Climate change and corporate responsibility: are there long-term financial incentives
5 August 2009:
The stated purpose is to “increase awareness among Canadian directors about the business impacts and related governance issues resulting from climate change.” The result is a guide that focuses on business strategy, risk management, and structure.
The briefing addresses five major areas for director improvement: understanding of business issues; influence on risk management and strategy; impact on financial performance; external communications and disclosures; and the adequacy of information systems and internal controls. For each of the sections, the briefing provides relevant questions for directors to ask themselves regarding their business.
One area that warrants emphasis is the idea that, for businesses that are faring poorly in the current economy, cutting back is not necessarily the answer. In fact, scaling back environmental reforms in the short run may lead to larger costs in the long run. Therefore, the CICA advocates investing now in changes such as waste reduction and energy efficiency. The thought is that these changes will lead to greater performance and shareholder value in the future.
The briefing also discusses business response to government regulations. The CICA notes that government regulations put “a price on carbon,” so businesses must ensure reliability of information such as greenhouse gas emissions. The briefing describes “adaptation” and “mitigation” measures, the latter of which requires management to reduce greenhouse gas emissions that are attributable to its products. This issue of tracking the climate impact of particular products most recently came to light when Wal-Mart announced its “sustainable products index” initiative, which requires suppliers to provide information about the environmental impacts of their products.
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Source: Global Climate Law
