Impact of Climate Change On Global Business

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Acknowledgement
There is an old say from my home country Give me an educated mother; I shall give you an educated
nation. At this stage of my journey I am very much pleased and honoured to say I am the first girl
from my family who is going to accomplish the Masters degree by the grace of Almighty from one of
the world famous university based in the capital of world, London.
In this Journey I would like to thank first Almighty Allah. Without the blessing of Almighty
nothing is attainable.
My Supervisor Dr. Ian Philip Clark who has given me continuous support from the begging
to end of the project, He had shown be the guideline to resubmission of this research project,
He had supported me in all the informative way with patience. I would very much like to
thank him cordially from the core of my heart.
I also like to thank my adored friend Mehedi for his continuous support, care and love & my
elder sister who give me encourage from thousands miles away, without questioning me
anything.
My final gratitude to my rest of the family, to my country who have given me the
opportunity to be here and to my class mates who have given me their shoulder within their
busy time.

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Abstract
Purpose: This paper aims to find the impact of climate change in the context of
measurement of the awareness of the corporate, measurement of the risk associated with the
energy sector, cost analysis of the mitigation of carbon emission also the perception of profit
and loss of the company.
Research design/methodology: It is using the data of various multinational companies
worldwide. Also statistical data been used from the various data sources. In this paper the
empirical evidence to prove why companies need to aware about climate change, secondly
also to examine the current market responses , focusing on the drivers like risk and
opportunities and the action being taken by companies to address climate change in the
energy sector.
Findings: This study identifies lack of awareness in the multinational companies as well
difficulties in the implication of the indicators of the adaptation. Also identifies the threat for
the energy sector and the risk management for this sector in terms of climate change.
Limitations: It would definitely been an advantage to talk more about the different regions
and their impacts based on the supply chain as a main tool of Global Business.
Recommendations: This study is based on the data that was available from various data
sources most updated is used although its recommended that primary data collected for
longer period of time based on various regions would be preferable.
Value: Climate change is the most important issue worldwide. The topic that is dealing
with is more over dealing with the scenario of the world of Business. This paper keeps a

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value to know about the impact of climate change in the market in terms of corporate
strategy.
Keywords: climate change, energy efficiency, implication, adaptation, Global business.

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Contents
Acknowledgement ............................................................................................................................... 2
Abstract.................................................................................................................................................. 3
1. Introduction: ..................................................................................................................................... 8
1.1 Background: ................................................................................................................................ 8
1.2. Research questions: ................................................................................................................... 9
2. Literature review: ........................................................................................................................... 10
2.1 Definition:.................................................................................................................................. 10
2.2 International Legislation and regulations on climate change: ........................................... 11
2.3 Climate change in the eyes of the Upper managements .................................................... 13
2.4 Case Study: Toyota .................................................................................................................. 14
2.5 Opportunities in climate change for the companies: .......................................................... 14
2.6 Strategic approach to climate change for the business: ...................................................... 15
2.7 Transparency to Stakeholder: ................................................................................................. 18
2.8 Forecast of warmer world: ...................................................................................................... 19
2.9 The Green Consumers and Marketing opportunities: ........................................................ 21
2.10 Why Business should care for climate change? ................................................................. 23
2.11 Investment world and climate change: ............................................................................... 24
2.12 Summary: ................................................................................................................................ 26
3. Methods: .......................................................................................................................................... 26
3.1. Research Approach: ................................................................................................................ 26
3.2. Qualitative and Quantitative approach: .............................................................................. 27
3.3. Primary and secondary data: ................................................................................................ 27
3.4. Data collection and literature search: ................................................................................... 28
4. Empirical Findings and Analysis: ................................................................................................ 30
4.1 Consequences of the climate change: .................................................................................... 30
4.1.1 Antarctic Ozone Hole ............................................................................................................... 32
4.1.2. Carbon Cycle: .......................................................................................................................... 33
4.2. Effects of Energy use:.............................................................................................................. 34
4.2.2. Rise of Temperature for energy use: ................................................................................. 35
4.2.3. Emission by sectors: ................................................................................................................ 36
4.3. Emission reduction policies in the energy sector: .............................................................. 38

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4.4. Cost analysis for present and future energy emission: ...................................................... 39
4.5. Adaptation for the climate change: ...................................................................................... 41
4.5.1 Risk/ Cost and Opportunities for the Business in terms of climate change: ............. 43
4.5.2 Constrains of taking action in response to climate change: ............................................ 45
4.5.2. Regulatory environment to be considered: ...................................................................... 48
4.5.1 Businesses seek both International consistency and industry flexibility: ................. 49
5. Research Findings: ......................................................................................................................... 50
6. Conclusion: ........................................................................................................................................ 52
Bibliography: ...................................................................................................................................... 54
Appendix A ............................................................................................................................................ 57
Appendix B ............................................................................................................................................ 59

8. List of Tables:
Table 1: Expected impact of climate in near future .....................................................................17
Table 2: Shades of Green consumers .............................................................................................18
Table 3: Opportunities and Threats of the product......................................................................18
Table 4.3: Examples of policy measures given general policy objectives and options to reduce
GHG emissions from the energy-supply sector............................................................................38
Table 4.4: The technical potential energy resource and fluxes available, potential associated
carbon and projected costs (US$ 2006) in 2030 for a range of energy resources and
carriers.................................................................................................................................................39
9. List of Figures:
Figure 1: Global Temperature Change ..........................................................................................30
Figure 2: Temperature anatomy from the year 1880-2010...........................................................30
Figure 3: Antarctic Ozone Hole..........................................................................................................31
Figure 4.1.2: Component of the Global Carbon Cycle (2009)..................................................... 32
Figure 4.2.1: Total Carbon Dioxide Emissions from the Consumption of Energy (Million
Metric Tons).......................................................................................................................................33

