Climate Change and the Future of Coatings Businesses
Few can deny (with one to two notable exceptions!) that our world is being confronted with major climatic challenges. Forest fires in California and Australia, decline in sea ice in the arctic, and increasingly erratic weather patterns are attributed to climate change in many countries. All this, scientists confirm, is due to global warming. To stem this, we need to collectively reduce the amount of carbon dioxide emitted.
This is not just on the environmentalist’s agenda – it is also a concern to investors. For example, Bank of England Chief Mark Carney has recently issued a climate change warning. He said that unless firms wake up to what he called the climate crisis, many of their assets would become worthless. And he warns that climate change is “A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan?”
If you need more evidence, last year the owner of KFC & Pizza Hut, (Yum!) announced that it would join the only other restaurant group to make a commitment to carbon emissions in accordance to the Science-Based Targets Initiative (SBTi). Interestingly the other restaurant group is McDonald’s. What is striking is that this commitment came only after investors agreed to withdraw a shareholder resolution to compel the company to use renewable energy and other environmental actions. It was the investor community that generated the action.
What Should Coatings Companies Do?
Companies and suppliers can do their bit to avert a climate catastrophe and also ensure that they have a financially sustainable business in the future by voluntarily adopting science-based targets. My advice to clients is always to be on the front foot, rather than the back foot and waiting to be forced to take action. Science-based targets may sound a bit technical but they are really very simple.
What are Science-Based Targets?
The SBTi is all about companies setting carbon emissions reduction targets that will in turn limit global warming to 2° based on climate science (hence the science bit). I find the following quote useful from the SBTi website:
“Science-based targets provide companies with a clearly defined pathway to future-proof growth by specifying how much and how quickly they need to reduce their greenhouse gas emissions.”
Targets are based on what is required to limit global warming. They are not “chosen” by an individual or the company itself, and so it is quite different to traditional target setting such as financial targets. Targets are then externally validated. Once you have set your target (with help, if necessary), the company then needs to create a climate action plan that will deliver it. Because it is likely to be stretching targets, on “day one” a company may not know all the steps it can take to meet its target – and that is quite normal. Over time there will be new technologies, innovations or opportunities to fill the gap between the target and known steps to achieve it.
Advantages to Setting Science-Based Targets
My belief is that businesses should see this as an opportunity rather than a burden. The SBTi have identified a number of advantages from a company adopting science-based targets:
- An Increase in Innovation. 63% of company execs say that science-based targets drive innovation.
- A Reduction in Regulatory Uncertainty. Taking more ambitious action over climate change helps organizations get ahead of future policies or regulation to limit greenhouse gas emissions.
- A Strengthening in Investor Confidence and Credibility. The example of Yum! is a great illustration of this. Companies taking a leadership position on climate bolster their credibility and reputation among stakeholders, including investors, customers, employees, policymakers and environmental groups.
- An Improvement in Profitability and Competitiveness. The thinking here is that setting science-based targets ensures a lean and efficient robust company in the future where resources are becoming increasingly expensive.
Coatings companies can be hugely influential in climate change mitigation and protect their business future by acting now and setting their own science-based targets. More information can be found at https://sciencebasedtargets.org/.