2017 promises to be a big year for climate change in Canada. For the first time in a long time, there is likely to be an increase in positive action from both Government and businesses, rather than simply bad news. This makes for great headlines and political posturing, but it can be a real challenge for individual companies to know how to optimize within a new reality of a certain carbon price, and the uncertain impacts from climate change.
Having supported hundreds of companies to navigate these evolving operating contexts, our experience shows that:
- There will be winners (those who adapt) and losers (those who pretend nothing has changed) from a tangible shift like this;
- If it is treated purely as a “cost to bear” it will be lose-lose-lose for companies, the country and the environment; and
- If approached as an opportunity and pursued proactively it leads to competitive advantage, innovation, and reduced environmental impacts.
So what can companies do to ensure that they are on the winning side of this equation? We see it as three relatively straightforward steps. First, understand where you are exposed to carbon risks or have advantages. Second, improve your business and carbon performance by reducing impacts, switching to lower impact inputs such as fuel and energy, and becoming more efficient overall. Third, succeed by differentiating yourself on the topic of carbon, and in turn creating additional business value. Below we explain how best to approach each of these steps.
Step 1: Understand
We always start with a qualitative gut check of where the hot spots – or key impact areas – are. This enables you to start taking action quickly, as well as identify support or incentive programs early (For example the $25M CME SMART Green fund to help SMEs in Ontario purchase more efficient equipment). However, it’s not enough to stop at the gut check as this has the potential to just reinforce our understanding rather than uncovering key risks and opportunities that a formal process provides. This quantification is done through a formal footprint exercise. A ‘footprint’ is synonymous with your carbon emissions. Fortunately, there are well established standards, processes, and emission factors to support this process in a consistent manner. Sample resources for this include those provided by the Greenhouse Gas Protocol, or consulting support through service providers such as Anthesis.
Once you have a grasp on your own footprint, we recommend engaging with your customers and stakeholders to better understand their expectations and needs, as well as to uncover additional business opportunities. Finally, we recommend engaging your suppliers, following a similar qualitative/quantitative process – often supplier engagement can be challenging but also creates opportunities for efficiency and risk reduction.
Step 2: Improve
It isn’t enough to just know what your footprint is – you must also look to reduce it over time to realize the benefits. This is especially true in the current regulatory context with the baseline price on carbon scheduled to increase yearly until it reaches $50/MT in 2022. In our experience, successful companies do three things to reduce their impact and realize value. First, they think reduction and growth. While reducing costs and risks they also look for revenue, brand, investment and innovation opportunities to grow their business opportunities. Second, they look for action, and celebrate easy wins, helping to build momentum and engage everyone in the organization. And third, they build their ambition and scope over time. They leverage the early wins to pursue larger, more complex and impactful efforts – that engage their customers further and open new efficiency opportunities.
Step 3: Succeed
We have seen many organizations realize marginal benefits from their carbon programs through reduced operating costs, as well as some customer and employee engagement. We have also seen companies that have really embraced the data, the science and the clear trends to reposition themselves for the emerging reality. Examples of this include: GE and their Ecomagination program; Unilever and their Sustainable Living Plan; automakers developing more efficient cars; architects building for more extreme weather events; etc.
What is consistent across all of these, and the many more examples out there, is their proactive approach to climate change. This often includes adjusting their products and business models to meet the changing landscape; looking for opportunities created by climate change (e.g. demand for more efficient products) while managing its risks (e.g. building more resilient supply chains). As a result, organizations are realizing substantial business value including: revenue, such as Johnson & Johnson’s Earthwards products which represent $9Billion (USD) in sales; faster growth, such as Unilever’s sustainable Living brands which are growing 30% faster than their other brands; or reducing costs, such as Shoppers Drug Mart which saved over $400,000 from energy efficient lighting in its Ontario stores.
As a CEO, VP, Manager or employee of a company we all need to appreciate that we are operating in a new and evolving reality that cannot be ignored. To ensure that we are on the right side of winners and losers we’ll have to take action. Fortunately, the path forward is well defined, with clear steps and relatively easy actions to take – it is now just incumbent upon ourselves to take the steps.
Watch this space for analysis, and practical guidance, on emerging trends in this area including the Pan Canadian Framework on Clean Growth and Climate Change.
To support Canadian companies in adapting to this new reality and maximizing their potential within it, we are offering a free 30 minute consultation. To set up a time please complete the form below: