Firms 'sleepwalking' into resource crisis

13th January 2013

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A poll of companies has found that most are unprepared for the impact of resource scarcity, as boards fail to grasp the business case behind sustainability.

A Carbon Trust survey of 475 senior managers at listed companies in the UK, the US, Brazil, Korea and China, reveals that just 20% of firms are taking action in preparation for resource scarcity, with 46% confirming that they do not foresee the need to make significant changes in their operations before 2018.

When asked about specific resources, respondents confirmed that they thought carbon emissions were likely to become critically important to their business in 2015, followed by water in 2018, electricity in 2020 and natural resources, such as rare earth metals, in 2022.

Despite this, 43% stated they did not monitor the risks of environment-related shocks, such as natural disasters, to their business and 47% agreed that acting on sustainability issues damaged profitability.

“Many organisations are ‘asleep at the wheel’ when it comes to addressing sustainability and resource scarcity,” warned the Carbon Trust’s chief executive Tom Delay. “Too often businesses see taking action as an obligation and a cost.”

The Carbon Trust’s findings were echoed by research from the Prince of Wales’s accounting for sustainability project, which interviewed chairs of companies, chief financial officers (CFOs) and high-level managers about the importance of environmental data in board-level decision making.

The study found that many organisations, both in the public and the private sector, failed to grasp the relevance of environmental factors to their operations and finances.

“The business case for the inclusion of environmental and social factors at board level is not yet clear, particularly for many CFOs,” concluded the researchers.

Scepticism over the quality of data, difficulties in linking issues such as biodiversity to organisations’ operations and problems in aligning sustainability issues with business objectives, were cited as key barriers to engaging board members with environmental issues in strategic decision making.

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