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Figure 4.2.2: Energy consumption vs. contribution to temperature increase year 2000-
2007.......................................................................................................................................................34
Figure 4.2.3: CHG emission by sector in 2007................................................................................35
Figure 4.2.4: Measurement of the factors companies considered to change their business for
climate change................................................................................................................................... 36
Figure 5: Company initiatives to handle the climate change. (%)...............................................41
Figure 5.1: Climate change risk or opportunity, corporate strategy...........................................42
Figure 6: Perception of the cost, business opportunities and revolution of climate change
(%)........................................................................................................................................................43
Figure 7: Businesses are struggling to understand the implication of climate change
(%)........................................................................................................................................................44
Figure 8: Response to, the companies positioned to deal with climate change (%).................44
Figure 9: Businesses facing Top challenges in respond to climate change (%).........................45
Figure 10: Perceived likelihood various regulatory measures being implemented (% by
market).................................................................................................................................................46

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1. Introduction:
This chapter will introduce the dissertation by presenting the background and the research question based on the
topic as well the purpose of the thesis..
1.1 Background:
Climate change is the most recent issue all over the world. The temperature of the earth is
rising day by day. The scientists have been accepting the rise of temperature would be 2-3 C
within 50 years, which will lead to access rainfall, flood, and drought. All over the world
everyone can feel the impact of climate change directly or indirectly. The direct impact can
be felt by the companies, some are taking it seriously as a part of their strategy some are still
considering it as a corporate social responsibility. The indirect impact can be disclose as the
attitude and behaviour of the stakeholders which include Government, customers,
employees, value chain, suppliers and the media.

The reason of climate change can be described as Atmospheric carbon dioxide (CO2), which
was 280 parts per million (ppm) before the industry revolution. It is now 380 ppm, which is
helping to concentrate the Greenhouse gas (GHG). The effect is the rising temperature of
Earths by 3 C. GHG emission is rising globally, under this condition if businesses follow
their as usual path as the temperature of the Earth will rise between 2C to 4.5C within year
2100. The IPCC has taken action to cut the carbon emission by 2015 to prevent the rise of the
temperature to 2C. Finally IPCC will take step to decline the rise of temperature by 50 per
cent by 2050.

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The regulatory framework for the climate change action is taking place, among them Kyoto
protocol is committed to shrink the carbon emission over fixed period of time. There latest
proposal is to collect the Green fund for the poor countries to help reduction CO2
emissions.
1.2. Research questions:
Companies all over the world are facing the unavoidable and unexpected consequences of
climate change. To achieve the sustainability of climate change by taking different strategies,
some of the companies already made huge change to their system. Some of them are still
taking time to take approach before get affected by climate change. The approach towards
climate change is not one size fits for all it depends on the region, company category also
the stakeholders demand.

The regulatory commissions of climate change want the companies to curb their carbon
emission within a fixed period of time. The Legislation is increasing the cost of the
companies production system. Some companies taking the carbon emission as a threat to
their business as well some are considering as an opportunity towards their business.

Since the approach towards climate change is individual according to the company,
therefore one should be curious about the impact of climate change on global business
particularly in the energy sector. It is an interesting topic to take into consideration the
physical evidence of the climate change for the awareness of the business cost and
opportunities of climate change on the major companies all over the world based on their
emission reduction.

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Thus the above discussion leads to following research question:
1. Why business need to aware about the climate change and to mitigate the greenhouse
gas how energy sector is reforming?
2. How businesses are seeing the cost and opportunities of Climate change in their
operation and strategy?
2. Literature review:
2.1 Definition:
What is Climate change?
Climate change is the kind of change in the climate pattern over decades or centuries. This
change occurs both for natural and human pursue. Climate change takes place may be due
to persistent anthropogenic changes in the composition of the atmosphere or in land use or
may be natural internal process or external forcing. (Climate change, 2009)
According to the KPMGs report the Climate Change at a glance
The Intergovernmental panel in climate change (IPCC) has found that concentrations
of carbon dioxide in the atmosphere have increased by 35% in the past 250 years, by
far exceeding natural variations over the past 650,000 years, and probably the past 10
million years.
According to Dawson, Within 50 years the temperature will rise 2-3
C , which
includes risk of flooding from melting glaciers, followed by disruption to water
supplies, affecting up to one sixth of the world population, mainly in the Indian
subcontinent , part of china, and South America.

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In Higher Latitude areas, such as Northern Europe agriculture yields may increase
and will decrease in Africa, which will lead to hundreds of millions of people
without sufficient food.
Increase of heat related death; spread of tropical disease, also there will be less death
of cold. With the increase of warm temperature the sea level will rise that will lead
to low lying coastal land, which will displace 10- 100 millions of people.
2.2 International Legislation and regulations on climate change:
According to (Vijn, 2006) and (Pinkase et al 2009)
The Kyoto protocol this protocol had come into effect in early 2005, and over 165
countries have now ratified the protocol, with notable exceptions of the USA and
Australia.
The European Union Emission Trading Scheme (EU ETS) has launched in early
2005, and created an EU- wide market for emissions trading linked to the Kyoto
Protocol.
In addition the Linking Directive was introduced in the EU in 2005 to link the EU
ETS to the Kyoto Protocol and allow credits generated under the protocol to be used
in the EU.
In Mid 2005 six major countries signed the Asia Pacific Partnership on climate
change, an initiative aimed at deploying technology to constrain and reduce
greenhouse emissions.

