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The financial crisis is a global, systemic event. Climate change may prove to be even bigger. This risk is not lost on CEOs.
"We won't be able to establish a low-carbon world unless every method of generating electricity?whether it's coal, nuclear, gas or renewables?is backed up by government research and investment in new technologies."
James E. Rogers
Chairman, President and CEO
Duke Energy Corporation, US
They are moving quickly to understand the commercial implications of stabilising global carbon emissions, but they also want more direction from governments in the form of clear policies.
The majority of CEOs say that their companies are already adjusting how they manage risk in response to climate change or are planning to do so in the next 12 months. CEOs are already seeing returns on their investments through innovation in products and services and adjustments in day-to-day operations. Changes to risk management-in response to climate change-rank second behind changes to day-to-day operations in already showing returns.
These efforts are both good for business and positive steps for society, but they fall far short of what is needed to stabilise the carbon levels in the atmosphere.
Markets need an international framework and agreement on national carbon emissions targets in order to generate and direct the capital needed for the massive transformation to a low carbon global economy. Without this framework the incentives for individual first-movers will remain unclear, and collective action is likely to come too slowly to avoid major crises.
Eighty-three percent of CEOs consider it important or critical for governments to provide a clear and consistent policy framework on climate change. They value clarity over specific types of frameworks, such as a Copenhagen protocol or a global carbon market.
Globally, only 28 percent of CEOs feel that their governments have clear and consistent long-term environmental policies. Thus far the development of standards is a patchwork of efforts by governments and non-governmental organisations (NGOs), but governments and businesses should be careful about allowing standards to be developed by NGOs without their active involvement.
James E. Rogers, Chairman, President and CEO of Duke Energy Corporation, speaks on the need for carbon regulatory policy combined with investment in new technologies to address climate change.
When asked about all the major stakeholder groups, only 34 percent of CEOs say they are already collaborating with NGOs, and just 22 percent feel that NGOs have increased their influence over the past three years. In contrast, 61 percent of CEOs say that they are already collaborating with government and regulators.
If governments, businesses and NGOs collaborate more closely, a more efficient and less fragmented set of standards will develop around the world.
CEOs are looking to governments for leadership on the international standards necessary to propel global action, but they recognise their organisations responsibility to create management structures that reward long-term thinking. Seventy-four percent of CEOs believe that this is a critical or important element in a solution to climate change.
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