The value chain is the process by which a company adds value to a product. This process can include the design, production, cost and distribution of a product. For example, a company that extracts raw materials from the earth, processes them in a factory, sets a price and launches the product has added new value to the original material. Climate change can affect the value chain at any point in the process. Fourth, financial markets are beginning to realize that inattention to greenhouse gas emissions could soon have real impacts on costs and risks. Last spring, more than 50 U.S. investors with a total administration of $4 trillion called on the U.S. Congress to pass legislation to reduce carbon emissions. In a statement, the signatories, including union investment funds, state pension funds, insurance companies and large asset managers, wrote: “In the current unpredictable environment of national climate policy, it is extremely difficult and risky for companies to assess and justify the large-scale and long-term capital investments needed to capitalize on existing opportunities and Emerging.. Dozens of funds are now looking at companies for environmental and sustainability factors, including emissions reporting, and excluding poor performance.

In July, for example, Citigroup downgraded coal inventories across the board, stating in an equity research report that “[coal] companies` productivity/margins are likely to be structurally affected by new regulatory mandates applied to a group perceived as global warming villains that degrade the landscape.” Meanwhile, the number of environmental resolutions presented to shareholders in the United States is 2007. The proxy season has reached record highs, led by calls to address climate risks. The Securities and Exchange Commission (SEC) is not exactly at the center of U.S. environmental policy. Nevertheless, since 2010, the SEC has required publicly traded companies to disclose to their shareholders any climate change-related issues that could have a significant impact on their operations. “Commission Guidelines on Disclosure in the Context of Climate Change”. Accessed December 19, 2020. Swiss Re, an insurer largely unknown to the public, has invested its money and muscles in an incentive program to convince its employees to drive hybrid cars, use energy-efficient devices and install solar panels, for example.

Strategic reasons: The company considers and is committed to the potentially catastrophic effects of climate change as a major risk to its industry and customers. The employee initiative reinforces the company`s key message to stakeholders, aligns employee action with company priorities and, to put it simply, shows that Swiss Re turns words into deeds. The combination of changing prices and changing weather conditions leads to changes in demand for certain goods. Demand for cold weather products such as heating oil and ski equipment could decrease. It is the primary responsibility of the Chief Executive Officer and the Chief Executive Officer to determine the impact of their company`s future climate risks and (a) to report and (b) mitigate them. Companies are adept at judging their financial performance, but too many of them are afraid to look in the mirror and face potential risks that could harm their business. Directors want to know that a company is as competitive in time as it is in the short term. This requires looking beyond the quarterly financial results. Financial reports, of course, allow you to understand only a certain portion of a company`s true market capitalization. Take coca-cola as an example: 20% of its market capitalization can be attributed to its book value, i.e.

to its physical assets. Eighty percent of its value is attributed to intangible assets – brand, R&D, risk management, capacity for innovation in a globalized and resource-constrained world – all things that are not recorded in a financial statement. Sustainability reporting focuses directly on areas that companies have traditionally not understood and managed well. In this month`s Foresight, we invited leading thinkers from business and academia to help our readers address climate issues by developing strategies that strengthen security, shape policy, protect reputation, and engage customers, employees, and markets. This particular section offers a sober look at a new challenging environment. There will be winners and losers. Companies that implement their strategy properly will find huge opportunities both to benefit globally and to create social good. Canada works with a number of bilateral and multilateral partners, including developing country governments, non-governmental organizations, multilateral organizations and special climate funds, and funding mechanisms such as the Green Climate Fund and the Global Environment Facility. Canada has also created funds to mobilize private sector investment in the fight against climate change from a number of multilateral development banks. The companies most affected by these requirements are companies in the energy and utilities sector that operate refineries and power plants. External stakeholders are people who have an interest in a company but do not work for a company.

These stakeholders are absorbing the risks of rising costs associated with climate change. The danger of buying RECs is that the mainstream press has begun to challenge claims about their environmental value. Articles have appeared in publications such as BusinessWeek and the Financial Times, pointing out that most RECs don`t really compensate for emissions and that skepticism is spreading on the Internet. In fact, most REBs do not lead to the production of clean electricity that would have been generated anyway, whether or not an REB was printed. As consumers become more savvy when it comes to assessing companies` environmental claims, companies that promote REC purchases may face charges of greenwashing. Combined with an inward-looking analysis, an outside look can reveal a new set of opportunities and threats. Climate change will impact a company`s business environment in two ways: by changing temperature and weather conditions, and by regulating this increases emission costs. Both can affect the availability of business inputs. the size, growth and nature of the demand; access to related and supportive industries; and the rules and incentives surrounding rivalry in the industry. Leaders should assess how climate change may affect each part of this context for competition.

For example, a company in the New England region of the United States could focus on short-term local policy development and participate in the U.S. Northeast and Mid-Atlantic Regional Greenhouse Gas Initiative. On the West Coast, a company could lobby the California Air Resources Board to develop binding emissions reporting rules. Or a U.S. company could get involved in the 47 states that, according to a July 2007 report, had begun to inventory emissions, develop renewal portfolio standards and climate plans, or commit to a cap-and-trade system. If you think generally speaking, the company could lobby at the federal level for one of the more than 100 climate-related laws that are on their way to a vote. Thinking internationally and in the longer term, a company could deal with the United Nations Framework Convention on Climate Change when debating the rules that will be established after the Expiry of the Kyoto Treaty in 2012. In fact, systemic vulnerabilities caused by climate change can become “system opportunities” for companies to forge new partnerships with government, other supply chain actors, and even traditional competitors, such as preparing the infrastructure needed for disaster recovery. By playing a leading role in helping regions anticipate climate change and mitigate risks, companies can promote their interests while building goodwill in the communities in which they operate.

Coca-Cola`s recently announced partnership with the World Wildlife Fund to protect the world`s water resources and improve its own water management is a good example of a company`s efforts to combat climate change both directly in its own operations and in the society it serves. Coca-Cola`s actions are likely to help both the company and local communities, while improving the company`s image around the world. For example, while property insurers` own carbon emissions may be low, the carbon burden may be high for companies that insure or reinsure coastal properties threatened by sea level rise. Similarly, most of the carbon emissions associated with oil do not come from oil companies, but from their customers. Emission restrictions will limit demand for these companies` products. Or think about the multiple external impacts on a food company like Nestlé. Climate change will change the relative productivity of the different regions where the company buys agricultural raw materials, which will affect input costs. At the same time, regulatory responses to climate change will increase the energy costs used to cool ice cream in retail stores, impacting demand conditions. .