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The Business Case For Carbon-Cutting Actions

While activists take to the streets, responsible business advocates are making the case for why companies should cut their own CO2 emissions.

The Business Case For Carbon-Cutting Actions
[Photo: Flickr user Dakine Kane]

National government action on climate change so far has been laughable, at best. Cities have done a better job, and companies concerned about their reputation and bottom line are paying more attention to the prospect of a warming climate. This week, a group of organizations involved in pushing businesses towards climate action launched We Mean Business, a coalition that, in its own words, “aims to amplify a unified business voice in the climate debate and highlight the fast-growing opportunities offered by the transition to a low carbon economy.”

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To kick off the launch, We Mean Business offered up a report outlining why committing to low-carbon actions makes sense for businesses. Designed for businesses and policymakers, the report draws on data collected by CDP a group that offers a platform for businesses to disclose environmental information.

“We concluded that the low carbon economy is well under way. There’s a critical role for policy makers, who can implement bold regulation,” says CDP executive director Nigel Topping and a member of the We Mean Business coalition along with other green business groups including Ceres, BSR, and the B Team.

There are two types of low-carbon investments discussed in the report: those that have modest CO2 emissions reductions and quick financial returns (like installing LED lighting or investing in energy-efficient HVAC units) and those that have big CO2 reductions that take longer to pay off financially (like converting company car fleets to electric vehicles and installing geothermal power plants).

The small measures are important. “A lot of companies, particularly in the U.S., are doing a good job of being able to see financial savings from simple measures. Because the return is so huge, it makes complete business sense,” says Emily Farnworth, director of Counter Culture and the lead author of the We Mean Business report. The report gives the example of South African IT company Altron, which cut CO2 emissions by 230,000 tons per year just by asking employees to turn off lights and air conditioning. Altron’s investment in the initiative was recouped less than a year later.

Companies that take pricier carbon-reducing actions with longer payoffs do it largely because of concerns about how neglecting climate change will impact business later on. With legislation down the line, growing resource scarcity, and shifting weather patterns, there are risks to doing nothing now. Farnworth notes that many companies surveyed believe they will be required to make payments for their carbon emissions some day.

As you can see in this chart from the report, though, companies are driven to take climate-related actions by reputation more than anything else.

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Some other highlights from the report:

  • Companies that have slashed their emissions to match what current science suggests is required had an average internal financial return of 27 percent. Companies with the proportionally biggest investments in low carbon initiatives have an equal or higher rate of return than other companies in the same region. There is little downside to making these investments, in other words.
  • Renewable energy investments have the highest level of emissions reductions compared to other CO2-mitigating actions. Many of these investments have been in Europe thus far, but some companies elsewhere are investing big in renewables. Apple, for example, has pledged to power all of its stores, data centers, and offices with 100% renewable energy, and the company has already invested millions in solar and biogas generation.
  • The business case for what the report calls “transformational change,” like finding low carbon options for aviation fuel and public transit, isn’t yet strong enough. Policy shifts can change that, the report claims, with carbon pricing, strong energy efficiency standards, and other measures.

This report is just the beginning for We Mean Business, which is working on a series of initiatives to promote a low carbon future. First up, a livestreamed panel today at Climate Week NYC, featuring Apple CEO Tim Cook and IKEA CEO Peter Agnefjäll. Check it out here.

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About the author

Ariel Schwartz is a Senior Editor at Co.Exist. She has contributed to SF Weekly, Popular Science, Inhabitat, Greenbiz, NBC Bay Area, GOOD Magazine and more

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