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The greenhouse gas emissions trading market increased from almost zero in 2003 to
approximately 18 billion Euros by 2006, according to data from PointCarbon
1
.
In the USA, the States of California and a group of nice states on the Eastern
Seaboard (The regional greenhouse Gas Initiatives) are introducing regulations on
greenhouse gas emissions, and similar regulations have been proposed by state
governments in Australia.
In 2007 launch of new EU climate change targets to prevent more than 2

C before
2020 including 20% reduction in GHGs; 20% improvement in energy efficiency, 20%
of energy use from renewable sources; 10% of transport fuel consumption by bio
fuels.
IPCC 4
th
Assessment Report released in February of 2007, It reaffirmed findings that
global temperature is rising and that this development is very likely to have induced
by human caused GHG emissions.
IN 2007 Canadian Regulatory framework made an update of their 2005 plan which
aims to realise a 20% reduction of greenhouse gases by 2030 compared to 2006.
Australian First emission trading platform Australian climate exchange was
launched in year 2007.
In 2007 Australia and New Zealand announced a join forces in the carbon trading
systems that would be compatible. Follows on Australias earlier statement that
declared to move towards a domestic nationwide emissions trading system per 2012.

1
Thomsons Reuters Point carbon is an independent provider of news, and consultancy services for gas, energy
and carbon market. www.pointcarbon.com

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In 2007 COP 13 Bali which is known as Bali Established plan ; an agreement to start
negotiating a post 2012 internal framework for climate change policy as a follow up
to the Kyoto Protocol.
In 2010, COP 16/CMP6 of UNFCCC, held in Cancun Mexico, has reached a deal to
curb climate change, including a fund (Green climate fund) which is $100 billion to
help the developing countries to financing emission reduction and adaptation.
2.3 Climate change in the eyes of the Upper managements
According to (Smith, 2009) Even the CEO of Tesco one of the greatest superstore is great
Britain said that his main concern is Climate change for the sake of the future generation
though he is not a scientist. Carbon footprint is the important issue to mitigate the carbon
emission by fuel. Even Wal-Mart started to believe long ago that lean is green. Tesco began
to search for its carbon footprint in its bulging store shelves. They put extra labelling of
carbon footprint as like nutrition or price on the body of the product so that customer can
easily compare how environmental friendly the product is. ILOG is an international supply
chain consultancy and software provider is also offering carbon footprint extension to its
logistics design and planning software. Which includes carbon emission by fuel type,
average fuel efficiency, and carbon-freight factor for waterborne and rail transport and also
alternative transport support for example rail transport. To determine total transport carbon
emission they apply fuel efficiency which is calculated by miles per gallon and carbon
conversion factor - kg CO2 per gallon or ton mile.
IBM was praised for cutting the companies own greenhouse gas emissions and designing
innovative climate- related products from energy efficient data centres to solar cell

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technology. (IBM, 2008) Ceres is a Network of Investors, environmental organizations and
other public interests groups released a report on the worldwide companies tacking climate
change risk and opportunities. According to the report IBM scored 79, Tesco scored 78 and
Dell Scored 77 among 63 of the worlds largest companies dealing with the risk and
opportunities of climate change. The lowest score went to the restaurant which is 17. The
report used 14 indicators to evaluate board oversight, public disclosure, emission
accounting, management executive and strategic planning.
2.4 Case Study: Toyota
Toyota is the successful car companies today; Toyota is also a leader in the automobile
industry in the battle of the climate change. Its approach to climate change is a story of
innovation and market anticipation, perhaps best presented by its mass produced hybrid car
(the Prius) in Japan in 1997. It was a testimony long 15 years ago in the market of automobile
long before the concept of climate change came in to most companies radars. Since the Prius
was introduced into the North American market in 2000, Toyota has sold more than 400,000
hybrids and demand is still high. It has saved more than 178 million gallons of gasoline and
1.6 million tons of CO2 emissions by the end of 2006. The innovation of Toyota is still going
on Toyota is currently developing the technology behind plug in cars that will run solely on
electricity (Cooper, 2008).
2.5 Opportunities in climate change for the companies:
(Schwartz, 2007) Climate change may affect the companies supply chain breakdowns,
migration of employees, Increase in disease, or even impact on reputation (e.g. those
companies have worldwide logistic system may blamed for carbon emission). Companies

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needs to evaluate their risk widely as their operation of the firm is on the environment that
is cascading climate related disruption or susceptible to catastrophic.
In fact Companies have to take the opportunity of the systems vulnerabilities occurs by
climate change as a systems opportunity for business to develop novel partnership with
the Government, 3PL supply chain community or in the case of traditional competitors,
Companies can do so by preparing the infrastructure needed for disaster recovery. In this
way companies can build goodwill towards the communities in which they do business by
providing leadership role in helping regions anticipate climate change and mitigate risk.
To serve the society on the era of climate change and to upgrade its own operations Coca-
cola recently announced partnership with the world Wildlife Fund to help protect the
worlds water resources as well to improve the firms water management system. The action
of Coca-cola has shown the help to the local communities while enhancing the companys
image.
2.6 Strategic approach to climate change for the business:
According to (Porter, 2007) Climate change is now a fact of political life and is playing a
growing role in business competition. Because of the carbon emission greenhouse gas is now
been scrutinized, regulated and priced. Though the managers are still unable to imagine
how the cost of the climate change will affect the business they still think it as a corporate
social responsibility issue rather than a business problem. The approach to climate change is
different from one company to another, depending on their particular business. Each
company should try to mitigate climate related cost and risks in its value chain. Also carbon

