Survey finds European companies lag behind Asia-Pacific on climate

Despite nascent policy on climate change and hype over business action, the development of corporate plans for carbon reduction remains limited, according to an Economist Intelligence Unit survey.1

The survey, which assessed companies’ actions to cut carbon emissions, was commissioned by UK Trade and Investment, a government organisation promoting business development. More than 630 senior executives worldwide took part.

The survey found companies in the Asia-Pacific region take climate change more seriously than their European competitors. Despite EU efforts to lead on climate change, more Asia-Pacific firms monitor energy use, implement carbon-reduction strategies, and in particular, take carbon issues into account in investment decisions.

James Watson, author of the report, said that while companies in Europe are doing quite well, Asia-Pacific firms lead on energy efficiency. North American companies lag behind the rest of the world and are more likely to think their carbon policies would not affect competitiveness.

Globally, less than 10% of executives said their organisations monitored their carbon footprints. Just 18% had a carbon-reduction plan, but a further 28% hoped to introduce one within the next three years.

"Despite various high-profile corporate carbon-reduction efforts, this survey reveals that businesses are generally only starting to address this issue," says the report. "Too many companies were simply unprepared for a transformation in regulatory and public expectations."

One practical problem is allocating responsibility for emissions, for example between energy suppliers and industry. Lack of regulatory clarity on boundaries, says the report, is delaying action.

Government regulation was the main driver for action and firms cutting carbon want a clearer framework to provide certainty on requirements and expectations. Almost a third of companies are acting to meet existing or anticipated regulatory requirements.

"Government action would move business much more quickly towards greater efforts", says the report. Progress will depend largely on "how rapidly governments can implement legislation that creates incentives for change."

Most respondents said they would increase or begin efforts if governments introduced a carrot, such as tax incentives, or more rigorous regulations. Most favoured a market-based system to price carbon. A proper regulatory framework is needed to create market-based incentives, otherwise "carbon reduction will never become the integral part of business operations that it needs to be."

Matthew Gorman, group sustainability manager for airport operator BAA, says in the report: "Governments tend to feel limited in their ability to introduce new policies for reducing emissions because they fear business resistance, while companies are unable to take their investments in low-carbon solutions to scale because of lack of long-term policies."

Investors are doing little to drive change, although they are becoming more interested in carbon risks and opportunities.

Nearly 40% of respondents said carbon impacts of new equipment, plants or technology played a part in investment decisions.

Some 17% of companies that had cut carbon saw a positive effect on their bottom lines, compared with 11% who said costs had risen. Those reducing carbon are spending just 0.6% of operating expenses on doing so.

More than half of respondents expected efforts to result in no cost or profit by 2010, through savings on energy bills and increased sales from strengthened brands.

"One surprise finding of the survey was how little difficulty cost presents in carbon-reduction efforts," says the report. "Many respondents simply rely on their programmes to pay for themselves."

Within heavy industries, 40% of firms expected carbon reductions to boost profits. "It’s quite striking that cost-cutting implications are even stronger in manufacturing and energy generation than in the service sector, given expectations that they will need to invest more to curb emissions," said Mr Watson.

The report says serious carbon reduction requires more than the present focus on energy efficiency. However, few firms said they wanted to modify supply chains. Even less popular was reducing business travel or discontinuing or changing carbon-intensive products.

Just one fifth of companies surveyed had a director responsible for environmental impacts, although this was expected to rise to one third by 2010.

Although 38% of companies thought carbon offsetting was a temporary solution, 16% were considering the use of voluntary carbon offset companies. But "concerns about the potential failings of offsetting could dent this," says the report.

Businesses see enhanced reputation as the biggest benefit of carbon reduction. But few were exploiting climate-related marketing opportunities. Action was delayed by the disparity between public expectations for companies to act on climate and consumer behaviour.

David Hone, climate change adviser at Shell International, says in the report: "Because people need the energy products that we produce, there isn’t a great deal of consumer pressure anywhere."

The EIU predicts that the proportion of companies reducing carbon emissions will increase by 150% in the next three years. At least twice as many companies are expected to implement wider strategies, focusing on everything from supply chains to product impacts. The average CO2 reduction planned by 2010 was 24%, rising to 34% by 2015.

Most businesses were not put off by a tighter regulatory regime when investing in other countries, and if anything saw restrictions as attractive and creating a level playing field.

  • In June, consultants KPMG published a survey by YouGov assessing responses to climate change among FTSE 350 and equivalent firms. Just 14% of 73 respondents had climate strategies in place, while more than half were developing them.

    Most thought the government was not doing enough to educate businesses on their role in tackling climate change.

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