Environmental issues are still a low priority for many small firms
By Steven Vass, Deputy Business Editor

CORPORATE profits will plummet unless businesses take urgent steps to deal with the threats from climate change - that's the message from a new report by consultants Accenture.

While almost half of the 500 business leaders surveyed by Accenture believe climate change is now a major issue, few are doing enough to prepare for a future where being green is a necessary part of running a business rather than a political preference.

Mark Spelman, global head of strategy and one of the report's authors, said the rising costs of energy and carbon would soon mean that green business would be about far more than having a corporate social responsibility director.

By 2020, those businesses that have not factored these costs into their budgets would find that they either cannot compete with rivals' prices or would face great upheaval from abruptly slashing costs. Either way, they would be in danger of going to the wall.

But, he said: "I don't think climate change has to mean that profits will go down, but my key message is urgency. If you don't prepare early, you will find that you are at a cost disadvantage."

He said there was a risk of a parallel with UK electricity companies, which believed they were ready for the deregulation of the UK power market but turned out to be mistaken and subsequently struggled to compete.

Climate change would also have just as much effect on small businesses, since the costs would be passed on from other parts of the economy.

For example, the large companies involved in the new European carbon trading scheme, due to launch this summer, would expect suppliers to fit in with their carbon targets or lose contracts.

Yet Accenture found that climate change was only the eighth priority for respondents, named by only 16% of them. This was well behind top-ranking categories such as sales growth (47%), cost reduction (46%) and developing new products and services (45%). Spelman predicted it would have moved up this list by the time Accenture completed its follow-up report in two to three years.

The report also found that half of businesses that were responding to climate change were only taking one or two initiatives, and that 19% were still doing nothing. Meanwhile 53% were struggling to understand the implications of climate change for their businesses.

David Lonsdale, assistant director of CBI Scotland, which represents businesses' interests, welcomed Accenture's findings and said that climate change efforts also benefited businesses by improving their reputations and making them more attractive to staff and customers.

This is supported by CBI Scotland's own poll on business responses to climate change, which came out last week. Having talked to 125 Scottish businesses, it found that 60% have a formal environmental policy and half the remainder plan to introduce one.

Of those that had introduced environmental policies, 62% said it had improved business performance, with reputation coming out first (mentioned by 73%), followed by lower costs (58%), better customer relations (53%) and better staff retention/recruitment (21%). Some 59% of respondents said they had taken steps to reduce CO2 emissions.

Although he avoided criticising Scottish businesses for not responding quickly enough, Lonsdale said great strides had been taken over the past couple of years, although "there is still a great deal of room for improvement".