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emission should be treated as costly cause they will be costly in near future as well leaders
need to assess their vulnerability to climate related environment and economic shocks.
To understand the emission cost companies need to evaluate its vulnerability to climate-
related effects such as the reliability of infrastructure and supply chains, the prevention of
infectious diseases, regional availability of energy and water. After that leaders needs to
systematically decide which to shrink through redesigning operations and which to transfer
to others through insurance or hedging contracts and which to bear.
The approach to climate change for some companies beyond operational and become
strategic others will find it as a opportunity to extend their competitive positioning by
creating or innovating new products such as Hybrid cars, restructuring their industries to
climate issues more effectively or introducing new activities by innovation to produce
genuine competitive advantage.
Porter described climate change impact in two ways which is Inside out to understand the
impact of firms activity in the climate and Outside in to understand how changing climate
may affect the business environment in which the firm competes.
Managers need to understand the inside out, which refers to- any value chain logistics,
inbound and out bound logistics, marketing, sales, after sales service can generate emissions.
The simple ratio of a profit to total ratio of value chain may lead to climate impact. The
managers need to understand whether the emission occurring is direct or indirect.
Emissions can be generated by the activities of suppliers, channels, and customers. A
company need to understand the emission it produces whether its by the partner company

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or by itself, as both type of emission is important to reduce the carbon exposure of value
chain.
This inside-out system has a potential revolutionary in inventory system. To reduce the
carbon emission day by day just in time inventory management is taking place in todays
world of costly emissions. The lengthy off shoring might need to nearby clusters of suppliers
to mitigate the carbon emission.
To meet the climate change demand Wal-Marts activities are logistics and transportation
intensive. As a climate change approach Wal-Mart is reducing the energy use to mitigate the
potential emission on the value chain. (Smith, 2009) Now Wal-Mart is a leading innovator in
green supply chain logistics.
In tandem with inside-out analysis, an outside in look can reveal a new array of
opportunities and threats. Climate change can affect the firms in two broad ways: through
shifting temperature and weather patterns, and through regulations that increase the cost of
emissions. Also the effect of the availability of business inputs; the size, growth and nature
of demand, access to related and supporting industries; and the rules and incentives
surrounding industry rivalry. Business leaders should evaluate how climate change may
affect each part of this context for competition.
For some example if carbon exposure is low for the property owner but high for the real
estate that is threatened by rising sea levels. Even same for the oil companies the carbon
exposure for them is low but high for the customers who use the oil. Restriction on these
products will limit the demand of these companies products.

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2.7 Transparency to Stakeholder:
(Esty, C. Daniel, 2007) Stakeholders customers , employees, capital market as well
government and NGOs expect companies to release public report on greenhouse gas
emission, progression in energy efficiency and estimated target for reducing emissions.
Companies that fail to meet those expectations face potentially serious business
consequences, for four broad reasons.
Firstly the responsibility towards the environment of a company is hard to hide and
threatening to its reputation. In June 2007 Apple launch its innovative iPhone, it was a major
hit in the market but the ranking of the carbon exposure list Apple came up in the last in the
category of electronics. The score was 2 out of 100 which is based on the companies tracking,
reporting and reduction of greenhouse gases. The scoring was done by an environmental
group called Climate counts. Poor marks on reporting and managing climate impact are
putting Apples reputation for being cutting edge and in the top of risk which have
dishearten the passionate customers. Some environmental NGOs have begun rising in
favour of Apple with its Green my Apple campaign. Steve Jobs have privately expressed
his concern of lacking of the environmental ratings. In May 2007 Apple posted a letter in
their website, Jobs acknowledge the criticism of the companys environmental performance
and declared Openly our plans to become a greener Apple
Secondly keen management of environmental changes has become a way to positively shape
brand image and attract new customers. Carbon emissions management has become a
public relations battleground among supermarkets in the UK; Tesco announced 100 million
in environmental technologies to reduce its energy consumption. Marks & Spencer
announced that it would go carbon neutral. The CEO Stuart Rose called it as Plan A

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because there is no Plan B. Tesco has announced that they will put label in their 70000 items
with their carbon footprint. These attitudes were highly followed by the keen customers.
Thirdly reporting signals a companys seriousness about climate change and provides a
gauge of its ability to track and manage emissions.
Fourthly, like other stakeholders financial market is also taking greenhouse gas emission
with great attention. Companies screen dozens of funds for the environmental and
sustainability factors by including emission reporting and excluding poor performance.
U.S is moving forward to regulating emission, and Europe is also striking greenhouse gas
limits, especially large Companies that dont report and expose the greenhouse gas emission
is seems to be high emissions. These companies have to face the carbon charges as well high
energy costs which will challenge companies competitiveness. On the other hand
companies that report greenhouse gases and the report appear to be in better position that
means they are trying hard to control the emission which will minimize the consequences of
new regulatory requirements.
2.8 Forecast of warmer world:
Throughout this century for the climate change there will be significant consequence upon
the humanity, industry and the environment. It is still unknown what will be the timing
and the precise nature of the effect. Although scientists are not just sitting back they have
estimated some repercussion which will help the business to think strategically about their
response.

