In 2015 the United States joined a coalition of 195 countries in signing the Paris Agreement, which gave us nationally-determined contributions for climate action to tackle by 2020, 2025 and beyond. Even though the United States has signaled its intention to withdraw from the Paris Agreement, that has not hindered the resolve of mayors, governors and business leaders to pledge to reduce emissions and stem the causes of climate change. In fact, the Global Climate Action Summit this September in San Francisco will be the first U.S.-based event since the Paris Agreement withdrawal and will showcase U.S. companies’ continued commitment to climate action.
There are more concrete reasons for businesses to care about and invest in climate action strategies – and the steps they take can help transform companies to become more profitable and mitigate risk.
Here are five reasons climate action is relevant to businesses today:
1 ) It’s cost effective.
The financial incentive to invest in sustainability, particularly in sustainable resource management, has never been higher. Policy is less and less of a market driver – solar incentives, for example, are being rolled back because the technology has become more affordable and cost-effective today. Meanwhile, according to the American Wind Energy Association, wind is becoming one of the most affordable options.
“Wind’s unsubsidized costs are competitive with conventional generation in certain regions of the country, ranging from $30/MWh to $60/MWh in 2017, with pricing lowest in the interior region of the country.”
New wind, geothermal, and biomass plants receive a Production Tax Credit (PTC) of $24/MWh, while technologies other than wind, geothermal, and closed-loop biomass receive $12/MWh. Water and waste reduction strategies – particularly in the face of increasing restrictions and regulation—also make sense, both from a reduction and risk perspective. The progress made with technologies is the driver of a continuous cost decrease over the last years. Overall, investing in those technologies to consume less makes financial sense.
2) It’s directly correlated with stock performance.
Bloomberg unveiled the Carbon Tracker app, which tracks the emissions footprint of a company so that investors can assess the risk of investing as it relates to action the company is taking, as well as any related risks they face. Markets are also pushing for transparent reporting rather than only short-term financials to allow for a focus on long-term sustainability.
3) It reduces financial risk. Environmental, social and governance performance (ESG) matters are important to investors.
In fact, according to a 2016 study released by PricewaterhouseCoopers, more than 60 percent of investors agree that business success in the 21st century will be redefined by more than financial profit. 2018 marked the first year of industry-specific reporting for CDP, and we are getting closer to an expectation that sustainability-focused financial disclosure is the norm. CDP’s second annual analysis in the Tracking Corporate Action on Climate Change series revealed that 89 percent of the world’s biggest, highest emitting companies reported having emissions reductions targets, compared to 73 percent in 2011.
Likewise, GRI reports that 92 percent of the 250 world’s largest corporations report on their sustainability performance. Investors, businesses, and policy makers use CDP data and insights to make investment decisions, manage risk, and capitalize on opportunities.
4) Leading companies are making public commitments.
There are many initiatives where more Fortune 1000 companies than ever are making public commitments to absolute reduction targets to help the planet remain under a 2-degree Celsius change in temperature. One indicator is the RE100, a collaborative, global initiative to unite influential businesses committed to 100% renewable electricity. Forty-six U.S.-based companies—nearly one-third of all members—have joined RE100 and set publicly-stated absolute reduction goals, which is more effective at measuring the total quantity of greenhouse gases being emitted. Another 417 companies worldwide are part of Science Based Targets and setting emission reduction targets in line with climate science. Finally, the We Are Still In initiative is comprised of U.S. businesses, cities, states, higher education institutions, faith groups and others who will not retreat from reducing their emissions.
5) Every commitment by business helps meet the Paris Agreement goal.
According to the UN’s 2017 Emissions Gap report, current commitments will only get us a third of the way to emissions reductions needed to keep the global temperature rise below 2 degrees Celsius.
Larger, multi-site companies have an even bigger role to play in reducing their environmental impacts – resource reduction and carbon reduction strategies will help us get there and are also cost-effective.
Today, our Coast to Coast Sustainability Tour takes us to Washington D.C. We will hear from partners like the CDP and We Mean Business Coalition to learn more about the importance of setting public sustainability goals and carbon disclosure – and how these organizations are seeing businesses lead the climate action charge. Follow our tour progress here.