30 Apr Large companies are taking environmental risks seriously

There has been a lot of focus on the drought in California, and while this is understandable due to the potential future implications of such an event, some of the world’s largest companies are also becoming increasingly concerned about the potential impact of extreme weather events on their bottom line. Following the flooding in Thailand in 2011, many technology companies were impacted by a shortage of hard drives, and Intel’s revenue suffered a hit following a decrease in sales of personal computers.

Research by CDP, an organisation that collects voluntarily reported environmental data, shows that companies are actively pursuing lower-carbon energy and changing their procurement practices as a result of the potential impact of extreme weather events to their financial viability. As the number of extreme weather events has increased in recent years, many large public companies are also embedding environmental issues in their business strategy.

Businesses who report data to CDP are also requesting greenhouse gas emission and environmental risk data from raw material and spare parts suppliers. A greater percentage of company suppliers are also setting greenhouse gas emission targets. In 2014, 48% of suppliers set such targets which has increased from 44% in 2013 and 39% in 2012.

CDP also reported anecdotes from several large companies who are directly addressing climate risk with their supply chains as follows:

• Bank of America requests greenhouse gas emission and energy use data and goals from suppliers
• by the end of 2015, AT+T will spend a significant percentage of its key supply chain budget with suppliers who track their own greenhouse gas emissions and have their own specific goals
• L’Oreal regularly challenges the climate change performance of its suppliers during business reviews.

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Gaining and exploiting a competitive advantage over others is central to the nature of business. It is refreshing to see that such an advantages can be sought beyond the sphere of a new or better product or service and that environmental factors are now also taken into account. It is possible (indeed likely) that a high percentage of the above companies’ customer bases will applaud their leadership, and that these customers will tell their friends and families who may switch loyalties to the above companies. It is not likely to end there; it is indeed also possible that companies in a variety of other sectors will see the potential competitive advantage that can be gained from such leadership, and that customers are becoming more discerning and competition is therefore becoming fiercer.