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March 12, 2009

Corporations Look to Copenhagen for Help in Addressing Climate Change
    by Robert Kropp

Report by the Economist Intelligence Unit finds gains in corporate energy efficiency, but little action on the broader impact of climate change. -- The potential impact on climate change of the Kyoto Protocol, adopted in 1997 and entered into force in 2005, was blunted to a significant degree by the failure of the US—the world's largest per capita emitter of carbon dioxide—to ratify it, and by subsequent resistance from developing countries to their perception of inequality in the absence of per capita emissions as a basis for the treaty.

In part because of such lack of consensus, according to a report by the Economist Intelligence Unit (EIU), a research and advisory firm, by 2005 global greenhouse gas (GHG) emissions measured nearly 14% above the 2000 figure. In the US alone, by 2006 GHG emissions had risen by 15% since 1990. Had the US ratified Kyoto, its emissions would have had to have fallen by 6%.

The EIU report, entitled Countdown to Copenhagen, designates 2009 as "a watershed year for climate change," in large part because in December the world's governments will meet in Copenhagen to develop a successor to the Kyoto Protocol that will involve both developed and developing countries in its framework.

The report concludes that for Copenhagen to be a success, developed economies will have to agree to major cuts in emissions, developing economies will have to limit future emissions, and developed economies will have to use their superior resources to help finance the adoption of low emissions technologies in developing economies.

According to the report, "Unless the US agrees to make major unilateral steps, compromise on the part of the developing economies, which themselves face a severe deterioration in their economic prospects and rising social pressures, could prove elusive." President Obama has indicated that a new direction for climate change and energy policy is a high priority, and Representative Edward Markey (D-MA), the chair of the House Energy and Environment subcommittee, said that a goal of the US Congress is to pass climate change legislation in 2009.

Part II of the EIU report, entitled "Business and climate change," aims to review the actions being taken by companies to deal with the threat of climate change. Estimating that companies are directly responsible for at least one-third and possibly as much as two-thirds of the world’s GHG emissions, this section of the report, based largely on a wide-ranging survey of businesses globally, found that "despite a severely deteriorated economic environment, efforts relating to carbon emissions and climate change remain important to many companies."

Based on a wide-ranging survey of businesses globally, the report finds that two-thirds of companies have responded to climate change by implementing such energy efficiency initiatives as greener programs, better equipment, and leaner processes. Longer-term goals for companies include switching to renewable sources of energy. The report finds that current economic pressures to cut costs might well accelerate these efforts.

A smaller proportion of companies have begun to conduct impact assessments of their broader carbon footprints by measuring emissions not only from their own processes but from the lifetime usage of their products and services as well. Studies by the information technology industry, for instance, have found that energy consumption is highest during the actual usage of personal computers, rather than in their manufacture.

In response to such findings, 40% of survey respondents say they have developed new products and services in the last two years that help reduce or prevent environmental problems, and 41% have improved the environmental footprints of existing ones. According to the survey, 30% of companies expect the development of green products and services to remain a high priority, primarily due to the expectations of customers in the developed world.

Lagging behind energy efficiency and green products and services are companies' responses to disruptions in their own operations as well as those in their supply chains due to environmental changes related to global climate change. Less than one in four companies polled have begun to prepare for possible disruptions to operations from shifting weather patterns, while 18% have taken steps to protect their supply chains from such possible disruptions.

Adaptations by companies to climate change have tended to take two forms, according to the report. The first is risk management, which focuses on supply chain resilience and the ability of company operations to continue in the face of extreme weather events. The second is consideration of business opportunities. In either case, companies view adaptation to climate changes to be as important to their long-range goals as reduction of their own emissions. Citing experts who contend that a significant rise in global temperatures is inevitable, survey respondents say that adaptation to changing conditions will be crucial to their survival.

The report concludes that most companies have begun to develop and implement climate-change policies, but few have gone beyond taking their first steps. Furthermore, because of the relative novelty of the existence of environmental concerns on corporate agendas, corporate sustainability budgets have never faced the budget challenges posed by the current economic crisis. According to the report, "Two-thirds of survey respondents agree that current economic conditions would necessarily result in environmental concerns falling down the agenda."

Somewhat surprisingly, given the chilly welcome usually given by corporations to increased regulation, the report found that 56% of corporate executives believe that more regulation is necessary if society wants business to change in the area of emissions reduction. Another 35% feel that voluntary actions and market pressures will be more effective. Less than 10% believe that more regulation will impair progress and growth.

Acknowledging that carbon reduction strategies will soon become a compliance issue rather than part of a broader sustainability program, business leaders are looking forward to Copenhagen as an opportunity to help them clarify the scope of business efforts to reduce emissions. Three-quarters of respondents believe a workable successor to the Kyoto Protocol is important. The United States Climate Action Partnership (USCAP), an alliance of major businesses and leading climate and environmental groups, has stated, "The climate change challenge will create more economic opportunities than risks for the US economy."

The EIU report concludes, "Companies believe that states needs to step in to create a level playing field with appropriate incentives and penalties if carbon reduction is to occur at the pace that scientists counsel."

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