Carbon Foresight - Business Response to Climate Change

“... the shift to a low-carbon economy is already under way ... business must get ready for it… sectors

that have so far featured less prominently in the debate, such as consumer goods, high tech, and

financial services, will have to get moving.” - McKinsey & Company, April 2008

The response of business leaders to the problem of climate change is undergoing a major

transformation. Even ten years ago, the corporate sector was almost uniformly opposed to serious government action on the issue. But increasing certainty about the science of climate change—and an ever greater understanding of the risks and opportunities it presents for businesses and society—have contributed to a new willingness among corporate leaders to help shape solutions. In addition to acting on their own to reduce greenhouse gas emissions, a growing number of businesses are calling for government action to protect the climate.

By properly accounting for their GHG emissions, corporations have an opportunity to establish a foundation for setting goals and targets; provide a baseline to measure progress; evaluate cost-effective greenhouse gas reduction opportunities; clearly communicate with their stakeholders; contribute to the development of accurate national inventories; and provide data that support flexible, market-oriented policies.

It varies by company. Some companies just make an educated guess of how much they think they can reduce their emissions if they start trying. Others take careful inventory of their emissions from each of their business units and identify specific opportunities for reductions, and then add up those opportunities to inform their target. Companies also have to make strategic decisions as to what kind of target they set. Whether they target GHGs directly, or indirectly through electricity use; whether they set an absolute target or one that is relative to product units or sales; and whether they target their own emissions or those of their suppliers, are strategic decisions that depend on the specific characteristics of their business.

Companies set targets because they believe targets will enhance their competitive positioning.

Targets help companies that are interested in focusing on the triple bottom line, managing their regulatory risk, guiding policy development and learning by doing, and using resources efficiently to reduce costs.