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Table 1: Expected impact of climate in near future
Projected
changes in
this century
Expected impact
On industry human
sentiments and society
On agriculture,
forestry, ecosystem
and water.
On human health
More hot days
, more
frequent heat
waves
- Higher energy demand
for cooling
- Lower energy demand for
heating
- Declining air quality in
cities
- Fewer disruption to
transport from snow and
ice
- Reduced winter tourism
- Higher crop yields
in colder
environment
- Lower crop yields
in warmer
environment
- Increased water
demand
- Increased insect
infestation
- Increase in
heat related
deaths
- Decrease in
deaths from
cold
More frequent
heavy
participation,
intense
tropical
cyclone
activity
- Floods that disrupt
settlements, commerce,
transport, and societies.
- Property loss
- Withdrawal of risk
coverage by insurers
- More power outages that
disrupt public water
suppliers
- Crop, tree, and
reef damage
- Soil erosion
- Water logging of
soil, inhibiting
cultivation
- Increase in
flood related
injuries and
deaths
- Higher
incidence of
infections,
respiratory,
and skin
diseases
More area
affected by
drought
- Shortage of water for
industry
- And settlements
- Reduced hydropower
- Population migrations
- Land degradation
- Livestock deaths
- Lower crop yields
- Wildfires
- More food and
water
shortages
- Higher
incidence of

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water and
food-borne
diseases
Rise in sea
levels
- Movement of population
and infrastructure
- Property loss
- Withdrawal of risk
coverage by insurers
- Stalinization of
irrigation water ,
estuaries, and
fresh water
systems
- Shortage of fresh
water

- Increase in
flood related
injuries and
deaths
- More
migration
related health
problems
Adapted from Climate change / Business climate 2007

2.9 The Green Consumers and Marketing opportunities:
(Biddle, 2008) have describes the level of interest of consumers for the green products.
Consumers always make decision based on the factor and only a very small number of
consumers factored the impact of environment. Consumers are motivated by the Al Gores
An Inconvenient truth and the Stern report; they actively look for the environmentally
friendly products. Concerns for the environment particularly the impact of greenhouse
gases on climate change , global warming, sea level rise and increased weather extremes has
become a major area of concern. In the last federal election climate change was the major
issue as well for the consumers. The climate related eco adjectives such as biodegradable,
phosphate free, energy efficient, carbon neutral, recyclable and carbon footprint by
companies to create a marketing advantage for their products shows that businesses are well
aware of the change in consumer thinking.

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There is always some extra cost the consumers have to bear to adopt an environmentally
friendly product. The degree to which level consumers bear this extra cost determines their
shades of greenness.
Table 2: Shades of Green consumers
Shades of the green consumers
Dark green Heavily committed, will seek out environmentally friendly products and
is willing to pay considerably extra.
Green Committed and aware and will seek out and pay a small premium for
green products
Pale- Green Is becoming more environmentally aware. Environmental factors will be
considered and there is a willingness to pay slightly more
Non- Green Have a low level of awareness. Environmental factors will not be important
and price and ease of purchase are the sole factors.

Also in this paper the author showed the threats and opportunities of the products that were
in demand in 1995 before the awareness of the environmental issues and the products that
are in demand now. The opportunity has increased for the products and the production
methods that have shown the environmental friendliness and threats for those that havent
listed below.
Table 3: Opportunities and Threats of the product
Opportunities Threats
(Winners) (Losers)
Small fuel efficient cars Large cars
Bicycles Water Sprinklers
Shares in ethical investments Lawns
Wind generators Plastic bags

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Water tanks Coal powered generators
Mulch Incandescent lights
Solar panels Clothes dryers
Drought resistant garden plants Domestic freezers
Rail transport Solid fuel heaters
Carbon offset schemes Oil heaters

The consumers will push towards the dark shades of the greenness scale if the firms dont
accept the importance of the reducing gases and the likely repercussion.
2.10 Why Business should care for climate change?
(Le Pla, R, 2006) A New Zealand based management company has figured out nine reasons
why company should care about Climate change. Few of them stated below.
1. Extreme effect: which will include Agriculture in New Zealand, Warmer temperature
may be blessing for the farmers of South Islands of New Zealand but a little worry
for the regions like Canterbury, Marlborough, and Hawkes bay is very likely to
increase.
2. Carbon counts: This is the age of carbon economy, The cost of a unit of carbon is
already becoming a critical currency in the way that multinationals are trading; So
weather launching an energy project in China or planting a forest in Brazil, the
carbon unit is becoming a critical part of the business case says New Zealands
Business Council for Sustainable Development chair Rob Fenwick.
3. The Big Yikes Theory: The concept of 1.3 billion Chinese concentrates the mind
wonderfully.

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4. Investor moves are afoot: Investors are sending letters to the world top 500
companies to clarify their possible impact of companies climate change related
regulations, new technology, changes in customer behaviour and altered weather
patterns. These requests came from the coalition of institution investors who
collectively represent more than US$31 trillion in funds under management.
5. Insurance Sticks and Carrots: In 2002 weather bomb had taken away $24 million out
of the insurance market half of them from her organization alone said the Sais IAG
New Zealands support manager Butler tot. After that within less than two years
later New Zealand insurers collectively split out $112 million worth of compensation
to the rain seriously stopped play in the Manwatu and central North Island regions.
2.11 Investment world and climate change:
Why should private equity care by (Kell, G 2009) has said private equity industry is related
to buyout , mid-stage , or venture capital is a major force in international finance and
driving business innovation. In addition as an investor the industry is also full of business
managers and employers with a vital stake in the role of business in society. In many
aspects, private equity firms are much closer to the fabric of economies and communities
than their publicly traded peers. For these and related reasons, societys expectation with
respect to private equity will only increase.
The UN and the private sector share common interests, for the sake of the corporate
sustainability issue, which includes:
- Building markets to advance development and reduce property.
- Investing in clean and efficient technologies to tackle climate change.

