Businessmen helping protect the wold from being crushed

Imperial College Business School Research Associate Mili Fomicov reveals six ways you and your business can help in the fight against climate change

It is now widely accepted that climate change exists and that there are ways we can help to stop the worst of its effects.

With rising temperatures affecting business performance, it's understandable – not to mention desirable – that there are business leaders who want to be part of the solution. While this is easier to achieve in some sectors than others, there are some obvious ways to help move your organisation in the right direction. 

The financial argument for doing the right thing

We cannot rely on the conscience of all CEOs to do the right thing. That's why executive compensation should consider not only economic profit, but also material environmental metrics, with companies disclosing how the relevant climate issues tie in to their executive compensation.

There are solid financial arguments for reducing environmental impact. Historically, environmental externalities haven’t been priced accordingly, sometimes requiring governments to intervene. But this is changing and the market has started to price certain externalities, with a number of stakeholders and market participants now very focused on this issue. As a result, investors are now penalising those who are contributing to high emissions, biodiversity loss, and air and water pollution.

You must measure your progress by using transparent and consistent metrics

Consumers are increasingly demanding products and services with a more responsible environmental ethos and there are opportunities for businesses to capitalise on this while doing the right thing for the environment. If competitors take this road and leave others behind, it will eventually impact the others' bottom line. Environmental issues will be increasingly important for all businesses and their value chains.

But what are the best ways to reduce your environmental impact? 

1. Formally commit

It should start from the top and run through the business. Businesses should empower and incentivise employees to generate ideas, provide rewards for environmentally conscious travel options, even persuade them to adopt practices in their own lives away from work through employee perks. But if the commitment doesn’t come from the top, it will be difficult to have an effective and well-coordinated environmental strategy. 

2. Invest

This is the best way to honour your commitment and move the dial. The amount of capital required to decarbonise and become more sustainable is significant, so don’t be shy in showing how much of your capital expenditure is going towards sustainability and decarbonisation. We would all certainly love to see the data.

3. Innovate

Be innovative in the way you run your business, in the products and services you create, in the positioning of your brands. If you have a financial business, consider green and transition financing that not only positions you as a climate friendly business, but allows your customers to borrow more cheaply to "go green", transform their businesses, and reduce their own environmental impact.

4. Be transparent

You must measure your progress by using transparent and consistent metrics. Too many companies are talking about their commitment to the cause, but finding creative ways to avoid showing progress (or the lack thereof). Make sure that those accountable for your transition plan are empowered to make radical changes, as well as responsible for showing clear metrics towards your environmental goals. 

5. Learn

Few businesses will have the expertise in-house to develop an environmental strategy and net-zero plan. Seek outside expertise to assess your environmental impact and design a cost-effective decarbonisation strategy. Provide climate training for your employees so they have agency to make informed decisions and be your partner on this rewarding journey. 

6. Be patient

This is a marathon, not a sprint. Your strategy should encompass small, achievable steps which immediately demonstrate you are committed to reducing your environmental impact. But there must also be medium and longer term goals, which will have a greater impact, but take longer or require more investment. You must play the long game.  

 

Reducing your environmental impact is not only necessary to protect this planet, it’s a sound business strategy that can add to your bottom line provided you are truly committed, transparent in your activity and investment, and creative in the way you approach this challenge and engage your stakeholders.

This is not optional, and an increasing number of businesses are waking up to it very late in the day. You really don’t want to be the most polluting company on the block, or to wait until it’s game over.   

Mili Fomicov

About Mili Fomicov

Research Associate
Milica was a director and portfolio manager in the Multi-Asset Strategies team at BlackRock. Before that, she was a portfolio manager on J.P. Morgan's CIO team, and multi-manager for US and Japan equity funds at Barclays, and AllianceBernstein in the US.

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