Tackling climate change is proving good business

As we face up to the pressing challenge of climate change and the need to take radical and immediate action, it is crucial to understand the contribution of business and the vital role it has to play, not just in reducing its own emissions, but in paving the way to a low carbon future.

There is no question that business is a significant contributor to climate change. Government figures indicate that the business sector was directly responsible for 40% of the UK’s total carbon dioxide (CO2 ) emissions in 2004.

Businesses not only contribute through the use of energy in their operations; there are also emissions associated with the sourcing, manufacturing and transport of materials and products. But the sphere of influence is much greater still and includes the emissions associated with the end use of products and services by customers.

The nature and scale of this contribution differs significantly between different types of businesses. Electricity generators, for example, face considerable challenges in reducing the CO2 emissions from their power stations. For retailers, on the other hand, the true impact lies in their supply chain, and in the use and disposal of products.

Just as business’s contribution to climate change is vast, so too is its potential to make a difference. Many firms are now recognising this. They also see that taking action to reduce their emissions can bring wide ranging benefits including lower costs, improved competitiveness and new market opportunities.

Given the complexity of the relationship between business and climate change, it is not surprising that the solutions are equally broad ranging. Businesses have to look at the way they use energy — to ensure they are working with maximum efficiency — and at how their products are used.

That means ensuring their own house is in order, as well as that of their suppliers and customers. It also means contributing to the wider process — through research, the development of new technology and engaging in the search for the best policy mechanisms.

It is clear that the private sector has embarked on the journey — but it is long and complex and myriad approaches are being taken by different companies.

The most direct and obvious action for firms to take is to cut back the emissions associated with their operations. Many have already gone some way to reducing their overall levels of emissions through improvements in efficiency and through the introduction of new technologies that produce less waste and demand less energy. BT, as one of the UK’s largest consumers of electricity, managed to reduce its overall CO2 emissions by 42% between 1994 and 2004, largely through reducing the size of its vehicle fleet. The government estimates that overall CO2 emissions from the business sector were about 28% below 1990 levels in 2004.

In order to have a more significant impact, some companies have not only pledged to cut their own emissions but are encouraging their clients and suppliers to do likewise. Marks & Spencer estimate that only 6% of their annual carbon footprint comes directly from their operations and are therefore asking their 1,500 suppliers worldwide to adopt specific environmental management standards.

Many are also working with their staff to support them in reducing work-associated emissions. The financial services company Zurich has encouraged may of its employees to abandon the use of private cars in commuting to work, by introducing travel plans that offer viable alternatives.

Proactive companies are not stopping at reductions in energy use, which inevitably can only be achieved up to a certain point. They are also opting to increase their use of renewable or green energy.

In terms of emissions, the goal should at least be that companies make no overall net contribution to climate change through their operations.

A few years ago, this may have seemed like wishful thinking. Yet an increasing number of high profile companies — including HSBC, BSkyB and Avis — are now pledging to become carbon-neutral, indicating the seriousness with which they take climate change. Some companies are finding real opportunities to exploit new markets and pave the way for a greener economy by developing new products based on clean technologies. Electronics firms, such as Matsushita, are focussing on providing energy efficiency related business-to-business solutions for their customers.

Other firms are offering customers the opportunity to offset the climate impact associated with using their product. Ford Motor Company and TerraPass have developed the ‘Greener Miles’ programme, offering Ford vehicle owners the opportunity to offset the climate impact of their driving by supporting projects that reduce greenhouse gas emissions.

Perhaps the ultimate challenge facing the private sector is to invest in and generate renewable and green energy. With the worldwide market for wind, solar, geothermal and fuel cell energy estimated to reach $200bn by 2020, forward thinking companies are looking to establish leadership in this field.

Anglo American and Shell recently announced an alliance to develop clean coal projects, including carbon capture and storage, with the aim of becoming a leading player in the market for green energy. Scottish Power has embarked on a wind energy development programme which will save an estimated one million tonnes of CO2 emissions in the UK by 2010. They are also piloting plans to co-fire sustainable biomass fuels, such as sawdust, at coal-fired stations.

These examples demonstrate what business can do. Although a step in the right direction, what has been done so far is not nearly sufficient given the size of the challenge. We need a change of gear in the development of low-carbon goods and services. Existing investments need to be rapidly increased and new technologies invested in.

This can only be achieved through close partnerships between businesses and government. To this end, a group of business leaders, which has come together under the auspices of HRH The Prince of Wales’s Business and the Environment Programme, is calling for a strong policy framework that creates a long-term value for carbon emissions reductions and consistently supports the development of new technologies. They believe that this will create long-term competitive advantages for the UK.

With a strong and widely-understood business case and a supportive policy environment, the private sector can achieve the goal of ensuring that the world’s economies continue to thrive in a low-carbon world, and that energy is available to meet the needs of everyone.

Libby Sandbrook is Climate Change Director, Business in the Community.