Organisations that take advantage of the opportunities provided by climate change challenges to distinguish themselves from competitors, and that are willing to embrace mitigation and adaptation strategies, are set to prosper in the anticipated climate-changed economy, says custodian for corporate governance the Institute of Directors in Southern Africa (IoDSA).
The organisation asserts, in a position paper on climate change, that companies most likely to thrive will be those that are able to recognise the importance of climate change mitigation at an early stage and that are able to predict the impact that these changes will have on their industry.
The pace of a firm’s adaptation to climate change and related policy will also influence the long-term sustainability of the business, says the IoDSA, as the ability to adapt becomes an increasingly discriminatory factor in its likelihood of success.
The IoDSA Centre for Corpor-ate Governance senior governance specialist Parmi Natesan adds that companies must be prepared to act early to reduce their direct and indirect emissions and to adapt to changes that cannot be mitigated.
“Success in business in the changed economy will be determined by the ability of the company to take advantage of opportunities that are presented by climate change. “Those that are unable to evolve and identify potential solutions will find themselves subject to increasing legislation and stakeholder pressure,” she says.
Meanwhile, the IoDSA points out that, while the way businesses respond to climate change will be driven in part by legislative compliance, this confines companies to reactive territories in which they have little control, which may stifle potential innovation.
Businesses should partici- pate proactively in the policy debate around energy and climate change in South Africa.
“We believe that our role is to promote dialogue through our Sustainable Development Forum, sponsored by Standard Bank, to share good practice and to keep our members aware of developments in policy, legislation, science and technology through regular briefing papers,” says Natesan.
Climate Change Response Strategy
Further, she explains that, for businesses to flourish, they must pre-empt a climate change strategy that incorporates executive-level understanding and commitment, which enables the integration of climate consid- erations into the company’s vision.
To succeed, this strategy requires a comprehensive assessment of the company’s greenhouse-gas (GHG) emissions profile, or carbon footprint, along with the definition of a common set of metrics for monitoring, calculating and reporting emissions, which are verified through agreed external processes.
“Companies should set up GHG reduction targets with an agreed baseline and target date that are integrated into key performance indicators and decision-making processes,” says Natesan.
The IoDSA emphasises that internal behavioural change is required to achieve these targets, and will require businesses to engage suppliers and customers for energy-efficient and renewable alternatives.
Climate Change Response in South Africa
In a recent report, commissioned by the JSE on the climate change response of the top 40 companies listed on the JSE, analysis reveals that there are encouraging signs of progress through improved governance, better strategies and disclosure.
Overall, 95% of the companies analysed demonstrated some form of response to climate change, but only 30% have demonstrated a reduction in overall GHG emissions over the past two years.
Further, the mining and banking sectors (the two largest sectors among those companies in the JSE top 40) demonstrate a high-quality response to climate change overall.
Sixty per cent of companies have set short-term GHG emission targets, but only 23% have set long-term targets, and 35% have linked performance on climate change to board and senior management level remuneration.
The report adds that early adopters of cleaner technologies have the opportunity to position themselves ahead of the curve and lower the risk of falling foul of the financial instruments intended to regulate climate change.