It's not all bad news for companies tackling climate change

Carol Adams

MANY Australian companies and public sector organisations will need to change the way they do business if we are to achieve the reductions needed to limit climate change.

Companies operating globally are aware that they are behind their competitors in Europe and elsewhere in developing the intellectual capital and know-how to respond to the concerns of their stakeholders about their environmental performance.

As the population becomes increasingly concerned about the values of the organisations they choose to work for — and buy goods and services from — companies are finding they need to change. There are a number of key ingredients to doing so.

Leadership is crucial, both corporate leadership and leadership from government and the public sector. Too many chief executives and corporate boards are either uninterested or actively curtailing initiatives from staff to reduce the impact of climate change. Some corporate and public sector leaders are unaware of those impacts, not having data on their carbon dioxide emissions.

Boards need to gain an understanding of climate change and the risks and the economic consequences associated with it. They need to be more than narrowly educated accountants and old-style authoritarian leaders focusing on what can be measured in dollars.

Our leaders must be able to instil a culture of social and environmental responsibility. The survival of much of our planet, and business, depends on responsible leadership, leaders with values who listen to the concerns of staff and other stakeholders. They must be able to create an organisation employees are proud to work for, and valued for driving environmental initiatives. Shareholders must recognise that business survival depends on it, and not let short-term greed stand in the way of boards and managers making progress.

Regulators, too, have a role. Legislation requiring companies to measure and manage their environmental impacts is essential. This will mitigate both fears of creating competitive disadvantage by reporting environmental performance information and also shareholder focus on short-term profits.

External public reporting requirements often drive much-needed development of internal data collection systems. Once data is collected it can be monitored. Targets can be set.

Managers will compete with each other to improve performance. Tools, such as balanced scorecards, can be used to encourage a different view of what constitutes good performance. Making public commitments to targets through sustainability reports enhances the organisation's focus on environmental performance.

Sustainability issues can be incorporated into corporate and public sector organisation strategies and plans made to ensure targets are met.

Voluntary reporting initiatives such as the corporate social responsibility indices and sector-based initiatives have played a part in assisting organisations that have chosen to change. But the increasing number of these has also been a source of confusion for environmental and sustainability managers who come to their roles from diverse backgrounds often with no relevant formal training and limited experience.

Environmental management systems can play a part in developing processes, training staff and raising awareness, but do not on their own ensure adequate data availability. Engaging stakeholders, hearing their concerns, can be a powerful force for change.

While some companies will drag their feet and struggle to deal with stakeholder concerns and meet the demands of new regulation, others will reap the benefits of improved reputations from adopting practices that go beyond mandatory reporting and target requirements and selecting suppliers on the basis of social and environmental responsibility.

These are the organisations that will attract and retain the best staff, increase their market share and long-term success.

Carol Adams is professor of accounting and sustainable development strategy, and deputy dean, faculty of law and management, at La Trobe University.