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Less CO2, More Profit? Absolutely!

From Environmental Leader, Published 29 October 2014

I find it difficult to believe that even in this day and age companies still need to be provided with incentives to ensure that they are operating in a carbon-friendly manner. If your moral compass isn’t guiding you, then the driver should at least be to ensure your organizations’ business continuity and profitability.

Several organizations that I come across believe that it isn’t in their strategic interest to manage and measure their carbon footprint or believe that they can’t afford it. Neither of these assumptions are correct. So what’s the big fuss and why would you as an organization ever want to invest in any carbon management initiatives? I’m probably slightly biased on this topic due to my role at FoundationFootprint but research is backing me up and has identified that the top four reasons for carbon management are related to cost savings, risk mitigation, managing public and investor perceptions and increasing competitive advantage. Have a read and let me know what you think.

Reason 1: Cost Savings

In the US alone, the number of organizations which have cited reducing costs as a key driver is at 77% which is a 35% increase over the last three years. Another study that was issued by the CDP and WFF said that almost 80% of companies earn more from investments that were directed at reducing carbon emissions than from any other capital expenditures.

If this isn’t a statistic that convinces you then how about the fact that these organizations’ return on investments were close to 200% with an average payback period of 2-3 years. That’s quite something, right?

Reason 2: Risk Mitigation

Many initiatives that an organization undertakes revolve around managing and reducing risk. So it’s not surprising that 73% of organizations in a study that was carried out by Berkley said that identification and mitigation of reputational, regulatory and operational risks was a primary reason for managing their carbon.

As with everything, you can’t manage what you don’t measure and in an increasingly resource constrained world, any of these risks, whether it be compliance, operational or financial can be managed more effectively if you understand your operational performance and its impact.

Reason 3: Public and Investor Perception

Inaction around sustainability has caught out several organizations in the past and has led to negative public and investor perception bringing significant harm to bottom line and customer trust.

A lot has happened in the past few weeks prior to the UN summit on global warming. 347 global institutions representing $24 trillion of investor assets have called on government leaders around the world for stable, reliable and economically meaningful carbon pricing. The Rockefellers, the powerful oil baron family, announced that they are bailing out of fossil and jumping into green power.

All of these institutions recognise that unchecked climate change puts their investments at great risk. Their goal is to have low carbon investments, create low carbon funds and reduce their exposure to fossil fuel and carbon intensive companies.

Investors like these and the public will be the catalyst for change and leave companies behind that are refusing to steer towards low carbon operations.

Reason 4: Competitive Advantage

Many recent studies have shown that companies adopting environmentally and socially responsible policies significantly outperformed their peers. An example of that is a study of 180 companies over 18 years by Harvard Business School that found that every dollar invested in a portfolio of “sustainable” companies, would have had a 32% higher return compared to a portfolio of companies less focused on sustainability.

Being able to stay ahead of the rest of the pack is in the interest of every company. Forward-looking leaders and executives understand that the ability to have transparency and visibility into an organization by the means of a carbon footprint is instrumental in not only maintaining the organization’s longevity but also to increase competitiveness by changing business operations to reduce cost and risk and improve stakeholder perception.

I think it’s imperative that organizations start thinking about managing their carbon footprint more seriously. We are, whether we like it or not, operating in an increasingly resource constrained world and it’s the environment around us that will have a say on how we do business. Thinking long term is key!

For additional reading regarding carbon management, please refer to the following links:

From Laggards to Leaders: Developing Carbon Management Systems for a Low-Carbon Future
DACH Region Announces Investor Scores for Carbon Emissions
Carbon Accounting Methods for Estimating Scope 3 Emissions