Most companies have no clear vision on how to manage the transition to more sustainable business models, according to research by the Carbon Trust.
Despite recognising the risks and opportunities of an environmentally sustainable future, most businesses continue to have a short-term focus, the trust said in a report.
The findings came from interviews the trust carried out with experts from business, finance, government, academia and civil society, as well as board-level decision makers in the UK, South Africa, south-east Asia, Latin America and the US.
The trust cites governance failures as a key reason for the weak business response to environmental sustainability. There is a lack of tools to help boards and senior executives to effectively assess and quantify business value at stake, it said.
The trust has developed a methodology and a set of questions to help boards with this process. The steps include:
- Define the base characteristics of the business or business areas. These could include forecast volumes, locations and production processes.
- Identify the drivers most likely to impact the business, such as regulation, carbon markets, technology breakthroughs, changes in consumer preferences and physical climate impacts.
- Consider the potential impact of each scenario by calculating the effect on revenues, costs and cash flows to 2050.
- Assess the opportunity for increased value from making changes by estimating cash flow out to 2050, and compare this to the business-as-usual case.
- Assess the extent of the risk to value from not changing by estimating cash flow, and compare this to the business-as-usual case.
Tom Delay, chief executive of the Carbon Trust, said: “Businesses are both a problem and the solution. They bring together the productive, technical and financial capabilities to lead the global transition to sustainable, low carbon future. But it is crucial that boards properly assess and quantify the long-term risks and value-creation opportunities from climate change and resource scarcity.”
