United States

Climate change and carbon footprint

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This article was originally published in our 2021 Environmental, Social and Governance special report. For more ESG news and insights, read the full report.

Respondents say climate change presents significant challenges

While ESG initiatives encompass a wide range of issues, those focused on the environment are of paramount importance, especially as more consumers and businesses factor sustainability into their buying decisions and as the Biden administration has prioritized net-zero emissions targets and other environmental goals. As such, pressures and shifts related to climate change continue to shape business planning for the future.

Many companies anticipate climate change will also present opportunities over the next three years. Twenty percent of respondents said climate change presents significant opportunities, with a notable gap based on size cohort; 9% of smaller middle market companies see significant opportunities, while that figure was 28% for larger middle market companies. Overall, 28% of respondents said climate change presents significant challenges, and 27% said it presents both significant opportunities and challenges.

The fact that middle market firms are “much more exposed” to environmental and climate issues—along with social issues—than their larger counterparts means it is even more urgent that they adopt ESG strategies, says RSM US economist Dr. Tuan Nguyen.

“They don’t have a lot of capital; they don’t have the leverage. So they have to act,” he says. “And given that growing risk and competitive pressure from bigger firms that are adopting ESG, the middle market should consider implementing ESG as soon as possible.” Doing so can also provide some downside protection during social or environmental crises.

Revenue size breakdown of respondents reducing net carbon emissions 

In specific categories of business, such as supply chains and the workforce, respondents expect sizable adverse impacts from climate change. Sixty-nine percent of respondents expect the prices of raw materials or commodities to be affected to either some extent or to a great extent; 67% expect supply chain reliability to be affected to some extent or a great extent; 66% expect such effects on higher operating costs, and 64% expect climate change will pose an adverse impact to some extent or a great extent when it comes to government actions to regulate carbon emissions (other than carbon pricing or taxes).

Extent climate change poses adverse impacts to organization bar chart

In terms of companies’ enhanced ability to attract workers and to retain workers, 58% and 57% of respondents—respectively—said climate change presents opportunities, either now or in the future, to some extent or to a great extent. Fifty-six percent said climate change presents opportunities around positive public relations from being a leader on climate issues either to some extent or to a great extent.

“There is a shortage of talent right now, and companies can leverage their focus on ESG to help stand out and attract key people,” says Kracunas. “More and more workers are becoming versed in ESG issues. I think for some of the younger workforce—it’s something they look for that really resonates.”

"More and more workers are becoming versed in ESG issues. I think for some of the younger workforce—it’s something they look for that really resonates."

A majority of survey respondents—68%—said in the third quarter of 2021 that their organization was either making efforts to reduce their net carbon emissions or has already reduced such emissions to zero. Examined by size cohort, this figure was 82% for organizations with annual revenues between $50 million and $1 billion and 48% for those with revenues between $10 million and $50 million.

Here is a breakdown of what survey respondents said were some of the most and least important considerations that factored into their decision to reduce their carbon footprint:

Importance of considerations in decision to reduce carbon footprint bar chart

Of respondents whose companies have formal ESG plans, 66% identified energy management as an objective included in their environmental plan or policy, 58% said reducing carbon emissions was an objective and 55% said reducing waste was an objective. 

 


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