Despite the UK Government's commitment to set the country on a
trajectory for an 80% reduction in carbon emissions by 2050 from
1990 levels, our analysis released recently shows that around two
fifths (41%) of FTSE 100 businesses do not have clear, robust
targets to cut carbon emissions; a prerequisite for demonstrating
genuine accountability and embedding carbon reduction within an
organisation's core business strategy.
The revelation that many FTSE 100 companies do not have a
forward looking target to reduce emissions comes in the midst of
Defra's consultation on mandatory carbon;
which recognises that measuring and reporting emissions is critical
to cutting corporate carbon footprints. And yet business
supply chains are accountable for the majority of carbon emissions,
through their own direct operations as well as the public's
consumption of their products and services. This gives business a
unique opportunity to take action to fundamentally reduce their
impact on the environment, and in so doing, support the
government's drive to meet stringent environmental targets through
the 2020s and beyond.
What is a good quality carbon target?
The business rationale for setting targets is clear; namely to
drive greater efficiency and innovation, and to serve as a catalyst
to generate longer term returns to the bottom line and share price,
while enhancing reputation. But what do we mean by a good
quality carbon target? The characteristics of effective
stretching targets are as follows: they are precise in what is
being measured; aspirational in driving collaboration and
innovation; and appropriate and relevant to the business in
question and its sector.
Rather surprisingly only the Kingfisher Group (trading as B&Q
and Screwfix in the UK) has publicly set a target to directly drive
revenue from the sale of sustainable products. Kingfisher has
put green business at the
heart of its corporate strategy, recognising the potential to boost
profits through energy efficiency and by tapping into the demand
from consumers for environmentally friendly products. Its corporate
responsibility strategy, Future Homes, has two aims. The first is
to make sustainable living easy for its customers, by providing
affordable eco products, such as eco paint and solar panels, and
the second is to embed sustainability into all aspects of its own
operation. It has increased its sales of independently verified eco
products to £1.1 billion, accounting for 10.5% of total retail
sales across the Group.
While exemplar companies, such as Kingfisher, are making
impressive strides, the gap between the leaders and the laggards is
widening. During the financial crisis many organisations
battened down the hatches and focused solely on the bottom
line. In the atmosphere of austerity that followed,
sustainability initiatives were considered a luxury rather than a
necessity. Those companies that lost their momentum and
vision for carbon reduction sacrificed the associated benefits of
setting and implementing robust targets, including the ability to
mitigate risks by minimising exposure to raw material price
volatility; improved talent retention and an enhanced business
reputation, not to mention increased profitability.
Gaining a competitive advantage
BrandZ, the WPP brand and corporate reputation study carried out
by Millward Brown, calculated that on average about 20% of sales
are influenced by corporate reputation and about 10% of the
corporate influence is directly related to perceived environmental
behaviour. This equates to 2% of all sales; which for many
companies represents millions of pounds.
However, our analysis also demonstrates that only a relatively
small number of FTSE 100 companies are excelling in this area,
meaning that there is still a window of opportunity (albeit a
narrowing one) to build competitive advantage by developing an
in-depth carbon strategy to improve efficiencies, meet the demand
for sustainable products, services and practices, as well as to
define workable, stretching targets which the enterprise can strive
to achieve.
Businesses have essentially reached a tipping point. A
combination of pressures is forcing companies to raise the bar on
carbon reduction performance, including the requirement to respond
to consumer demand. According to our research, the number of
shoppers that would shun brands that don't take steps to measure
and reduce the carbon footprints of their products has doubled in
the last year to almost one in two shoppers (45%).
Businesses currently have an opportunity to set targets and
demonstrate a wider appreciation of the environmental pressures
emerging on the business, social and political landscape, including
an appreciation of how water, waste and packaging is counted
against their environmental footprint. By stepping up to the
plate in this way, these businesses will be in a position to help
drive green growth in the low
carbon economy, and to benefit from it. The time to take
advantage of this is today, while businesses still have a chance to
carve out a leadership position by creating a vision for a
profitable and sustainable future.