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- Advancing good workplace practices through the supply chain
- Introducing good governance policies and anti corruption measures.
For the respect to investors, the UN Global Compacts work has centred on the Principles for
Responsible Investment (PRI). The initiative was co launched in 2006 by the Global Compact
and the United Nations Environment Programme Finance Initiative (UNEP F1). Today PRI
is led and governed largely by institutional investors.
The Global compact is the largest corporate citizenship and sustainability initiatives in the
world with over 7700 corporate participants and stakeholders from over 130 countries. It is a
strategic policy initiative and leadership platform which have ten principles along with
environmental, which are
- Business should support a precautionary approach to environmental challenges.
- Undertake initiatives to promote greater environmental responsibility and
- Encourage the development and diffusion of environmentally- friendly technologies.
(Moerman, F et al, 2008) There is more emission reduction opportunities in China so foreign
investors may wish to invest in Clean Development Mechanism projects in China.
- US companies can participate in Clean Development Mechanism (CDM) projects in
China through their subsidiaries in countries that have ratified the Kyoto Protocol.
- China prefers CDM projects that include renewable energy and energy efficiency
improvements, as well as projects that transfer technologies to China.
- Like all project CDM projects come with risks that investors should thoroughly
investigate before making a commitment.

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2.12 Summary:
In the world of climate change, its not possible for the companies to ignore the issue of
climate change. In the literature its been tried to bring the gist of the changing world by
climate change. The list of regulation bodies with their major policies for example EU ETS,
Kyoto protocol, Australian climate exchange, Cop16 and Cop 17, Canadian regulatory
framework, IPCC etc. The Future forecast of the warmer world. The companies have to
make longer planning to reduce their carbon emission. Companies have to know their
carbon foot print first with the standard measurement of UK and US. The faster they will
know their source of emission the fast the companies will be able to shrink the carbon
emission from their annual report.
Financial services for example investors and insurance companies are giving priorities to the
companies who have declared themselves as Green. Insurance companies bringing new
packages as well they are also facing challenges in vulnerable systems like Australia and
New Zealand. Some others companies taking advantage of marketing of the climate
friendly products by adding the phrases like biodegradable, recyclable, carbon footprint,
Green citizen etc.
3. Methods:
This chapter starts off by presenting the research approach; discuss the methodological problems with the chosen
method and data collection.
3.1. Research Approach:
Research study can be conducted in two different approaches one of them is deductive
approach, the deductive approach is designed to testing a theory by research strategies that

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will lead to a theory that may either support the theory or not. The researcher mainly uses
their own knowledge to get the research conclusion.
On the other side Inductive approach is designed in a way that starts from the bottom of
empirical data which is used to build new theory.
This research project is based on the deductive approach since the purpose of the research is
to draw a conclusion based on the empirical data. Although the aim of the research is to find
out the opportunities and threats of the companies as well the impact of climate change with
the help of practical evidence.
3.2. Qualitative and Quantitative approach:
All non-numeric data that have not been quantified is referred to as qualitative data while
numeric data that have been quantified is referred to as quantitative data. (Lewis et al, 2007).
For the completion of this research study the data that has been gathered is mostly in
numerical form which is a survey. The data is analyzed after that. So according to the above
sense its a method of quantitative. Also qualitative approach is also been applied for this
research project for example business journals, recent articles as well reports based on this
topic have been used to have a deeper understanding of the topic and empirical data.
3.3. Primary and secondary data:
Primary data is collected for the research project under the study and secondary data that
were originally collected for some other purpose. (Lewis et al, 2007). In this research project
the main focus is on secondary data as this is a research based on the Global companies, the
time duration that was specified for the project is too short to collect the data from all over

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the world companies. The research was possible to be conduct, because of the available
survey data from the other organizations.
3.4. Data collection and literature search:
The data was collected for the research in a sequential way; different sources are used in
each step of the research approach.
Data collected is required to answer the following research questions:
1. Why business need to aware about the climate change and to mitigate the
greenhouse gas how energy sector is reforming?
2. How businesses are seeing the cost and opportunities of Climate change in their
Firstly to find the answer of the first research question the question need to break down into
key parts which is provided below with the used data source:
Key Points Data collection source
evidence, mechanism of climate change earthobservatory.nasa.gov, Office of
Biological and Environmental Research of
the U.S. Department of Energy Office of
Science
Measuring the contribution of energy sector
to increase the temperature of the earth
(climatology)
International Energy Agency; Climate
Analysis Indicators Tool (CAIT);
Measuring the Factors to consider climate 2007, McKinsey Quarterly survey on climate

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29

change into strategy of Business in energy
sector
change
energy sector reform policies and cost
analysis of reformation
Source: Intergovernmental panel for climate
change (IPCC), Mitigation of Climate
Change: working group report III. (2007)

Finally to answer the second research question the question stated above needs to break
down into key parts as below with the used data source:
Key Points Data collection source,
Adaptation measurement of the Business
initiatives
Accenture (2008) Appendix B
Measurement of the implication and policies for
climate change
Accenture (2008) Appendix B
Cost and opportunity in the corporate strategy
UN Global Compact, 2011

Additional reporting data was also collected from the UK Government website. Also from
the following websites the IPCC official website, Climate changing corporation, Harvard
Business Review, global reporting, ACCA global reporting, Cancun Mexico, gbn.com,
eoearth.org, BBC, world resource Institute, World bank, International energy agency, CAIT
etc.

