Will business benefit from or be harmed by measures to combat climate change?
Aren't business and the environment always at odds?
Not at all. This impression grew up in the early days of the green movement, when industry and environmentalists were often locked in battle over specific pollution or conservation issues. At the same time, some environmentalists attacked the whole concept of economic growth. But more recently business and environmentalists have become allies and particularly so over combating climate change. Business leaders on both sides of the Atlantic have been in the forefront of pressing governments to do more to reduce emissions of carbon dioxide and other greenhouse gases.
Where's the common interest?
Business absolutely depends on a healthy global environment, which produces its raw materials and provides services ranging from supplying clean air and water to receiving its properly treated waste; you could say that the economy is a wholly owned subsidiary of the environment.
At the same time, economic growth is essential to provide the wealth needed to clean up pollution: most environmentalists have not always been against economic development as such, wanting rather to ensure that it benefits people and the world. Twenty years ago this crystallised into the concept of sustainable development, defined as "meeting the needs of the present without compromising the ability of future generations to meet their own needs", for example, through seriously damaging the environment. Nothing exemplifies this better than the imperative of avoiding the impacts of climate change.
So what is happening?
More and more businesses are putting their own house in order and reducing their CO2 emissions. For example, DuPont has cut them by 60 per cent, AstraZeneca by 63 per cent, and the Vancouver-based Catalyst Paper by 71 per cent.
Increasing numbers of companies including BSkyB, Avis Europe, Barclays UK and the airline Silverjet have already gone carbon neutral by offsetting their remaining emissions, for example by financing energy efficiency and renewable energy projects. Others including NewsCorp, Timberland and Marks & Spencer have committed to joining them soon.
In 2005, HSBC was the first major bank and one of the first companies of any kind in the world to achieve carbon neutrality. This June it committed to spend another £45m over the next five years to reduce further its impact on the environment by cutting energy and water consumption, introducing renewable energy technology, erecting flagship green and efficient buildings, reducing business travel and carbon dioxide emissions, using less paper, producing less waste and engaging its employees to do their bit for the environment.
Isn't the cost of cutting emissions prohibitive?
Of course it costs money to introduce the energy-saving measures, techniques and equipment that cut CO2 emissions but the value of the savings achieved far outweighs the expense and thus improves profitability and boosts the bottom line. DuPont saved an enormous £1.5bn in energy costs between 1990 and 2005, Dow Chemicals an even greater $4bn in little over a decade between 1994 and 2005. Often the measures taken pay for themselves in a year through lower energy bills. A recent survey of 84 corporations by the The Climate Group found that not one of them had lost money by taking action to reduce their emissions.
Are new opportunities created by action to improve the environment?
Yes, they are. A vast global market for environmental goods and services is growing rapidly. It is now worth over £400bn and is expected to shoot up to £688bn by 2010. Pioneering companies are rushing to meet the demand. General Electric, for example, launched Ecomagination, a range of high-tech low-carbon products and services, in May 2005; a year later it reported revenues of over £5bn. Global wind energy generation has more than doubled since 2000, while solar cell production has grown sixfold. And the increasing demand for green, energy-efficient homes will also provide big new markets.
Does pioneering pay?
Companies and nations that move fast to take advantage of such developing markets can reap huge benefits and help mitigate greater impacts later on by getting an early lead in products, techniques and services which are then in demand worldwide. Unfortunately Britain has sometimes missed such opportunities by losing early leads in windpower, for example. It may now be in danger of doing the same over carbon capture and storage, which prevents carbon dioxide emissions from burning fossil fuels from getting into the atmosphere.
Anything else?
Taking measures to combat climate change can also improve a company's reputation, and enhances its brand. BP became one of the world's most respected companies after being the first major oil firm to acknowledge the reality of climate change and taking steps to reduce its emissions and develop renewable energy. A green reputation can also help attract and retain the best, and most highly motivated, staff. Research has shown that a good corporate reputation is rated second only to career growth potential, as the most important consideration for people when choosing a new employer ahead of starting salary, fringe benefits, and sports and social facilities.
What about the downside?
New regulations and taxes brought in to force companies to cut emissions can bear down on them. But here, again, the fast-moving can benefit. Searching for ways to minimise their costs can be a powerful spur to innovation, producing new techniques and products that others will want to buy. It is important that Governments are consistent and fair in bringing in such measures, and that they set out a clear direction for the long term: otherwise companies are likely to be reluctant to innovate or make new investments.
What if we don't control climate change?
That would be disastrous for the economy. Sir Nicholas Stern warned last year in his review of the economics of climate change that continuing on our present course could lead to another Great Depression.
Global warming, he calculated, could cost 20 per cent of global GDP a year. As the report highlights, early affordable steps to tackle climate change now may avoid the need for drastic and costly measures in the future. And as any businessman will recognise, that is a good investment.
What is HSBC doing to help? Find out more at www.hsbc.com/cr
We don't know if business will benefit from measures to combat climate change, however, HSBC believes companies that behave ethically, responsibly and sustainably are better able to deliver long-term profits growth. Companies that adopt these principles will also be more effective in addressing the issues on which the long-term success of their business depends.
Indicators such as carbon dioxide emissions are the hard measures of performance in the world's fight against climate change. But as we start to address underlying causes and develop solutions, it is clear that we also need a new, "softer" set of measures that chart our progress in engaging the most critical element of all: people.
That's why, this July, HSBC launched its first international survey of public attitudes towards climate change. The HSBC Climate Confidence Index highlights a surprising spectrum of opinions across the world. Climate change may indeed be a global issue, but the reactions to it vary strongly.
The HSBC Climate Confidence Index shows that people in developing economies exhibit the greatest concern, commitment and optimism towards the problem of climate change and in developed economies the greatest indifference, reluctance and fatalism. While cynicism and "green rejection" is demonstrated by respondents from developed economies in the Index, it may be that this is fed by the difference between what consumers think governments should be doing (68% think they should be playing a leading role) and what they think they are doing (33% think they are playing that role). This clearly shows there is an opportunity, even a mandate, for both governments and companies to do more.
