ICT sector’s role in climate change mitigation: An analysis of climate change performance and preparedness of 320 global ICT companies

Abstract

This report, produced jointly by CDP and IIM Bangalore, looks at the state of preparedness of the ICT sector in addressing the climate change challenge; major risks and opportunities presented by climate change for the sector; best practice examples from leading companies in the sector; and emerging opportunities for ICT companies. The study is based on the responses received for the CDP climate change program from world’s leading 320 ICT companies*. The findings unambiguously prove that that the ICT industry is well aware of the urgency in dealing with climate change issues. Climate change is viewed by most as a serious disruptive business risks as well as a potentially significant business opportunities. Nevertheless, there still is a sizeable group which is not yet geared up to insulate itself from the climate change risks or to tap the opportunities, and hence run a risk of being outperformed by their proactive peers. The report was reviewed by Ernst & Young LLP (EY). The key findings from the study are: * High importance accorded to climate change issues at the board level. A significant proportion of the ICT companies (63%) have board level supervision of climate change related issues in the business. Simultaneously, performance on this dimension is also being incorporated into monetary as well as non-monetary incentive structures within organisations. * Climate change issues strongly influence strategy formulation. 81% of the respondents report a clear linkage between their business strategy and climate change issues. These trends indicate that managements are increasingly recognising that climate change strategy can be a source of competitive advantage, directly through cost, revenue or reputational impacts. Interestingly not all the firms have been able to integrate climate change issues into business strategy. Companies’ efforts to do so have been hampered by a host of factors including: inadequate understanding of climate change related risks; lack of consensus within the management about impacts or adaptation measures; lack of resources; and tough business climate. * Strong engagement models to influence policy on climate change are emerging. Given the ever increasing emphasis on mitigating climate change impacts by governments, a significant number of firms have attempted to influence public policy issues through a combination of direct as well as indirect engagement efforts. Despite this however nearly 24% of the firms have stayed away from engaging with policy makers on issues related to climate change policy. The reasons cited range from lack of organisational resources to conflict with organisational philosophy to the nature of operations. * Use of integrated companywide risk management processes to mitigate climate change risks. The most commonly cited risks from climate change arise by way of loss of reputation, increases in energy prices, changing regulations, intensifying of carbon tax regimes and increased emission reporting obligations placed on companies. Of the 81% companies that have well defined risk management processes, only 9% have specific climate change risk management processes, the rest have it integrated into multidisciplinary company wide risk management process. * Recognition of climate change both as a business risk and an opportunity. Fuel and energy taxes & regulations and emission reporting obligations are some of the most commonly reported regulatory risks. But at the same time, companies already meeting or exceeding the energy efficiency targets for their products are anticipating increased demand for these products. Reputation and changing consumer behaviour are also identified as significant sources of risk as well as opportunity which will have a huge bearing on the brand image of the companies and hence the demand for their goods and services. * Improved performances for sampled firms. Reducing carbon emissions continues to be a dominant corporate agenda with 68% of the companies using absolute or intensity targets or a combination of both for emission reduction. Presenting an encouraging trend, 41% of the companies reported reduction in their absolute emissions (scope 1+2) during the latest reporting year. Companies which reported an increase in absolute emissions site change in output, acquisitions or change in boundary as primary contributing factors. On the other hand, almost a third of the companies report increase in their emission intensity per unit revenue and per fulltime employee which indicates that there is still considerable scope for controlling and reducing emissions by greening their products and services as well as increasing the energy efficiency of their operations.