Jeremy Warner's Outlook: It makes good business sense to cut emissions. Most companies are starting to wake up to it

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The Independent Online

Oh for the days when all the chief executive had to do was worry about the bottom line. The social and environmental bit was for governments to deal with. Profit was the only god the chief executive was answerable to. If business leaders didn't like the regulatory and tax burden imposed by the state, they could always vote with their feet and go somewhere else instead.

That type of thinking is fast becoming a thing of the past. Next week, Sir Nicholas Stern, a former World Bank economist, is due to publish a Governmentcommissioned report on the economic costs of climate change. One of his themes will be that global warming must in future be a key part not just of the political agenda but the business one too. Any chief executive who thinks otherwise had better watch out. Failure to address these issues could leave them at an extreme competitive disadvantage as the crackdown on the carbon economy gathers pace.

Nor is it just climate change which is coming between the chief executive and the profit motive. So too is ethnic and religious division, acceptable employment practices and much else besides that used to be neatly pigeon- holed into the largely irrelevant activity of corporate, social responsibility, and then bundled off to some deadbeat executive in the departure lounge of corporate life. Today, they are all part of the chief executive's in tray. The purpose of being in business hasn't changed. But the practicalities of pursuing competitive advantage are becoming ever more complex.

The costs of addressing these issues can be high, particularly in smaller companies struggling for survival, but the costs of doing nothing, or leaving it to governments, are likely to be exponentially higher, a message expected to be driven home with a vengeance in next week's Stern report. It therefore makes sense for business to make the necessary investment, if only as a form of insurance policy, of the type routinely used against the possibility of catastrophic loss.

It is easy to be cynical, and dismiss the efforts of business leaders to address global warming as mere tokenism, a box-ticking exercise which if you are lucky might win you a few more sales among the brown rice and open sandals brigade.

Some of the green initiatives announced amid much fanfare are indeed little more than crude PR, costing little and achieving even less. It is remarkable how environmentally unfriendly even some of the most ecologically motivated companies seem to be. Many companies that pretend to be sensitive to such matters struggle even to know their own carbon footprint, let alone make any serious attempt to do anything about it.

Yet it would wrong to think this is the way it will always be. A sea change is occurring, and the idea of corporate social responsibility as no more than half-baked marketing is today as backward looking as the chief executive who still thinks that climate change is none of his concern.

In all my meetings with business leaders in recent months, climate change has figured as one of the biggest, and in some cases the biggest, challenge that companies think they face today. In the pecking order of issues, it has begun to assume an importance above that of technological change, economic well being, or even in some cases the normal cut and thrust of business rivalry.

Nor is this just an Al Gore- inspired moment of environmental conscience which will be quickly forgotten come the next downturn. More and more, business leaders are coming to recognise that doing something about global warming is key to having a viable business future.

For some companies, such as HSBC and Standard Chartered, with major operations in parts of the world likely to be devastated by climate change, it is about survival itself. With others it is about anticipating change which if not undertaken voluntarily will soon be forced on them from outside by government regulation. For still others it is about the perceived business opportunity of green investment.

A prime example of this new thinking is James Murdoch, chief executive of BSkyB. If the claims are to be believed, he's become the first in the FTSE 100 to make his company carbon neutral.

The most significant thing about this achievement is that it is not the sort of thing a chief executive would even have thought about five years ago, still less given any time to or thought a worthwhile business ambition. Today, Sky regards it as one of its key successes - up there with exceeding subscriber growth and profit targets, the launch of high-definition television and all the other conventional yardsticks of business achievement.Helping save the planet might seem a reasonable enough aim in itself, yet it has made good business sense for Sky too, helping to give the company the right sort of image in an age of growing public concern about climate change. The contrast with just a few years back, when Sky seemed to stand for the sort of red-in-tooth-and-claw capitalism once espoused by James's father, Rupert, could hardly be greater. Encouraged by his son, Mr Murdoch senior is now rolling out Sky's success in addressing these issues into the wider News Corp empire.

Nor does this have to be an expensive exercise which only very large, financially solvent, businesses are able to afford. Most companies are capable of making themselves carbon neutral at relatively small cost. By doing so, they encourage their employees to do the same. Likewise, once they make the effort, they fast discover it possible to make very substantial cuts in carbon usage at a relatively small cost to themselves. A number of companies are already providing cash incentives to help their employees achieve this aim.

Sky is unable to give a precise figure on the costs of going neutral, but it may be that there is no cost at all, that, by putting in place systems to become more energy-efficient, the company has actually saved itself money. Even the price of offsets for what carbon the company must inevitably burn may have a positive effect if it helps instil employee loyalty and enthusiasm.

Who said that the market was incapable of dealing with climate change, and instead would need to be brow-beaten into submission by government regulation and taxation? If it makes business sense to reduce emissions, then markets are likely to pursue that purpose much more effectively than governments.

The obvious exception to the self-help programme beginning to take root in the business community is transport - both road, sea and particularly aviation. This is an area of growth in emissions that even the most environmentally-friendly companies will struggle to resist.

The Government aims to reduce Britain's carbon emissions by 60 per cent by 2050. If the present growth in aviation is left untouched, the rest of the economy would need to be producing no emissions at all by that date if Britain is to stand any chance of meeting this target. It is hard to see how voluntary restraint of the type which other businesses are now applying can counter the growth in transport and aviation.

People need to travel to trade. Modern communications seem to have had only a marginal effect in limiting the propensity to travel. If people can communicate easily over long distances, you would think there would be less need for them to meet. In fact, the two things feed off each other. What's more, the more people communicate, the more they trade in goods and services, further enhancing the demand for transport.

More draconian and interventionist approaches may be necessary to bring soaraway growth in aviation to heel. Merely making aviation part of the European Emissions Trading Scheme is unlikely to be equal to the task. Whatever the action, its effect on overall economic growth may be more serious than Sir Nicholas Stern and other similarly minded people would like to believe.

j.warner@independent.co.uk

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