Companies weigh their effects on the climate, as investors and regulators demand it | WARC | The Feed

Companies weigh their effects on the climate, as investors and regulators demand it

Talking about climate impact is no longer the domain of do-good firms or those looking for a purpose-led kick; investors and regulators increasingly want to know how sustainable a company is and what the risks of its operations are.

Why it matters

The UN IPCC’s special report, dubbed ‘code red’ for humanity, was unequivocal that humans (and therefore companies) are causing the global temperature to increase, with devastating effects expected should we go beyond the 1.5⁰C target limit set at the Paris conference in 2015. This is, ultimately, no longer a personal political position.

Action on climate change is effectively no longer optional for companies: according to the Sustainability Accounting Standards Board, quoted in the WSJ, climate risk is set to significantly affect 68 of the 77 industry categories it studies. That’s 89% of the market value of the S&P Global 1200.

What it means is that investor communications are likely to start really talking up environmental credentials as a risk-limiting factor. Should the hegemony surrounding what a good business to buy into looks like change, it’s likely that a broader idea of what a good business to buy from will follow, and marketers will need to respond.

Bottom line: this is now mainstream.

What’s happening

• While making public the climate impact from company activity is increasingly expected, there are very few standards. Ratings agencies, for instance, look across ESG (Environmental, Social, Governance), with certain agencies placing more emphasis on different aspects of the three.
• Companies also struggle to quantify their impact, with some issuing full, data-heavy reports, and others talking about sustainability gimmicks. Some issue the green house gas impact of a single unit – like a can of soda – while others give company-wide figures.
• Should climate impact become a part of publicly listed companies legal duties to disclose impact, then the accuracy of that information will be extremely important. Total emissions (known as Scope 3) related to products as well as activities of employees, suppliers, and consumers are extremely difficult to calculate.
• Expect auditing services that attempt to take a company’s impact into account to proliferate alongside the already booming sustainable finance sector.

Sourced from the Wall Street Journal, The Guardian