by Laura Day Howard
Climate-friendly business practice not only makes sound commercial sense, but is a necessity for any modern company that cares about its impact beyond the boardroom, according to Sir Stelios Haji-Ioannou, Chairman of easyGroup.
Speaking at the first in a series of IoD Financial Director Network briefings on the risks facing today’s UK companies, sponsored by Lloyd’s, Sir Stelios emphasised: "The climate change debate is over. The science is proven and it is every industry’s responsibility to do something about it."
A clear consensus emerged amongst the event’s speakers that climate change provides opportunity for business as well as a responsibility. But Sir Stelios said that, rather than risk demonising certain industries, the emphasis should be on encouraging all sectors and businesses to do what they can to make a difference.
He argued that recent climate change studies show that the global aviation industry accounts for only 1.6% of carbon emissions. Indeed, budget airlines can be seen as the greenest part of the aviation sector, he contended. "Flying low-cost is actually better for the environment," he said, noting that more people travel on the same plane. "There are more seats and more of them are occupied."
However, Sir Stelios was keen to make clear that easyJet is not complacent and is committed to change. He pointed to the decision to phase out 22 aircraft, which were over 10 years old, and replace them with brand new, more efficient aircraft. In the last year alone, he said, the company "has spent £275 million on new planes".
Other speakers at the event included Chairman of Lloyd’s, Lord Levene; Ian Pearson, MP, Minister of State for Climate Change and Environment; and James Anderson, Director, Climate Change Services and International Development for consultancy firm Sd3 Ltd.
Outlining the government’s position, Ian Pearson emphasised that every business needs to understand and manage its operational and strategic risk when it comes to climate change. Businesses will increasingly also need to show that they are "as green as possible", as consumer pressure grows, he said, explaining that consumers are starting to actively seek out the greenest products and services.
"Climate change provides threats and challenges. At the same time, it provides new business opportunities. The UK market for environmental goods and services is something like £25 billion at the moment. We expect that to at least double over the next 10 years. I think that will bring along with it substantial opportunity," he said.
Like Sir Stelios, the Minister opined that going green on climate change increasingly makes good business sense. The challenge for companies is to find ways to decarbonise their operations and at the same time actually find a way to benefit the company, he said. He said that companies should be finding ways to tap into the advantages that renewable energy might bring a business, "or how they can tap into the growing appetite for green products."
Ian Pearson noted that the UK government is working hard to speed commitment on climate change at a European Union and international level. He said that Government clearly recognises the role the business community is playing in building momentum for change, and as a result, "I’m very optimistic you’ll find that you’ve got a very supportive government."
Lloyd’s has become highly involved in the climate change debate, given the fact that the insurance industry is likely to be in the front line of those affected by the increased severity and frequency of extreme weather – a predicted side-effect of global warming. Yet working with the Economist Intelligence Unit at the end of 2005, Lloyd’s conducted research with business leaders, which showed that only one in four companies have changed their risk management strategy as a result of increasing weather-related catastrophes.
Giving an insurance perspective, Lord Levene said that the time for business to take action had clearly come. "As insurers, we believe that risk management reasons alone are enough to demand action. Indeed, some 92% of those we interviewed last summer agree that climate-friendly behaviour makes good risk management sense," he said.
"But the majority of businesses may not yet be fully aware – or fully convinced – of the full range of benefits which climate-friendly behaviour can bring to the bottom line," Lord Levene went on to say. "Instinct suggests that climate-friendly behaviour could have a tangible impact on corporate reputation and company efficiency."
As customer understanding grows on the issues surrounding climate change and preferences change accordingly, it may become a source of competitive advantage, he affirmed.
As a consultant with companies and governments on climate-change initiatives, James Anderson told the audience he has come to the conclusion that directors of larger global companies now feel compelled to say that "climate change is important in their businesses".
However, he said, these companies need to make sure that their proclamations go beyond paying lip-service and are actually translated into corporate actions. But whether businesses like it or not, climate change "is happening and it’s happening extremely fast", Anderson warned. Businesses cannot wait on the sidelines; they must be active in developing solutions that are good business and good for business, or they will fall behind, he said. He added that the solutions developed should be long-term solutions, rather than quick fixes.
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