Younger employees push corporations to address critical risks, hire green-savvy executives.
Younger employees push corporations to address critical risks, hire green-savvy executives.
WASHINGTON, D.C. — Climate change is a bottom-line concern for corporations. It has a profound impact on both fiscal and staffing success.
Two studies, conducted by international accounting firm KPMG and international law firm Eversheds Sutherland, show that while corporate leadership is moving toward embracing climate policies, evidence points to rank-and-file employees as essential to changing the CEO’s attitudes.
These studies underscore that green-energy work experience is a much sought-after skill.
A survey released in November of executives worldwide revealed corporate management lacks the skill set to address climate-related risks, which are estimated to cost $1 trillion.
KPMG has outlined three main classes of risk corporations may face from climate change.
The first is the “physical risks” of climate change, which can include effects such as drought, wildfires, increased storm intensity and frequency, flooding and erosion, decreased agricultural output and other consequences of increased warming in some areas. The “transitional risks” can include new regulations, technological changes and social expectations. Corporations can also expect to face liability risks if they fail to properly address climate change, KPMG wrote.
The survey conducted by KPMG and Eversheds Sutherland of more than 500 corporate executives from some of the world’s top companies was revealing: 74% of corporate leaders believed they and their companies needed better skills to address climate change.
“The survey demonstrates a significant gap: Three quarters of executives think climate risk poses a threat to their job, while only 26% admitted they have the skill set to deal with the risk,” said Michelle T. Davies, International Head of Clean Energy & Sustainability at Eversheds Sutherland.
At the recent Reuters Events: Future of Renewables conference, Davies noted climate policy is having an impact on some companies’ workforce.
A major concern is attracting talent. Some 25% of the world’s largest companies said they were losing talent because of climate policy,” she said. “They weren’t able to attract the junior talent.”
In a similar study by KPMG released in November, more than half of the world’s 250 largest companies see climate change as a financial risk to their business.
However, not all of the pressure to address climate change is coming from the top.
The survey showed 40% of the executives said employees leave their jobs because they are unhappy about their firm’s focus on climate-related policies and projects. Another third of the executives said employees have been vocal about their dissatisfaction with their company’s impact on climate change.
While 45% responded that climate change doesn’t appear to be an issue for employees, another 28% said potential employees were asking about the company’s “climate impact” in interviews. Still another 14% each replied the company’s climate impact was making it more difficult to recruit young talent or that employees are putting pressure on management to act.
“Greater attention to climate issues among rake-and-file employees will also be present among potential hires,” KPMG wrote in the report. “Therefore, companies’ efforts around climate change should become a significant factor and even a differentiator in their recruiting efforts, particularly for young people.”
Some countries are more likely than others to report financial risk from climate change.
France, Japan and the U.S. are more candid, while German and Chinese firms were less likely to add those risks to their corporate disclosures, the KPMG report said. However, while many German firms don’t note climate change as a financial risk in their corporate reports, German CEOs were the most likely to mention climate risks as part of their annual report message.
Not surprisingly, companies in the oil and gas sector were most likely to report climate risks. Utilities are also experiencing financial risks with fossil fuels.
Last month, Arizona-based utility Salt River Project demolished its 2.2-gigawatt Navajo Generating Station after it determined it would be “uneconomical” to continue operating the plant.
Across the country, one of the U.S.’s newest coal-fired power plants is struggling, according to a report from the Institute for Energy Economics and Financial Analysis. The Virginia City Hybrid Energy Center, built just eight years ago, is “at risk of closure as market and policy forces continue to work against its viability.”
Climate-related risks aren’t isolated to the U.S.
In Australia, a Japanese firm is divesting itself from a $1 billion investment in the 466 megawatt Bluewaters Power Station after “no longer wanting to be associated with investments in loss-making thermal coal-fired power plants,” IEEFA reported.
In the KPMG and Eversheds Sutherland survey titled “Climate change and corporate value: What companies really think,” 78% of executives believe climate risk will be a key factor as to whether they keep their jobs over the next five years.
The shifting focus to renewable energy has the potential to affect the workforce across a variety of industries, and not just the hourly workforce, warned Dane Parker, Chief Sustainability Officer at General Motors. GM speculated on the fate of engineers specializing in the internal combustion engine as the auto industry increasingly adopts electric vehicle technology.
Julien Pouget, senior vice president of renewables at French oil producer Total, said the urgency of an energy transition is present at all levels of the international company.
“It’s not just the young employees,” Pouget said during the Reuters conference. “The existing leadership teams are aware of the challenge and that a transition is necessary.”
(Edited by Fern Siegel and Bryan Wilkes)
