Climate Data Shows What's Good Business

"In the last decade, many major US businesses have recognized that the protection of natural resources is directly aligned with profitability and long-term growth,” says Suzanne Apple, senior vice president of private sector engagement at WWF-US. “It has moved from a risk-management-focused, nice-to-do approach to a core business function that is becoming more integrated into everything from operations to procurement. When companies like The Coca-Cola Company are at risk of losing access to, or availability of, water resources in key markets,” she adds, “sustainability and conservation become even greater business imperatives. Or consider a company that produces wood, paper or pulp: What happens when they run out of trees? This is especially true in challenging economic times when reducing costs becomes an absolute priority.”

More and more major companies across America have been reaching the same conclusion: saving money and saving the planet are not mutually exclusive. They’ve made another important connection as well. Meeting the challenges of global climate change—by improving energy efficiency, reducing waste and investing in green technology and renewable energy—is good for the bottom line.

But what does “good” look like in the context of sustainable business, and how is it best pursued in light of the latest climate change science? How can sustainability investments bolster profitability both in the short term, through energy cost savings, and in the long term, by securing markets and preventing disruptions to supply chains? Taken from another angle: What is a company’s fair share in the fight against climate change, and what are the potential rewards? What are the possible consequences of inaction?

Carbon Out, Productivity and Profit In

Built on the real-world experiences and successes of major US companies, the Carbon Productivity Portfolio maximizes carbon reduction and creates business value through a practical, five-step process. It is just one tool in the corporate toolkit WWF has created to help capture the full emission savings possible in 2020.

Carbon Productivity Portfolio

“One of the most powerful components of The 3% Solution is that it says, ‘This is what good looks like,’” says Steven J. Swartz, a partner at McKinsey who provided analytical support for the report. “Companies that want to do their fair share need to be delivering a negative 3% absolute emissions trajectory, but few Fortune 500 companies currently have standards that meet that threshold. You can look at their annual reports and see all sorts of ways of describing what they’re doing, and they’ll all sound very good, very compelling. But The 3% Solution does something new by giving a barometer for the process. It sets a benchmark for getting on the pathway toward what climate scientists say is required to avoid the worst impacts of climate change.”

And that’s perhaps the greatest asset of The 3% Solution—that it brings clarity and cohesion to an effort that many companies across the globe have been tackling individually, often without scientific guidelines and with varying results.

When science-based goal setting is in place, however, the chances that a company’s carbon reduction program will succeed are amplified. Swartz goes on to explain, “When you set a goal, you professionalize your approach to this. You put a program in place, and you put responsibility and accountability for delivering it in place, and you deliver better performance.”

The prospect of wide and possibly cooperative participation in the 3% solution vision is particularly exciting, he says. “Having a large number of very big companies set goals on common timelines, with a common analytical framework, to reach common objectives, is a concept with tremendous power. If you could get 100 of the Fortune 500 companies to set goals to this 3% pathway and to work collaboratively on delivering emissions reductions, the coordination that would come from that would be several orders of magnitude more than what the individual companies could do on their own.”

Paul Simpson, CEO of the global environmental charity CDP, agrees. “We know that setting targets can facilitate better corporate performance. CDP data suggests that companies that perform better on climate change generate superior financial returns,” he says. “While companies don’t always achieve their sustainability targets, those targets are powerful drivers of behavioral change.”

Step by Step: Ecofriendly Targets Get a Boost

For the largest corporations in the United States, clean energy is now becoming mainstream.

Less Is More

Huge savings are possible in nearly all elements of the US corporate sector, to the tune of over a trillion dollars in total by 2020. And, whether from implementing behavior changes or improving technology, the potential for carbon emission reduction is just as big.

While the report focuses on the carrot of cost savings for participating US companies, it also brandishes the stick of the potential cost of failing to act immediately. “If you don’t act now, it’s going to be far more expensive and harder to plan for,” says CDP’s Simpson. “The costs of inaction are very high, including significant disruptions to supply chains. We’re already seeing companies reporting increased physical risks from changing weather patterns and a changing climate.”

To avoid those scenarios, The 3% Solution identifies three categories of corporate activities that can achieve the required carbon emissions reductions and generate the associated cost savings. These are improved energy efficiency through behavioral or management changes; technology improvements (like creating systems that generate heat and power at the same time and by switching from older, energy-inefficient technologies to newer, upgraded systems); and increased investment in low-carbon and renewable energy—especially rooftop solar power.

“I personally was a bit surprised at the report’s emphasis on rooftop solar, but I shouldn’t have been because innovation, mass production and scale are really driving the cost of photovoltaics down,” Simpson says. “There are many cost-effective approaches to emissions reductions with great returns on investment available. But the cost of solar panels has plummeted in the past five years, making solar energy more attractive. It presents a huge opportunity for many of these companies that have enormous roof spaces.”

Johnson & Johnson is already reaping the benefits of investment in solar power. According to the company’s global energy director, Jed Richardson, J&J now has more than 20 megawatts of solar panel arrays installed on its properties worldwide. “Years ago, solar was much more expensive, and our implementation was reliant on rebates and incentives offered by states and countries around the world,” Richardson explains. “Today, because the price of solar panels has dropped so dramatically from what it was even five years ago, we’re beginning to look at solar in parts of the world where the energy rates are just high, even though you don’t necessarily have any external force influencing the installation of the panels.”

“The nice thing about solar for us is that it really is plug-and-play. You turn it on, you walk away and it really does its job,” says Richardson. “J&J is also increasing its use of wind power, recently installing two three-megawatt wind turbines at its manufacturing plants in Ireland.”

And that’s the key, reiterates WWF’s Spitzer: getting a suite of scientifically grounded options into these companies’ toolkits. What matters most, he believes, is to get American companies to adopt the 3% solution now, while there’s still time to implement the report’s recommendations on a schedule that’s gradual, economically feasible and, best of all, profitable. “Interest is high and the anchor in science is a huge boon in effecting change,” says Spitzer. “That’s a good thing,” he adds, “because climate change isn’t slowing down soon, so we have a limited time to make the kind of universally beneficial changes we need.”

Slow and Steady Wins the (Climate) Race

There’s no time to waste to help the environment (and improve the the bottom line). Adjustments made now will allow companies to spread out the cost of 3% improvements over time while limiting the climate-related disruptions many groups have already seen. From a scientific and business perspective, Scenario A offers the greatest return on investment.