average, only 1 in 10 companies currently provided this type of incentive, and that there is a widening the gap between business leaders and laggards. As new environmental regulations are implemented, this gap is expected to get bigger.

Another report by Ceres published last month tells a similar tale. According to Environmental Leader's article on the matter, the report focused on 600 of the largest US companies and analyzed their ability to meet environmental sustainability expectations. Their findings show that even though two thirds of these businesses have committed to some minimal environmental responsibilities, most companies aren't acting quickly enough to become truly sustainable enterprises. For example, while 64% of the companies investigated made commitments to reduce GHG emissions, "only 36% of them set time-bound, quantitative targets" to do so.

The main reason for companies' delayed response to this information  is its perceived tangibility. According to Simon Messenger, CDSB managing director, management can struggle to understand climate change and its potential implications, deeming it immaterial. This lapse between information's deemed and actual meaning can lead companies to struggle in managing their climate-related risks and opportunities, leaving them vulnerable.  The misunderstanding of climate-related information can lead to a lack of formal accountability, which hinders companies even more. Kristen Lang, director of the Ceres Company Network, agrees, explaining companies that  have "formal board oversight and link executive compensation to sustainability oversight are over two times more likely to have company-wide, time-bound targets to reduce GHG emissions... than those who do not."

Both these reports showcase that in order for companies to succeed long term, they must be prepared for upcoming environmental changes. The reports highlighted how imperative it is for companies to back up their environmental goals with "concrete, measurable and science-based targets," and how long term planning can help secure a company's leadership position in the future. Stealth Power's products are a great example of technology that can tie in with a company's long term, environmentally- conscious plans. Their hybrid mobile power solutions and idle-reducing technologies are able to reduce environmental impact and decrease a company's cost on fuel and maintenance. As Stealth Power's COO Shannon Sentell explains, "Stealth Power's real-time data and analytics assist companies in measuring tangible results in environmental impacts and cost savings. This accountability aids in simplifying operational analysis and provides executives with the information needed to make informed sustainability decisions."

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