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Book, Scientific articles, Journals, news articles, financial articles available through the
Greenwich University Library database. Also references collected from the London School of
Economics.
4. Empirical Findings and Analysis:
This chapter will present the empirical findings of this study and the analysis of these. The data
analysis is divided in few sections the first section the consequences for climate change, Contribution
of Energy sector for the climate change, Policy and cost analysis for the energy sector, Opportunities
for the companies, Constraints of taking action in response to climate change, Regulatory
environment to be considered. All the Empirical finding is based on the analysis of data.
4.1 Consequences of the climate change:
Figure 1. Global Temperatures Change

1880 1889 2000 - 2009

The world is getting warmer, whatever the cause. According to an analysis by NASA
scientists, the average global temperature has increased by about 0.8Celsius (1.4
Fahrenheit) since 1880. Two-thirds of the warming has occurred since 1975.
Source: earthobservatory.nasa.gov

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The world is getting warmer whether the reason is nature or human, temperature rise only
0.8 degree Celsius but this temperature can be massive for the whole earth because it takes

Figure 2. Temperature anatomy from the year 1880-2010

huge amount of heat to warm all the oceans, atmosphere, and land by that much. It takes 1
or 2 degree drop take the earth in to the little ice age. A five degree drop of temperature will
be enough to bury the large part of North American under a towering mass of ice 20,000
years ago. (earthobservatory.nasa.gov). In the graph figure 2 its showing the temperature
will be 0.7 degree Celsius in 2010.

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4.1.1 Antarctic Ozone Hole

Figure 3 : Antarctic Ozone Hole

September 17, 1979 October 1, 2010

In the early 1980s, scientists began to realize that CFCs were creating a thin spota holein the ozone layer over
Antarctica every spring. This series of satellite images shows the ozone hole on the day of its maximum depth
each year from 1979 through 2010.
Source: earthobservatory.nasa.gov

The Global temperature mostly depends on how much energy the planet receives from the
sun and how much it radiates back into space, this quantity is very little. The amount of
energy radiates by the earth depends significantly on the chemical composition of the
atmosphere, particularly the amount of heat trapping greenhouse gases.

From the above figure it can be seen that greenhouse gas is making significant amount of
hole in the ozone layer, this ozone layer is helping to protect life on earth from the damaging
ultra violet ray which lead to DNA damage of plants and animal. This large hole was made
by the CFC gas emission. (earthobservatory.nasa.gov)

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4.1.2. Carbon Cycle:
Figure 4.1.2. Component of the Global Carbon Cycle (2009)

Credit or Source: Office of Biological and Environmental Research of the U.S. Department of Energy Office of
Science.science.energy.gov/ber/
A simplified representation of the contemporary global carbon cycle is shown in the centre
of this figure. Values in parentheses are estimates of the main carbon reservoirs in gigatons
(GT) as reported in Houghton (2007). The natural flux between the terrestrial biosphere and
the atmosphere is about 120 GT of carbon per year, and that between the oceans and
atmosphere is about 90 GT per year (IPCC 2007). In the terrestrial biosphere, photosynthesis
removes about 120 GT of carbon from the atmosphere; decomposition of biological material
and respiration from plants and soil microbes return 120 GT of carbon. In the oceans, the
marine biosphere does not take up CO2 directly from the atmosphere. Each year the oceans

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absorb and release about 90 GT of carbon largely via diffusion across the air-ocean interface.
Human activities (primarily fossil fuel use) emit about 9 GT of carbon each year. About 4 GT
of this human-contributed carbon remain in the atmosphere; 3 GT are taken up by natural
terrestrial processes, and another 2 GT are removed by the ocean (Canadell et al. 2007)
4.2. Effects of Energy use:
The effect of energy use is major in the environment. It clearly has shown in the graph below
4.2.1 that the carbon dioxide emission from the consumption of Energy in different counties
that had been increased from 2005 to 2009. In every country the consumption of energy use
has gone higher. The consumption rate is higher in China for their rising economy and quite
normal for Germany and United Kingdom.
Figure 4.2.1. Total Carbon Dioxide Emissions from the Consumption of Energy (Million
Metric Tons)

Source: Graph complied by me based on data, International Energy Agency. www.eia.gov

0
1000
2000
3000
4000
5000
6000
7000
8000
9000
United
States
Germany United
Kingdom
China India Japan New
Zealand
2009
2005

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35

4.2.2. Rise of Temperature for energy use:
Total Energy Consumption in 2007

Contributions to Temperature
Increase
2000-2007

CO2 (energy)

Correlation: 1.00

Country
Total, Thous.
Tonnes Oil Eq. Rank

Index Rank
Rank
Difference

United States of America 2,339,942 (1) 100.0 (1) 0
China 1,955,766 (2) 75.9 (2) 0
European Union (27) 1,758,846 (3) 70.4 (3) 0
Russian Federation 672,139 (4) 27.0 (4) 0
India 594,913 (5) 19.6 (6) -1
Japan 513,519 (6) 21.5 (5) 1
Germany 331,257 (7) 14.8 (7) 0
Canada 269,369 (8) 9.6 (8) 0
France 263,718 (9) 6.8 (13) -4
Brazil 235,556 (10) 5.9 (16) -6
Korea (South) 222,197 (11) 8.4 (10) 1
United Kingdom 211,308 (12) 9.4 (9) 3

Source: Climate Analysis Indicators Tool (CAIT) Version 8.0. (Washington, DC: World
Resources Institute, 2011)
Figure 4.2.2. Energy consumption vs. contribution to temperature increase year 2000-2007
Below the rank of the energy consumption and the temperature increase by the year 2000-
2007 is shown. United States is the highest in the rank of energy consumption also have a
good contribution to the increase of the temperature. After that China, EU, Russia, and
United Kingdom are in the rank of 12.

