Climate Change Business Leaders Survey II

6 months on
KPMG LLP (UK)

Climate Change Business Leaders Survey II

This latest survey, undertaken by YouGovStone on behalf of the KPMGs Carbon Advisory Group, reveals that whilst business is recognising the increasing importance of climate change, eight out of ten still have no strategy in place to address the issue.
The survey, which interviewed 209 senior UK business executives from the FTSE 350 and equivalent private companies, illustrates that whilst climate change is still featuring on boardroom agendas; significant progress still needs to be made if UK business is to meet the challenges demanded by the recent European Commission proposals, the UK Climate Change bill and, increasingly, consumers. Whilst recognition of climate change as a significant business issue has increased by a third to 85 percent, the relative importance of climate change as a business issue has dropped (May 2007: 74 percent, December 2007: 67 percent), and remains bottom of the corporate priority list. Similarly, only 22 percent of respondents said that climate change was regularly discussed at board level in their organisation. In addition to this, a considerable knowledge gap still remains amongst senior executives. Whilst 41 percent of respondents claim to understand the impact of carbon emission reduction targets on their organisation, only 7 percent know what the UK Governments 2050 emissions reduction target is. Still a priority So, recognition of climate change as a current and future business issue is high and has increased since our last study. Eighty five percent (May 2007: 52 percent) of respondents think that climate change is a significant business issue, with 77 percent expecting its significance to increase in the future. However, only 53 percent of respondents thought that their organisation should give a high level of attention to climate change.

Only seven percent are fully aware of what the UK Governments 2050 target for climate change is

How significant an issue do you believe climate

3% 12% 34%

change is for business at this current time?

Very significant Fairly significant Fairly insignificant

51%

Very insignificant
Source: KPMG LLP (UK)

2008 KPMG LLP a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member , firms affiliated with KPMG International, a Swiss cooperative.

Businesses still looking for clarity around next steps for climate change

Responses here reveal a split between male and female attitudes to this issue while 66 percent of female respondents thought that their organisation should give a lot of attention to climate change, only 50 percent of male respondents agreed. Despite the consensus that climate change is a significant business issue, the level of attention given at board level varies significantly. Ten per cent of respondents said that climate change is discussed at board level in every meeting, 12 percent once a quarter and 16 percent annually. Significantly, 13 percent of respondents organisations are not currently, but they will going forward, be discussing climate change in the boardroom. Asked to indicate the relevant importance of climate change as a business issue, the following total levels of importance were recorded:
Employee engagement and performance 96% (100% in May) Customer service 96% (100%) Profitability 95% (100%) Brand awareness 89% (88%) Risk management 89% (96%) Technology 88% (93%) Marketing 88% (95%) CSR 76% (89%) Climate change 67% (74%)
Source: KPMG LLP (UK)

Regardless of whether your organisation is currently developing carbon management strategies or not. In your opinion when it comes to an organisation like yours developing carbon management strategies which of the following areas pose the biggest challenge?

Developing future carbon scenarios for planning Accurately measuring carbon emissions Influencing partners and suppliers to adopt more carbon efficient practises Understanding offsetting Understanding environmental tax issues Getting employee buy-in for carbon reduction strategies across the firm Other (please specify)
Source: KPMG LLP (UK)

14 15 24 4 5 25 11

But still struggling Despite being seen as an important issue, organisations are still struggling to address climate change appropriately. Of the respondents, only 17 percent were confident that they fully understand climate change and their carbon footprint and have a clear strategy in place to deal with it. Forty percent have a good understanding of the issue and are developing a

strategy, whilst 32 percent only have a vague understanding. Therefore, 83 percent of the organisations covered by this survey do not have a strategy to address climate change. Despite the overwhelming majority of respondents organisations not having a strategy in place, over half (56 percent) thought that their organisation gave the right amount of attention to
How good is your business's understanding of

6% 1% 4%

climate change?

17%

32% 40%

Source: KPMG LLP (UK)

We fully understand the issue know our carbon footprint and have a clear strategy We have a good understanding and are developing our strategy We have a vague understanding aware of the key issues only We dont understand the climate change debate or how it affects our business We are sceptical and dont believe climate change is actually happening Dont know

2008 KPMG LLP a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member , firms affiliated with KPMG International, a Swiss cooperative.

climate change. Only a third thought that too little attention was given and a sizable minority (10 percent) thought too much attention was being paid to climate change. When asked, respondents cited influencing partners and suppliers to adopt more carbon efficient practices (24 percent) and getting employee buy in (25 percent) as the biggest challenges in developing an appropriate carbon management strategy. Gaining employee support seems to be particularly difficult amongst respondents in the business services and financial services sectors (both 34 percent). A significant knowledge gap Although 41 percent of the executives questioned believe that their organisation understands how they will be affected by carbon emission targets, only 7 percent are fully aware of what the UK Governments 2050 target for climate change is, and only 10 percent correctly selected 60 percent as Londons 2025 emissions reduction target. The number of respondents that did not know the targets was 46 percent and 18 percent respectively, suggesting that London has had slightly more success in educating business than the Government. This low level of awareness and knowledge contrasts with the 73 percent of respondents who agree that education and increasing awareness

amongst businesses is key in combating climate change. Despite the majority of respondents not knowing Governmental targets, Government (47 percent) and quasigovernment (48 percent) remain the most popular trusted sources for information on climate change for respondents, along with NGOs (39 percent).
30 25 20 15 10 5 0

