By Owen Smith, Director of Energy Policy and Strategy for Ingersoll Rand’s Center for Energy Efficiency and Sustainability
Put simply, the role of businesses in addressing climate change is paramount. Regardless of size or type, there is urgency for businesses to take bold actions to improve their operations, products, and supply chains to solve this pressing challenge. Encouraging signs are all around us, as an accelerating drumbeat of companies are stepping forward with commitments and actions to address climate change. These recent developments suggest we’re on the right track, but not yet moving fast enough to head off the worst impacts of climate change. Business needs to do more, and there are now increasing signs that doing more is in fact good for business.
To dive deeper into the role businesses are currently playing in tackling climate change, Ingersoll Rand and GreenBiz conducted a research study to determine what actions companies are taking today to reduce their impact on the environment. Key findings from the study include:
- More than 90% of companies have already taken some type of action to reduce their environmental impact.
- 75% of companies report that they will be either better off or not significantly impacted if there was a mandatory price on carbon.
- Companies are becoming more sophisticated in how they approach climate action, whether it be through utilization of emerging tools like internal carbon fees or looking across their entire value chain for opportunities to reduce impacts.
Let’s dig into each of these findings for a better understanding:
Most Companies Have Already Taken Action of Some Type
The study examined three main types of commitments or actions companies have taken, including commitments to (1) reduce greenhouse gas (GHG) emissions, (2) increase utilization of renewable energy resources, and (3) increase energy efficiency. Companies of all sizes reported high rates of having made at least one of these types of commitments. The research revealed, not surprisingly, that cost savings or other economic factors were a common driver of these actions. This does not tell us about the level of ambition embedded in these commitments, but it does reveal a widespread convergence of the strong drive for business to capture economic opportunities with the imperative for companies to mitigate climate change impacts.
In these research findings, the phrase “largest organizations” represents those with revenues greater than $10 billion, “large organizations” are those with annual revenues between $1 billion and $10 billion, while “small organizations” represent those under $1 billion.
Within these responses, the study revealed distinctions between what companies have already done or have developed formal strategies for doing, as compared to what they have publicly committed to. More specifically, companies were most likely to have implemented formal strategies to capture energy efficiency opportunities, whereas public commitments to reduce GHG or increase utilization of renewable resources were more common. This likely speaks to the often cited reality that energy efficiency opportunities can be highly economical, even if they lack the broader appeal of GHG and renewables commitments.
Most Companies Well Positioned to Deal with a Carbon Fee
A number of companies have made very ambitious commitments to reduce their environmental impact. Some of these are very highly publicized, and they are all commendable, but it may still be unclear how widespread the benefits of acting on climate change are to the business community as a whole. This study suggests the business case for clear climate policy is stronger and broader than many have perhaps understood. Specifically, the study revealed that 75% of the largest companies will be either better off or not significantly impacted if there was a mandatory price on GHG emissions. There were variances in these responses by size of company, though the general sentiment held true across all sizes of companies.
In some ways, this is very surprising given the longstanding debates over climate policy. And we cannot dismiss the still-sizeable segment of respondents that report they would be worse off if a mandatory price on carbon were imposed. But fundamentally, business is about solving problems, and as such, climate change represents both a problem and a sizeable opportunity for many businesses.
Companies Becoming More Sophisticated in Their Approaches to Climate Action
The most common place companies are taking action to reduce their environmental impacts is within their own operations. This is not surprising, given these actions would be impactful to nearly all companies, particularly those with significant energy consumption and/or operational costs. That said, many companies are also looking across their entire value chain for opportunities to reduce environmental impacts.
This is encouraging, as it reveals that businesses are paying attention to the root causes of the problem, and not just what is closest to home or simplest to address. To illustrate this further, Ingersoll Rand’s value chain assessment reveals that one of our biggest opportunities to mitigate climate change is in making our products as energy efficient as possible. As manufacturers of long-lived equipment such as commercial and residential HVAC, air compressors, transport refrigeration solutions, and electric utility vehicles, we place a real business priority on making our products as economical to operate as possible, which in turn translates into improved environmental outcomes.
Continued Acceleration Ahead
On the heels of the historic Paris climate negotiations, businesses around the world will face increasing pressure, and opportunity, to take action in addressing climate change. Recent developments with respect to the number and type of actions from companies are very encouraging. We’re on the right track, but we still need to accelerate. In this spirit, all companies should continually take a fresh look at what they can do to contribute to addressing the challenge we face.
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As the director of energy policy and strategy in Ingersoll Rand’s Center for Energy Efficiency and Sustainability (CEES), Owen Smith works with Ingersoll Rand’s businesses to develop market-leading strategies that reflect significant trends in the energy sector. His efforts expand and accelerate market opportunities for energy efficiency solutions by engaging with leaders from business, non-profit, academic and government institutions. He also seeks to ensure the company’s strategic brands are well positioned to thrive as they address society’s pressing energy and environmental challenges. He holds a Master’s in Business Administration from Wake Forest University and a Bachelor of Arts in Industrial & Organizational Psychology from East Carolina University.