Large companies see their greatest reputation as reducing emissions
Companies are increasingly convinced that reducing carbon emissions can have a positive impact on market demand, reputation and even supply chains, writes Nick Ferris.
Companies that want to thrive must face the challenge of climate change. The good news is a significant part of it across the EU. The UK and US are increasingly convinced that reducing emissions is good for business. This is the result of a major new survey by the European Investment Bank (EIB).
The EIB asked 13,300 companies – from SMEs to large corporations – to assess the impact of reducing carbon emissions2 Emissions based on market demand for their products. In the 29 countries surveyed, an average of 27.8% of companies reported having a positive impact, while only 17.3% had a negative impact.
Companies in France were the most positive: 52.8% said the reduction in emissions had a positive impact on market demand, compared with 9.7% who did not. In general, Western European countries were more likely to report that the emission reduction had a positive effect than in Eastern Europe.
Company survey responses by country on the impact of reducing carbon emissions on market demand
source: European Investment Bank Survey 2020
Companies in all but four countries – Cyprus, Romania, Greece and Estonia – said reducing emissions would have more positive than negative effects on market demand. Greek companies saw the least value in reducing emissions. Only 13.7% said they were stimulating market demand, compared with 17.1% who did not.
„Our collaboration with companies from a variety of industries has shown that companies see significant potential for the transition to net zero emissions,” said Ana Musat, policy director at Aldersgate Group, a UK climate think tank.
However, governments must now set a „clear direction” to maximize economic benefits, she adds. It is through „regulation, market mechanisms and investment in skills, [that] Private investment will flow into low-carbon solutions and enable a timely transition that maximizes business opportunities, „she says.
Companies cite the positive effects of emissions reduction on the population who are motivated to combat climate change
source: Source: Survey by the European Investment Bank 2020, UN climate protection vote 2021
According to the analysis, companies see more advantages for market demand in countries where a larger part of the population is highly motivated to combat climate change.
Seven European countries surveyed by the EIB were also surveyed in the 2021 UN climate change vote, which assesses national opinion on climate change. Of these seven countries, Poles were the least likely to believe that we should do „whatever is necessary” to combat climate change. In the EIB survey, Polish companies also saw the least positive impact on market demand in reducing emissions. Only 24% of them said they did.
A Western European company that is adapting its business operations to meet customer demands is Enel. The Italian multinational utility will invest EUR 190 billion (USD 225.7 billion) in green energy and electrification over the next ten years to become a green „super major”.
Enel adapts to changing market demand, says Francesca Gostinelli, director of economics and scenario planning for the company. „We are sticking to a path of long-term sustainable growth in line with the Paris Agreement,” she says. „We have decided not only to take advantage of the opportunities associated with the energy transition, but also to act as pioneers.”
The company’s approach is based on the „system value” theory, which takes into account all economic, environmental, social and technical outcomes of a solution and not just base profits.
„Shifting the representation of the energy transition towards values is of crucial importance for society and the economy and can support the implementation of commitments for sustainable action and investment,” says Gostinelli.
Elsewhere in the EIB survey, companies indicated that reducing emissions had a positive rather than a negative impact on reputation. Across the 29 countries, an average of 31.2% of companies said it had a positive impact on their reputation, compared with 7.9% who did not.
Large companies found decarbonization to be more positive for their reputation. 37.8% of the large companies surveyed saw a positive impact on their reputation compared to 25.2% of the small companies.
Average survey response on whether reducing CO2 emissions has an impact on the company’s reputation
source: European Investment Bank Survey 2020
A multinational that has long identified with sustainable practices is the world’s largest furniture retailer, Ikea. The Swedish multinational is investing hundreds of millions of dollars in renewable energy and sustainability efforts to become a climate positive company by 2030.
In practice, this would mean using only renewable and recycled materials and reducing the company’s carbon footprint by an average of 70% per product.
„Our vision at Ikea is to create a better everyday life for people,” says Andreas Ahrens, Head of Climate at the Inter Ikea Group, which, for example, connects Ikea franchisees with suppliers. „Climate change threatens this for the people of today and for future generations. With increasing customer awareness and increasing willingness to act [sustainability] improves our brand, but any brand-related recognition should only be seen as an additional effect for taking responsibility and ensuring sustainable business. „
Ahrens adds that the company’s decarbonization efforts are having positive effects elsewhere. „Our supplier partners’ investments in renewable energies show cost reductions in many cases,” he says. This is a consequence of the dramatic drop in the cost of technologies such as solar panels. In addition, more energy is generated on site and you avoid any CO2 Taxes.
Despite the generally positive message on the consumer side of the companies, the respondents to the survey were more skeptical about the effects of emissions reduction on the business side.
In the 29 countries surveyed, an average of 14.8% of companies said that reducing emissions had a positive impact on supply chains, while 26.1% said it had a negative impact. Companies in the EU and the UK were more likely to report positive impacts than companies in the US, which responded to the survey towards the end of Donald Trump’s climate-skeptical administration.
Survey whether the reduction in CO2 emissions has an impact on supply chains
source: European Investment Bank Survey 2020
A significant majority of companies – 59.1% – responded that reducing emissions had no impact on supply chains.
Myles McCarthy, director of the Carbon Trust, a climate change and sustainability consultancy firm, says the reputation and market demand benefits may outweigh the challenges, although supply chains could be difficult to transform in practice.
Ikea’s Ahrens emphasizes that taking action now can help ensure future profits, even if there are short-term costs. „The biggest gains are reshaping our operations and supply chain to reduce future costs associated with climate change,” he says. However, transforming supply chains is not just about future climate resilience.
„Many companies – and especially those with customer contact – have historically had remote relationships with their suppliers,” says McCarthy. „Their main focus has been to get them lower prices. Companies are now realizing that much more can actually be achieved by working more closely with suppliers over the long term.”
McCarthy cites the example of Dave Lewis, Tesco CEO from 2014-2019, who oversaw a business transformation that included developing long-term relationships with its larger suppliers to achieve both cost and emissions savings. This increased involvement in the supply chain shows a growing trend in the food industry that is unleashing innovation to reduce emissions and achieve efficiency.
Survey response to the question: „How are your sustainability priorities likely to change due to Covid-19?”
source: Carbon Trust report on corporate attitudes towards sustainability in 2020
„Much of Tesco’s rescue came from a change in how the company worked with its suppliers,” says McCarthy. „Lewis has built long-term relationships with them to reduce impact and drive costs. This has been beneficial for both the retailer’s bottom line and the environment.”
“It’s about getting a bigger picture of what’s going on. It sits down and says, instead of using this plastic wrap, we can use this reusable container. It’s also about understanding how consumers are concerned and how companies can address these changing concerns by driving sustainability in their supply chains. „
Covid-19 as an accelerator
The impact of the coronavirus pandemic has resulted in a need to focus on business practices. The Carbon Trust’s Corporate Attitudes to Sustainability report for 2020 shows that 74% of companies give sustainability a higher priority after the coronavirus pandemic. Only 7% said sustainability had become less important. This survey included large companies with 1,000 or more employees operating in a variety of industries in France, Germany, Mexico, Singore, Spain and the UK.
„One thing that has seen a number of industries over the past year has been the disruption of their supply chain caused by Covid-19,” McCarthy says. „Businesses are realizing that if you haven’t diversified your supply chain and ignored risks, including those associated with climate change, you may find your entire business is at risk.”
He says many companies have learned from dealing with the ups and downs of the pandemic, and that is now an indication of their response to the parallel climate change crisis.
This article appeared first Just-Food sister title Energy Monitor.