Government responsibility As in our May 2007 survey, respondents strongly believed that the Government bears prime responsibility for education and awareness-raising for climate change (56 percent) and for influencing behaviour through leading by example (49 percent). Conversely, business and individuals were thought to have relatively little obligation for both, though respondents identified leading by example as the area where individuals bore greatest responsibility (23 percent). However, responsibility for investing in technology to reduce carbon emissions was more evenly shared between Government (43 percent) and business (42 percent), reflecting the capital and expertise that commerce is able to bring to bear in this area. Despite being seen to bear primary responsibility for addressing climate change, a majority of respondents (57 percent) felt that the Government were failing to effectively educate businesses and individuals on their role in tackling climate change. In the case of educating business, this represented an increase of 15 percent since our May 2007 survey. Respondents scepticism towards Governmental activity extends to domestic and international policy, with under half now believing that policies such as the Kyoto protocol and the UK Climate Change Bill are likely to result

"Our organisation understands how it will be affected by carbon emissions targets in the UK Governments forthcoming climate change bill."

Strongly Agree Agree Neither agree nor disagree Disagree Strongly disagree Dont know Not applicable
Source: KPMG LLP UK

2008 KPMG LLP a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member , firms affiliated with KPMG International, a Swiss cooperative.

Which of the following areas, if any, is currently the primary driver for adopting more carbon efficient business practises within your organisation? (please choose one)

Pressure to reduce costs i.e. energy bills Exploit new business opportunities Reduce the environmental impact of the organisation Meet regulatory pressures Respond to investor demand for more 'carbon-friendly' products Enhancing reputation/brand value Respond to customer demand for more 'carbon-friendly' products None of these we are not adopting more carbon efficient practices Dont know or other
Source: KPMG LLP (UK)

16 7 27 10 2 16 9 7 5

in businesses taking positive steps towards tackling climate change, compared to just over half (52%) in May 2007 .

10% 8% 15% 41% 27%

and business responses Despite the lack of understanding, lack of appropriate corporate action and the assignment of responsibility to the Government, 76 percent of respondents still agree that business and individuals need to invest in our future by changing the way we work and live now and by taking steps towards tackling climate change. When asked where business reviews are currently taking place, 42 percent of respondents mentioned operational management, down from 55 percent in May 2007 The proportion of . respondents mentioning strategic development plans (42 percent) and supply chain (33 percent) also fell, by 28 percent and 14 percent respectively. The level of respondents whose organisations were utilising the main measures to tackle climate change was again down on May 2007:
Recycling / using recycled products 77% (92% in May 2007) Installing / using energy efficient appliances 67% (85%) Educating and training employees on environmentally friendly business practices 53% (70%)

So what are the primary drivers for those that are adopting more carbon efficient practices? Twenty-seven percent of respondents identified reducing the environmental impact of the organisation as the driver, with 16 percent citing pressure to reduce costs and the same number identifying brand enhancement and value. Next steps The results from this latest survey show that the majority of business leaders still dont treat climate change as an economic issue that can have a positive or negative impact on the bottom line. Knowing your carbon number is rapidly becoming a key performance indicator that employees, regulators and shareholders demand accuracy and assurance on (Richard Sharman, Lead Partner, KPMGs Carbon Advisory Group). KPMGs Carbon Advisory Group is providing insight and strategies to help companies understand and manage the many business implications of climate change. Drawing upon their experience across audit, tax and advisory, their multi-disciplinary team is already helping clients develop strategies to embrace planned and likely changes in; environmental regulation, changes in stakeholder demands, energy efficient or renewable energy investment and trusted carbon offset and trading schemes.

Policies such as the Kyoto protocol and the UK Government Climate Change Bill are likely to result in businesses taking positive steps towards tackling climate change

Strongly agree Agree Neither agree nor disagree Disagree Strongly disagree
Source: KPMG LLP (UK)

However, the number of respondents whose organisations are working to achieve carbon neutral status rose slightly to 22 percent.

2008 KPMG LLP a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member , firms affiliated with KPMG International, a Swiss cooperative.

kpmg.co.uk

Contact us: Richard Sharman Lead Partner +44 (0) 20 7311 8228 richard.mas.sharman@kpmg.co.uk Adrian Wilcox Carbon Audits and Accounting +44 (0) 20 7694 5165 adrian.wilcox@kpmg.co.uk Frank Sangster Environmental Taxes and Incentives +44 (0) 20 7311 2448 frank.sangster@kpmg.co.uk Rob Cormie Strategic and Transactional Objectives +44 (0) 20 7311 4606 rob.cormie@kpmg.co.uk Andrew Cox M&A Transaction Support +44 (0) 20 7311 4817 andrew.f.cox@kpmg.co.uk Tim Jones Carbon Efficient Supply Chain +44 (0) 20 7311 2657 timothy.jones@kpmg.co.uk Trevor Wiles Offsetting Investigations +44 (0) 20 7311 3785 trevor.wiles@kpmg.co.uk Jonathan Coltman Restructuring +44 (0) 20 7694 3747 jonathan.coltman@kpmg.co.uk Naseem Walker Carbon Management +44 (0) 20 7694 4274 naseem.walker@kpmg.co.uk

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

2008 KPMG LLP a UK limited liability partnership, is , a subsidiary of KPMG Europe LLP and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved. Printed in the United Kingdom. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss cooperative. Designed and produced by KPMG LLP (UK)s Design Services Publication name: Climate Change Business Leaders Survey II Publication number: 311-970 Publication date: February 2008 Printed on recycled material.