Many manufacturers still have a long way to go to address the risks and opportunities posed by the push toward more environment-friendly production processes, according to a new study conducted by RiskMetrics Group, a provider of risk management services. Those risks include higher energy costs due to tighter greenhouse gas (GHG) emissions standards, and the opportunities include growing global demand for more energy-efficient products.
The report ranks large manufacturers and other companies on their effectiveness in such areas as reducing GHG emissions, energy efficiency projects, expanding renewable energy purchases, and integrating climate factors into product designs. However, perhaps reflecting the skepticism many people still have as to exactly what role, if any, manufacturing plays in global warming, many companies are largely ignoring climate change, particularly at the board and CEO level.
According to the report, which was sponsored by the Ceres investor coalition, only 17% of the respondent companies say their boards receive climate-specific updates from management; 11% of the CEOs have taken leadership roles on climate change initiatives; and exactly none have linked C-suite executive compensation directly to climate-related performance. "With or without a recession, climate change is a core business issue that all consumer and tech companies should be focused on," asserts Mindy Lubber, president of Ceres.
"Green strategies that save energy and fight global warming have broad consumer appeal and political support," says Doug Cogan, director of climate risk management for RiskMetrics Group. "Companies that seize the initiative can gain market share, build investor confidence and insulate themselves against future energy shocks and climate change regulations. It's simply smart business to employ these governance practices today."
Top Ten 'Green'
1. IBM Corp.
Source: RiskMetrics Group
The report was commissioned on behalf of institutional investors participating in the Investor Network on Climate Risk, an alliance coordinated by Ceres. "There is a strong link between sound reporting and management of climate- and energy-related challenges, and the long-term financial viability of companies we invest in," says Anne Stausboll, interim chief investment officer at the California Public Employees Retirement System (CalPERS), a public pension fund with $181 billion in assets under management and an INCR member.
Among other suggestions, the report recommends that companies raise supply chain awareness by including supply chain GHG emissions -- those emissions that result from raw material extraction, production, transport and packaging -- in emissions inventories, as well as setting emission standards for suppliers.