How Businesses Can Respond To “Code Red” Climate Change and Address ESG

How Businesses Can Address ESG, Respond To "Code Red" Climate Change Report

In the face of increasingly dire climate change news, ESG (Environmental, Social, and Governance) is becoming a priority for businesses that want to identify risks and growth opportunities to address upcoming challenges.

The UN’s series of Intergovernmental Panel on Climate Change (IPCC) reports often make headlines around the world when they are released, but the comprehensive details in each report can be overwhelming. For example, the 2021 report was over 4,000 pages long and included hundreds of scientists analyzing some 14,000 studies. All the reports call for action. But what should that action look like, practically, on the ground level?

ESG-focused regulators, investors, as well as employees and customers, are all looking for a response from businesses. While much attention will be on what high-level solutions must be undertaken by governments and large corporations, here are 3 practical actions even small businesses can take to address climate change, impact ESG, and help them prepare for a changing tomorrow, while guarding their bottom lines today.

1) Reduce Waste, Target Methane

For the first time, the 2021 IPCC report put a focus on methane.

When we think of climate change, we think of carbon dioxide. But methane (CH4) can hold 100 times more heat than carbon dioxide (CO2), and it stays in the atmosphere for only about a decade, versus carbon dioxide, which can remain for centuries.

This means that “cutting methane is the single biggest and fastest strategy for slowing down warming,” said IPCC report reviewer Durwood Zaelke, president of the Institute for Governance and Sustainable Development in Washington, D.C.

“Because it doesn’t last very long in the atmosphere, once we start reducing the emissions, you can really see the atmospheric concentration goes down… and that is very different from carbon dioxide,” Tianyi Sun, climate scientist at the Environmental Defense Fund, told WIRED magazine.

Among the main sources of methane is waste management.

Reducing waste can help bring down methane emissions. There’s also a bonus benefit–reducing waste will also help businesses address increasing waste removals costs, which have risen steadily over the past few decades, and is worsening with the industry’s current hiring challenges.

So on a practical level, here’s how businesses can start to reduce waste:

2) Track and Report Your Impact

If you know your businesses’ carbon footprint, chances are you work for a Fortune 500 or S&P 500 company. The biggest companies on the planet take ESG and future planning seriously. They want to know the environment in which they are operating now, and how that might change and affect their futures.

“If you’re not moving forward on things like the environment, you’ll be uninvestable in certain parts of the investor universe… it’s just becoming too important to investors,” Larry Wieseneck, Cowen co-president, told an online conference for CFOs sponsored by the American Institute of CPAs.

As a result, sustainability reporting, including the inclusion of ESG scores is increasing. Businesses need to show that they are making sustainability a priority, and that they are taking action to reduce their climate impact.

According to the GRI, the 2020 KPMG Survey of Sustainability Reporting found almost all (96%) of the world’s largest 250 companies (the G250) report on their sustainability performance. For the N100 –5,200 companies comprising the largest 100 firms in 52 countries – 80% do so.

Support for mandatory sustainability reporting is also increasing, with G7 and the G20 Finance Ministers’ calling on companies to act now to get adequate sustainability reporting processes in place, as noted recently by EY, Deloitte, KPMG International, and PwC.

So on a practical level, here’s how businesses can start to track and report their ESG impact:

  • Calculate waste-related GHG emissions. Understanding waste-related greenhouse gas (GHG) emissions (eg: from transportation and waste treatment processes) will give you a better picture of your businesses’ impact. After all, for many businesses and buildings, waste is the #2 contributor to GHG emissions, behind energy. Click here to calculate your GHG from waste now.
  • Invest in carbon footprint accounting. Documenting and analyzing this information provides a blueprint for taking steps toward curbing an organization’s environmental impact. Every business, including small and medium-sized businesses, will benefit from this exercise.
  • Conduct a Waste Audit. A waste audit gives you the waste data you need for reporting and more.

3) Educate and Engage

“As business leaders, we need to recognize that our people are our greatest asset — our superpower,” Punit Renjen, the CEO of Deloitte Global, noted on CNN, while announcing his company’s roll out of an education effort for all 330,000 of its professional staff worldwide.

“By building a workforce of climate advocates and a culture of climate action, we will create a network of support for a transition to sustainable business models with far-reaching influence,” he wrote.

Deloitte is spot on about this in two ways. First, they are showing leadership by setting the tone from top down. If management shows that they are ready, willing and able to address climate change, so will employees. Secondly, they are engaging and enlisting their global team to gather support to ensure the company succeeds in its climate goals.

But not every business has the resources of a global corporation to launch an organization-wide ESG or sustainability program. 

So on a practical level, here’s how any businesses can educate and engage staff:

  • Appoint a green leader or assemble green teams. Every business, or even office, can benefit from having a green leader, who acts as the point person for all things related to sustainability; or a green team that can provide the bridge, helping to bring concerns and questions about green issues to management, while helping to highlight company accomplishments and boost morale.
  • Implement regular education programs to remind staff about how the company’s waste program works, and alert them to any changes in processes or procedures. Help everyone understand that waste reduction is an effective climate action.
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