We recognize that a policy framework is necessary for businesses to act at the speed and scale required to meet the climate challenge, but that does not mean businesses and investors should sit back and wait to act, especially as the impacts of climate change are happening now, faster and stronger than expected.
The decisions businesses and governments make today — this week, this month, this year — are crucial. They will impact not just the size of the threats from climate change, but also the overall security of the U.S. economy, affecting countless businesses, jobs, and homes. As the Sustainability Accounting Standards Board found, 71 of 79 industries in the economy are already affected by climate risk. Businesses from nearly every sector have a stake in this transition and need to be active participants in shaping policy and in making operational decisions to reduce their own carbon emissions and climate risk.
We recommend businesses take the following specific actions even in the absence of a strong policy framework for energy transition, while recognizing that some companies will not be able to put meat on the bones of these recommendations without that framework:
- Conduct a detailed analysis of the risks that climate change poses to operations, facilities, supply chains, and markets. These risks include both the physical impacts of climate change — such as sea level rise and increased heat — and the potential for rapid changes in technology and markets as governments and businesses act to reduce greenhouse gas emissions.
- Build internal capacity to address climate risks by engaging experts who can analyze the fast-growing set of climate science and risk data available to businesses.
- Develop and implement concrete action plans, including putting an internal price on carbon, to reduce these risks. Putting an internal price on carbon can help identify revenue opportunities and risks, and anticipate future government action. Setting a specific price will also make this issue real to companies and their investors, and affect corporate business decisions in a way that a general commitment to sustainability will not.
- Create, publicize, and implement plans to significantly reduce or even eliminate company-wide emissions by a set future date. Ideally, these emission reduction goals should consider not only direct and indirect emissions from facilities, but also emissions associated with business travel and employee commuting. Moreover, supply chain management represents the largest emissions reduction opportunity for many businesses. Setting ambitious “stretch” goals will help identify profitable emissions reductions opportunities that may not be obvious when looking only for modest reductions.
- Provide investor-facing information on how the company is dealing with climate risks and opportunities. This includes improving disclosure of climate factors in SEC filings that go beyond boilerplate language and include specific analysis of material climate-related risks.
- Push governments at all levels to provide policy frameworks that are necessary to achieve the speed and scale required for the transition to a clean energy economy. Businesses and their trade associations should actively engage, individually or through collective action, in shaping effective, efficient, and internationally consistent policies. Multinational businesses working with multiple governments across jurisdictional boundaries can be particularly effective in pushing for this kind of policy change.
The decisions businesses and governments make today — this week, this month, this year — are crucial.
“Now, more than ever, business must lead this transition for the sake of our climate, our country and our economic security.”