How can slowing climate change accelerate your financial performance?

Traditional business leaders see sustainability as a drag on profitability. However, new evidence paints a different picture. Businesses that adopt policies to protect the environment may be more successful than those that don’t.

How is climate change affecting businesses?

According to a UN report, climate change poses multiple risks to existing businesses, which could combine to force the loss of 80 million jobs globally. Higher temperatures, rising sea levels, supply chain disruption and extreme weather events could lead to catastrophes in various regions.

Physical risks are already affecting economies. Research indicates severe weather events are becoming more frequent, with approximately 20% to 24% of the world’s population at risk of flooding. A further 700 million will be at risk of drought by the year 2030. Combined, the threat to the agricultural sector is significant and, therefore, all other sectors.

There’s also changing demand for goods. Consumers are shopping in an increasingly eco-friendly manner, seeking brands that minimise their environmental impact. Patagonia, Beyond Meat, Green Toys and Yes Straws are all excellent examples of this process in action. Businesses that fail to adopt green policies risk irrelevance.

Climate change is also impacting prices. Companies are bumping up against ecological limitations and having to expend more resources to extract the same quantity of materials. Energy, in particular, is suffering this fate, increasing input costs across the economy.

Lastly, companies face regulatory risks. As climate change becomes more dangerous, governments will act to reduce emissions and may implement stricter measures. More than 200 countries are now members of the Paris Agreement, forcing international corporations to abide by environmental standards.

Commentators worry about the costs companies will face as they transition to greener production methods. Changing technologies and consumer tastes require businesses to adopt fundamentally different practices. Corporations may not have the managerial expertise to implement such innovations.

Miners and energy suppliers are under the greatest pressure. Those who do not alter their methods risk backlash from policymakers and consumers. Carbon pricing, boycotts and other policies could force them to cease operations or capital investment.

How can climate-friendly policies boost your business’ performance?

Fortunately, businesses can adapt by implementing climate-friendly policies. These mitigate many risks discussed in the previous section while improving business performance.

For example, adopting climate-friendly practices may improve consumer perceptions. Studies suggest more than 63% of consumers want large companies to spearhead environmental action, even without government action. Furthermore, three-quarters of people would consider not buying from a business if it didn’t care about climate action.

Adopting green business policies could also make companies more sustainable and able to deliver returns to shareholders and owners for longer. Failing to address climate issues will make it more challenging to operate a vibrant global economy in the future.

Climate-friendly business policies can shape investor demand. According to Gartner, ESG pressure from investors is forcing management to take environmental issues seriously. Companies that demonstrate their ESG performance are more likely to attract the capital they need. According to BlackRock CEO Larry Fink, sustainability isn’t just “doing the right thing,” but also a path to sustainable profits.

Lastly, taking climate action may increase productivity. That’s because employees feel more motivated to perform when companies take care of the environment, increasing profits by 60%, according to McKinsey & Co. research. Companies are also more likely to attract talent. Between 44% and 49% of Gen Z and millennials said they made job decisions based on ethical considerations, with many willing to take lower pay if it meant working for a more sustainable business.

Climate-friendly ideas for your business

There are plenty of things you can do to make your business more environmentally friendly.

• Offer remote work. This strategy removes the need for employees to be physically present in your offices, cutting down on transport and on-site carbon emissions. Fewer cars on the road also reduce the risk of accidents and improve economy-wide productivity.
• Adopt green web hosting services. A company’s digital backend can emit a significant amount of carbon dioxide. However, sustainable businesses should explore so-called “green” cloud options which reduce energy usage. Hosting services may offset energy consumption with solar panels or wind turbines.
• Buy carbon offsets. Technological constraints may make it impossible for your company to reduce emissions directly. However, you can purchase carbon offsets to mitigate the environmental impact of emissions. Many organisations, such as Cool Effect and South Pole, provide services to take carbon out of the atmosphere on your behalf.
• Improve your energy efficiency. Lowering your energy bill is easy, thanks to significant technological advances. Consider installing
• LEDs, smart thermostats and sensors which switch lights on and off, depending on whether there is someone in the room. Also, adopt a laptop-only computer policy instead of using less frugal desktops.
• Switch to sustainable packaging. Today, thousands of companies offer biodegradable or compostable packaging for every product. A survey by Sendle revealed that 64% of consumers are more likely to purchase from a brand offering sustainable packaging.
• Use sustainable in-office products. Consider switching to more environmentally friendly printers, cleaning supplies, and paper. (Check whether it is pre- or post-consumer waste-derived).

At Gerald Edelman, to bring sustainability to the forefront and ensure it is a core principle, we launched a sustainability committee in 2021. The committee is comprised of team members who have a vision to lead the way to a more sustainable future, inspiring stakeholders to make changes that have a positive impact on the planet.

As part of the committee we complete an annual Carbon footprint report to track our progress and highlight the areas we need to improve.

A few of our key achievements:

• We have been approved for the SBTi. Science-based targets provide companies, like ours, with a clearly-defined path to reduce emissions in line with the Paris Agreement goals, helping us with our aim to achieve sustainable growth.
• Through constantly reviewing energy efficiencies in our offices we reduced our night rate usage from 41,500 in 2021-22 to 21,500 in 2022-23. The changes we made were simple, such as turning off air con units overnight, but have had a big impact.
• In the process of moving to a renewable energy supplier
• In the process of applying to become a B Corp

What support is available?

We partner with NatWest Mentor to deliver a range of HR consultancy services. One such service is Environmental Management.

Under the Environmental Protection Act 1990, all businesses have a legal obligation to manage their environmental impact. Mentor can help in the following ways:

• Environmental impact assessment
• Environmental audits
• Produce environmental policies and procedures
• Provide advice on environmental best practices and solutions
• Environmental awareness training
• Assist with implementation of policies and procedures
• Free Carbon Planner Tool
• Support to achieve ISO 14001 (ISO 14001 is the international standard that specifies the requirements for best practice environmental management)

If you would like further information regarding how Mentor may be able to support your business, please contact the team directly on 0800 970 9814, quoting reference “GE”.

In summary, slowing climate change can significantly accelerate your financial performance. However, each company’s path to sustainability will be different. Choose the strategies that make sense for your company and move decisively in that direction to reap the full benefits.