CEOs weigh the Climate Agenda

Date: 05-02-2008
Source: Bangkok Post

During the past 12 months, climate change has soared up the public agenda. So what are CEOs doing to combat the threat of global warming?

From September to November 2007, PricewaterhouseCoopers conducted interviews with 1,150 CEOs in 50 countries for its 11th Annual CEO Survey. The results of this survey, which were released last month at the World Economic Forum in Davos, Switzerland, suggest that while CEOs are showing greater levels of commitment toward the climate change agenda, they believe greater government input and collaboration are essential.

Why climate change worries CEOs: CEOs are concerned about the financial and physical consequences of climate change. Sixty-four percent cite rising energy costs, while nearly half are nervous about increasing costs in areas such as compliance and insurance.

They also worry about the physical toll climate change is expected to levy. Thirty-nine percent of respondents are concerned about potential supply-chain disruptions and 28% about the risk to people and property from extreme weather events and the like.

Asian CEOs are especially apprehensive. Seventy-nine percent worry about the impact of rising energy costs; 67% about higher compliance and insurance bills; 59% about supply-chain disruptions; 46% about greater pressure from stakeholders to deal with climate change; and 46% about the physical damage climate change could inflict.

Governments should lead the way: Four-fifths of CEOs agree that governments should lead the effort to address environmental problems. Ninety percent of Asian CEOs take this view - not surprising in a region of rapidly emerging economies, where resources are in high demand and ecosystems have already shown signs of damage.

This call for greater government involvement is remarkable, given that companies generally seek less regulation and more flexibility to manage their operations. It suggests that CEOs recognise the scale of the problem and think that only governments - in their role as public stewards - can act in concert to address it.

The call for collaboration: Nearly three-quarters of CEOs believe businesses need to collaborate more effectively with each other to address climate change. CEOs in India, Japan, France, Korea and Germany top the chart in this respect.

This powerful endorsement of greater collaboration may stem from early evidence of the impact business networks can have. Wal-Mart has, for example, formed a partnership with major suppliers to measure the carbon footprint of its products and reduce waste and energy use through more efficient packaging. Similarly, Marks & Spencer is increasing its use of sustainable sources of cotton, wood and paper goods, and selling free-range poultry and eggs. It is even considering whether to locate facilities on its suppliers' farms to avoid waste and re-generate energy.

Big companies are leading the pack: More than one-third of CEOs say they are investing significant resources to address the risks and opportunities arising from climate change. The percentage is considerably higher in very large companies with turnover of more than $10 billion a year. This is possibly because they possess the capital to address the commercial opportunities, install energy-saving technologies and prepare for changes in regulation.

Smaller companies, by contrast, may find it harder to justify spending a lot of money without government guidance on the controls that are needed to allay environmental damage.

Developed countries' responsibilities: Nearly 75% of CEOs expect developed countries to accept more responsibility and a greater share of the costs involved in mitigating climate change than developing nations. CEOs in Korea, India, Russia, Spain, Germany and Brazil are most convinced that developed nations should bear the brunt of the burden, whereas those in Japan, the US and the UK are least likely to share this view.

How to apportion responsibility for cutting emissions between the developed and developing worlds proved one of the knottiest issues at the recent UN Climate Change Conference. The resulting Bali Action Plan acknowledged that "deep cuts" will be required, but stopped short of setting specific goals because of the difficulty in securing international consensus.

CEOs see some positive aspects: Nearly a third of CEOs see climate change as an opportunity to reduce their costs or generate additional profits from new environmentally friendly products and services. Another third believe that demonstrating their companies' commitment to the mitigation of climate change will bring intangible benefits such as stronger brands, an enhanced reputation or better access to talent.

The climate change agenda in Thailand - what's ahead? We expect to see climate change become a bigger part of the agenda for CEOs in Thailand. For example, at PwC Mekong we have launched internal climate change awareness campaigns in our offices. Initiatives include reducing the amount of paper we use, and saving energy by turning off the lights and computers during the lunch hour. By identifying the areas in which our business can reduce its impact on the environment, and installing processes that make it easy for staff to follow, we are taking steps toward a cleaner environment, and thus a more sustainable future.

We believe that the Thai government is starting to answer the calls of CEOs, and initiatives toward curbing emissions are increasing. Despite the potential burden of increased regulation, the results of our survey indicate that business leaders in Thailand will welcome clear global standards.The above article is based on the results of PwC's 11th Annual Global CEO survey, which is available to download at http://www.pwc.com/th

Sudwin Panyawongkhanti is Corporate Social Responsibility partner of PricewaterhouseCoopers Mekong, which comprises of offices in Thailand, Vietnam, Cambodia and Laos.