Leading the way on climate change
- Management ,
- Corporate governance ,
As international climate negotiators ramp up activity towards the Paris talks in December, Paul Suff asks why more corporate leaders are still not taking action to cut carbon.
Climate change should take centre stage this year, with world leaders gathering in December to hopefully sign a new global agreement to reduce greenhouse-gas emissions. Some corporate leaders are increasingly recognising that businesses have a key role to play in tackling climate change, and they are pushing to reduce the carbon footprints of their own organisations and encouraging others to do likewise.
Addressing members of the Corporate Leaders Group at an event in January to celebrate its 10th anniversary, Prince Charles stated: “Forward-thinking businesses are ever more determined that they are going to be a part of the solution to climate change.” There are many examples of companies acting to show that this is true. So why was climate change absent from the list produced by consultancy PwC of the 19 issues that most concern chief executives in 2015?
The heir to the British throne made a few other observations in his speech that may provide an answer to that question. He expressed great faith in business leaders getting things done on climate change because they tend to have the vision, the skills and the capacity to drive real change. This belief was accompanied by the caveat, “once they are fully engaged”.
Engagement on environment issues is something that top management will have to demonstrate if their organsiations are to comply with the requirements of the revamped 14001 standard. It includes a section devoted to leadership and the role of senior managers, and, as practitioners make clear, provides an opportunity to raise awareness among executives of the business risks and opportunities associated with issues like climate change.
One explanation for the lack of engagement among so many at present is the excessive focus by some business leaders on short-term results at the expense of long-term interests. Profit maximisation and achieving quarterly earnings tend to trump all other strategies in too many big companies and among investors. The pressure to deliver quick returns is often to a company’s detriment.
Long-term incentive plans for executives have been introduced to try to counter the mindset that focuses on short-term returns at the expense of longer-term sustainability. If carbon reduction targets and other sustainability goals were included in the performance objectives for executive incentive plans, and the new 14001 acts as a lever to raise awareness, those top managers now failing to show leadership on climate change may change their behaviour.
They could then, as Prince Charles pointed out, put their skills to good use and help drive reductions in greenhouse-gas emissions on the scale needed to keep temperature rise below the dangerous 2°C level.
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