Why Copenhagen Matters Less than You Might Think

A.T. Kearney’s Jochen Hauff attended the UN Climate Change Conference in Copenhagen.  Below he shares his perspective on what the summit means for business.

By Jochen Hauff
Global Sustainability Program Manager
December 2009

Failure is not an option. Above all the political posturing, media coverage and street spectacles, this is the overriding message of the U.N. climate negotiations in Copenhagen. The world is looking to this international meeting and demanding significant progress and concrete results. The weight of the world—literally—seems to be on the Nordic town, but after all is said and done, the Copenhagen negotiations may matter less than most people think.

Certainly, Copenhagen has been positioned as a milestone for the ability of the international political community to deliver on its promises to secure a meaningful and binding agreement to prevent catastrophic climate change and to mitigate the economic effects by providing financial support to the most affected countries. Admirable goals, surely, but the associated hype risks sending the message that without strong political agreement in Copenhagen, no concrete action will happen.

Consider that the emissions of about 2,500 of the largest global corporations account for roughly 20-25 percent of the world’s GHG (greenhouse gas) emissions. Many of these companies are already taking significant action to report, manage and reduce their GHG emissions as well as improve their overall sustainability performance in accordance with a triple bottom line approach. Most have done so not out of a legal obligation, but out of good business sense. When managed correctly, sustainability is a profitable strategy that helps to reduce costs, increase revenue and bolster a brand image: It is doing well by doing good.

In other words, the thing to remember about Copenhagen’s success or failure is that the same concern for a sustainable future that is driving policymakers is the same concern displayed by customers, investors and employees every day.

Consider the following examples:

• Under the Carbon Disclosure Project, more than 40 of the world’s leading consumer good companies are not only disclosing their own direct GHG emissions but are also developing and demanding reporting standards to be implemented by their suppliers. This so-called “greening the supply chain” is tremendous in both environmental and economic terms, and defines new standards for procurement in all sectors of the economy. Some of the most advanced companies are also defining targets for the consumer-use impact of their products, which takes on an even broader responsibility for the products they sell.
• In a recent study, we found that in many sectors, companies that embrace sustainable business practices fared better during the economic downturn than their competitors. One of the underlying reasons is that these companies are able to access capital at better rates because they are judged to be exposed to less risk. In 13 out of 16 analyzed industries, the group of sustainable companies had a lower average WACC (weighted average cost of capital) than the non-sustainable peer group. This is not to say that sustainable business practices save management from failure, but it does show a significant correlation between being sustainable and being successful.
• Over the next decade, innovations in technology will dramatically change the way energy is supplied globally. This is driven by a multitude of parallel developments in next-generation technologies such as wind, photovoltaics, concentrated solar power and biomass. Combined, they will become part of an emerging “smart” energy system that will enable consumers to manage energy consumption more effectively. New innovations on the consumption side, such as plug-in vehicles, LEDs, high-efficiency appliances and zero-energy building standards—along with advanced options for optimizing industrial energy consumption—will further allow companies to meet their energy needs at a significantly lower carbon cost.

The good news is that even if the political decision-making in Copenhagen should not live up to its promise, the attention to climate change is in no danger of fading. An international agreement would certainly encourage faster progress, but the tide of local, regional and national policies and objectives that are already driving implementation on many levels will continue regardless. Too much is already underway: Too many technological, strategic and behavioral shifts are taking place, and the overwhelming benefits of sustainable business strategies are clear to most corporate leaders. While we hope for positive change in Copenhagen and encourage continued efforts among international policymakers, we also are confident that determined efforts will continue even if political goals are stymied.

Jochen Hauff is the Global Sustainability Program Manager and is based in A.T. Kearney’s Berlin office.

For more information, please contact the author.

The views expressed in this paper are those of the author(s) and do not necessarily represent the views of A.T. Kearney or the Global Business Policy Council. The views are not meant to suggest specific inducement to make a particular investment or follow a particular strategy, but only as an expression of opinion.