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Walmart’s plan to extend carbon dioxide emissions reduction targets to its suppliers – aiming to cut 20m tonnes from its supply chain by the end of 2015 – indicates that, for some companies, climate change is integrated into corporate strategy.
However, World Biodiversity Day in May was a reminder that greenhouse gases are just one of a range of environmental impacts the corporate sector has to worry about.
“There are different ways of looking at resource use, and it’s not just about energy,” says Dominic Searle, head of clean technology and renewable energy at RSM Tenon, a member of the global accountancy network RSM International.
He cites the case of a cup of coffee and its water use. “The hundreds of litres it takes to produce that cup has an impact on the rest of the world, particularly in water-distressed areas where the beans are produced,” he says. “This message has yet to emerge, whether in financial markets or among individual consumers.”
Among some companies, however, a more integrated approach is emerging. “We are seeing some great examples,” says Mindy Lubber, president of Ceres, a coalition of investors and environmental groups.
She cites the case of General Mills, and its strategy on water and other environmental impacts. In its Green Giant division, the US group has worked with growers not only to cut water consumption but also minimise use of agricultural chemicals for all its main crops, setting tangible goals in areas such as insecticide application on maize, where it aims to make a 30 per cent cut over three years.
This integrated approach appears to pay off for companies. In research conducted by Accenture, the consulting firm, of Fortune 1,000 companies, it found that the 30 highest financial performers also did well on sustainability. “And almost all those companies are looking beyond pure carbon,” says Peter Lacy, who heads Accenture’s sustainability services practice across Europe, Africa and Latin America.
Mr Lacy points to Diageo as an example of a company that has taken an integrated approach. In addition to establishing aggressive carbon targets, he explains, the company is also focusing on reducing water consumption, introducing sustainable packaging codes and coming up with alternative materials to reduce waste.
However, the integrated strategy embraced by General Mills and Diageo is not being universally adopted. For water consumption alone, even among organisations espousing sustainability, not all companies are factoring consumption into their decision-making processes.
Mr Lacy sees a 20-40-40 division of companies, with 20 per cent now very concerned about water resources and the extent to which they could threaten their cost base and operations in the short term.
He believes 40 per cent may be aware of water as an issue but do not yet know what it means for their business, while another 40 per cent have not even considered water as a risk.
Ms Lubber would agree. She argues that sustainability practices are often piecemeal and seen only in a small group of high-profile companies. “We have to move from anecdotal, one-off projects to systemic, strategic movements,” she says.
A recent study commissioned by IFS, a software company focused on lifecycle management, found that nearly half of top executives admitted their company did not have technology to track its environmental footprint on a continual basis.
Moreover, if the number of companies considering waste, water and other environmental issues in their business strategies is increasing, those addressing the full spectrum of their impact on natural resources remain in the minority.
Few companies, for example, have an understanding of their impact on biodiversity or their business exposure to its loss.
And yet – in the food and agriculture sector in particular – many rely on healthy ecosystems and biodiversity to prevent soil erosion and provide protection from storms. Diverse natural resources also provide raw materials such as crops for food and fibres for textiles.
Some sectors, such as mining, have been forced to address biodiversity. Often as a result of activist pressure, companies have developed not only mitigation strategies to address their impact on biodiversity but also rehabilitation plans, particularly after closure of a mine or quarry.
However, few other companies have yet considered their impact on biodiversity. “I’m not sure biodiversity has been thought through, either on the downside, in terms of the impact, or the upside in terms of how you can harness biodiversity, particularly in supply chains,” says Mr Lacy.
He believes biodiversity and ecosystems will start to enter the corporate consciousness. “This will become increasingly central,” he says.
“Particularly as a number of organisations are beginning to think about the broader environmental services impact of their business.”