CLIMATE CHANGE DIRECTLY AFFECTS COMPANIES' DECISIONS
CLIMATE CHANGE DIRECTLY AFFECTS COMPANIES' DECISIONS
THE DECISIVE ATTITUDE OF THE EU COMMISSION HAS STARTED TO IMPACT ECONOMIC DECISIONS OF THE COMPANIES
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Last May, at an online event of the Romanian French Chamber of Commerce, a panel on climate change was held with experts doing international research on the subject. I was also present as a participant and had the chance to receive direct information from the experts. On this occasion, I wanted to share the information explained there with you and think about it a little bit.
CLIMATE CHANGE
First of all, let's make a small reminder for those who wonder why we need to talk about climate change. I get the data on this on the NASA (US Government's space research agency) website. In the graph you will see in Figure 1, the average value of the average temperature of the earth's surface between 1951-1980 was taken.
Based on this average, it was determined how hot or cold the other years were. As can be seen, while the years before the 1940s were below the said average, this average has been exceeded for all years since the 1980s. As well as systematically. This one degree difference may seem small, but it is not. Do you know what the average temperature of the world is? It is about 14 degrees. Each of its ups and downs determines how much of the incredible energy the earth receives from the sun, how much it absorbs and how much it reflects. Therefore, the exacerbation of climate disasters depends on the increase in average temperature.
About climate change from the NASA website...
Why should we care about a degree or two of global warming? After all, temperatures fluctuate by more than one degree every day we live.
The temperatures we experience locally and for short periods of time can fluctuate significantly due to predictable, cyclical events (day and night, summer and winter) and difficult-to-predict wind and precipitation patterns. But global temperature mainly depends on how much energy the planet receives from the Sun and how much is emitted back into space. While the energy from the Sun fluctuates very little from year to year, the amount of energy emitted by the Earth is closely tied to the chemical composition of the atmosphere, particularly the amount of greenhouse gases that trap heat.
One degree of global change is important because it takes enormous amounts of heat to warm all the oceans, atmosphere, and landmasses that much. In the past, a drop of one to two degrees was enough to plunge the Earth into the Little Ice Age. A five-degree drop was enough to bury much of North America under an ice floe that rose 20,000 years ago.
CLIMATE CHANGE ACTION PLANS SURVEY WITH COMPANIES
Climate change also means that companies face significant responsibilities and obligations. The carbon emission limits set by the legislator impose new burdens on many industrial and commercial activities. Companies face a demand to zero their carbon emissions. I would like to see how the companies operating in our region handle this demand through a research conducted by DELOITTE. This report, which you can get on the company's website, is based on a survey of companies' finance directors.
The survey was conducted between October and December 2021. Answered by 592 Finance Director. So its scope is not negligible. It has been applied in 15 Central European countries in total, let's give a list of these countries: Albania, Bosnia-Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, Poland, Romania, Serbia, Slovakia and Slovenia.
Figure 1 Questioning the existence of carbon emission reduction plans of companies responding to the survey
???????????In Figure 1, we see the responses of the companies responding to the survey regarding the existence of carbon emission reduction plans. It seems that half of the companies have not yet made a plan in this area. However, the other half have taken action to reduce their carbon emissions at different levels and over the years. In a way, this is a positive signal because 50% of companies take the business seriously, which indicates progress. However, the concern of carbon emissions is an area that every company should think about and reset its impact in its field of activity. On this occasion, it becomes important to tell those who think that they are not interested in how they have an impact on their daily lives.
REASONS FOR COMPANIES TO CREATE ACTION PLAN
In the graphic in Figure 2, we will read about the motives of these companies for creating their action plans. Of course, the content of this graphic should have been created only with the responses of those who have an action plan.
Accordingly, 44% of companies consider these action plans as an important part of their strategies to increase efficiency and reduce costs. 34% have created an action plan due to compliance with current or future legal obligations. Reputation and trust in the eyes of the customer ranks third with 31%. As it turns out, the effort to gain the trust of customers with the idea of reducing costs forces companies to work on climate change.
What are the main factors driving climate action in your organisation?
Possibility of cost reduction (For example, energy saving, low cost heating/cooling)
44%
Compliance with current or future legal requirements
34%
Improving our reputation and gaining the trust of our customers
31%
To be protected from cost increases that will increase in the future (High carbon costs, high capital costs, etc.)
29%
Getting more creative (with collaborations or hi-tech)
26%
We have not developed a climate-related action in our company
23%
To adapt to the expectations of our customers
22%
To benefit from public support
18%
To enter new markets, to increase prices
9%
To reduce the risks associated with liabilities
9%
To protect our facilities from physical harm
6%
For other reasons
1%
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CONTENT OF COMPANIES' ACTION PLANS
Finally, in Figure 3, the content of the actions in the companies' contribution plans to combat climate change was asked. When we look at the answers here, we find that small but effective and feasible actions come to the fore in the first place. It is mentioned about actions such as renewing the windows with modern products with stronger sealing ability, replacing the light bulbs used in lighting with low-energy LED bulbs, reducing travels due to less oil consumption, and incorporating waste into the recycling chain. A significant portion of companies, such as 58%, are convinced of these actions, which both save costs and improve carbon emissions.
Does your company take or plan to take the following actions within the framework of combating Climate Change?
Reducing internal emissions through incremental changes (such as modernizing windows, switching to lighting with low-energy bulbs, reducing travel, separating and recycling waste)
58%
Developing new climate-friendly products and services
36%
Reducing carbon emissions in the logistics chain
30%
We don't take any action
28%
Developing collaborations with new creative firms, competitors, NGOs and universities
13%
Directing our investment portfolio to companies with low carbon emissions
11%
Protect from climate disasters by renovating or moving our machinery or factories
11%
Balancing our carbon emissions in the market (carbon certification, forest development investments, etc.)
10%
Developing our climate disaster insurance framework
6%
Acquiring companies that will have a positive impact on our carbon profile or exiting our investments in companies with a negative impact
3%
Other Actions
2%
??????????????With the same parallel thoughts, the search for low emissions in the logistics chain is in the third and fourth place with 30%, and new plans with cooperation with different sectors are in the third and fourth places. The idea of developing new climate-friendly products and services comes second with 36%. This shows that companies have started to work not only on cost reduction but also on consumption patterns in the fight against climate change.
CONCLUSION
Ultimately, we find that the CFOs of companies, namely Finance Directors, are all aware of these action plans, but still half of them have not developed an action plan. I think there are still illusions here. In other words, some of the companies have not completed the analysis of the emissions related to their activities. For example, the emission contribution of a tourism company is not only the result of the fuel burned by the planes on which its customers board. It is necessary to deepen the analysis such as the vehicle emissions of the employees of that company on the way to and from the company, the emissions in the hotels they prefer to stay, the office needs of the company employees such as heating and cooling, etc. Otherwise, companies may consider themselves unconscious from this struggle, and this will be the illusion itself.
According to the survey results at hand, there are signs that actions are being managed effectively and quickly in the part of the companies that make action plans. We still need to examine the effectiveness evaluation reports from independent organizations. Only then can we confirm that these actions are active.
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?ekil 1 ?irketlerde iklime y?nelik eylem plan? olu?umunu y?nlendiren etkenler
?ekil 2 ?irketlerin iklim de?i?ikli?iyle mücedele katk? planlar?ndaki eylemlerin i?eri?i