Corporate Strategies for Addressing Climate Change

Abstract

Executive Summary Climate change is now a bright, blinking issue on the radar screens of companies worldwide. Companies have started addressing climate change for a myriad of reasons – reasons as diverse as their respective business models. The academic and business literature has done a fairly good job of exploring why companies are addressing climate change. This study examines how they are addressing climate change. It explores the risks, rewards, opportunities and barriers surrounding corporate action on climate change and provides insight into the strategies employed by companies that have led the way in taking early action. The lessons learned by early actors can inform the efforts of those who follow. Climate change presents companies with significant risks, uncertainties, and an increasing number of market opportunities. Companies now confront a patchwork of regional regulation. In addition, most companies in our survey expect federal regulations to limit GHG emissions within the next decade. The unknowns of potential regulation create uncertainty, and therefore risk, for businesses making strategic decisions. Volatile energy prices wreak havoc on cost structures, severely impairing the ability to accurately forecast profitability. Large storm events have caused companies to think differently about the physical risks of climate change. Accumulating scientific evidence, coupled with these large storms, has boosted public awareness, leading to changing consumer preferences. Companies are looking at these changing preferences and identifying market opportunities, broadening the traditional risk-mitigationcentered approach to climate change. The focus of this study is “climate-related strategies,” defined as the set of goals and implementation plans within a corporation that either aim to reduce GHG emissions, or that significantly reduce GHG emissions as a co-benefit. This includes strategies and measures for achieving near-term emission reductions from a company’s own operations; research, development, and investment in low-carbon production and process-related technologies; alternative products that have a more attractive carbon profile; energy-efficiency initiatives; reductions obtained through offsets and emissions trading; and activities to reduce “upstream” or “downstream” GHG emissions along their value chain.