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4.2.3. Emission by sectors:
World

Sector MtCO2e %

Energy 28,147.8 92.1

Electricity & Heat 13,407.2

43.9

Manufacturing & Construction 5,714.8

18.7

Transportation 5,610.5

18.4

Other Fuel Combustion 3,208.0

10.5

Fugitive Emissions 207.4

0.7

Industrial Processes 1,381.3 4.5

International Bunkers 1,022.0 3.3

Total 30,551.2

United States of America

Sector MtCO2e %

Energy 5,778.4 96.7


45.7

Manufacturing & Construction 638.1

10.7


30.3

Other Fuel Combustion 592.9

9.9


0.2

Industrial Processes 48.3 0.8

International Bunkers 146.2 2.4

Total 5,972.8

Asia

Sector MtCO2e %

Energy 11,044.6 90.1


46.4

Manufacturing & Construction 3,063.2

25.0


9.8

Other Fuel Combustion 1,078.7

8.8


0.1



Total 12,258.9

European Union (27)

Sector MtCO2e %

Energy 3,930.3 90.0


38.2

Manufacturing & Construction 632.7

14.5

Transportation 962.8

22.0

Other Fuel Combustion 663.3

15.2


0.1



Total 4,368.8

Source : Climate Analysis Indicators Tool (CAIT) Version 8.0. (Washington, DC: World Resources Institute,
2011)
Figure 4.2.3: CHG emission by sector in 2007

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37

In the Figure 4.2.3 the emission by sector is shown specially Energy sector is being shown in
the pie graph. Industrial process, International Bunkers (land use), energy use emission is
shown in the graph in the year of 2007. In every country the C02 emission is more than 90%
of the total emission rate.
Below is the level of factors that energy companies as well other sectors are considering as a
part of their strategy planning in terms of climate change. Here it can be seen that corporate
reputation, investment opportunity and regulations are the main factors for the energy
Industry to be concern of the climate change.

Figure 4.2.4: Measurement of the factors companies considered to change their business for
climate change.
Source: Adapted from McKinsey Quarterly survey on climate change (2007).

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4.3. Emission reduction policies in the energy sector:
The reduction of GHG emission from energy-supply systems is being actively pursued
through a variety of governmental policies and private sector research. There are many
technologies, behavioural changes and infrastructural developments that could be adopted
to reduce the environmental impacts of current energy-supply systems. Whereas planning
policies provide background for climate-change mitigation programmes, most climate
policies relating to energy supply tend to come from three policy families (OECD, 2002a).
Economic instruments (e.g. subsidies, taxes, tax exemption and tax credit)
Regulatory instrument (e.g. mandated targets, minimum performance standards,
vehicle-exhaust emission controls); and
Policy process (e.g. voluntary agreements and consultation, dissemination of
information, strategic planning)
Many GHG emission that have been undertaken to date aim to achieve multiple objectives.
These include market and subsidiary reform in the energy sector. Policy selection is not a
easy task , it depends on many factors, including costs, potential capacity , the extent to
which emissions must be reduced, environmental and economic impacts, rates at which the
technology can be introduced, governmental resources available and social factors such as
public acceptance. Implementing policies Government needs to consider about the
developing countries that are specially rely on the income of the fossil-fuel exports and on
oil-importing developing countries.

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Table 4.3: Examples of policy measures given general policy objectives and options to reduce GHG emissions
from the energy-supply sector.
Policy
objectives
Policy
options
Economic
instruments
Regulatory
instruments
Policy processes
Voluntary
agreements
Dissemination
of information
and strategic
planning
Technological
RD&D and
deployment
Energy efficiency Higher energy
taxes Lower
energy subsidies
Power plant
GHG taxes
Fiscal incentives
Tradable
emissions
permits
Power plant
minimum
efficient
standards Best
available
technologies
prescriptions
Voluntary
commitments
to improve
power plant
efficiency
Information and
education
campaigns.
Cleaner power
generation from
fossil fuels
Energy source
switching
GHG taxes
Tradable
emissions
permits Fiscal
incentives
Power plant
fuel portfolio
standards
Voluntary
commitments
to fuel
portfolio
changes
Information and
education
campaigns.
Increased power
generation from
renewable,
nuclear, and
hydrogen as an
energy carrier
Renewable energy Capital grants
Feed-in tariffs
Quota obligation
and permit
trading GHG
taxes radable
emissions
permits
Targets
Supportive
transmission
tariffs and
transmission
access
Voluntary
agreements to
install
renewable
energy
capacity
Information and
education
campaigns
Green electricity
validation
Increased power
generation from
renewable
energy sources
Carbon capture and
storage
GHG taxes
Tradable
emissions
permits
Emissions
restrictions for
major point
source emitters
Voluntary
agreements to
develop and
deploy CCS
Information
campaigns
Chemical and
biological
sequestration
Sequestration in
underground
geological
formations
Source: Intergovernmental panel for climate change (IPCC), Mitigation of Climate Change: working
group report III. (2007)
4.4. Cost analysis for present and future energy emission:
A summary of cost estimate ranges for the specific technologies as discussed in table 4.4
below. In table are shows that costs and technical resources will remain available. Though
there is uncertainty due to the wide range of assumptions renewable energy fluxes and

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uranium resources are in sufficient supply to meet global primary energy demands well
past 2030. Proven and probable fossil-fuel reserves are also large, but concern over
environmental impacts from combusting them could drive a transition to non-carbon energy
sources. The speed of such a transition occurring depends, inter alia, on a number of things:
how quickly investment costs can be driven down; confirmation that future life cycle cost
assessments for nuclear power, CCS and renewable are realistic; true valuation of external
costs and their inclusion in energy prices; and what policies are established to improve
energy security and reduce GHG emissions (IPCC)
Table 4.4: The technical potential energy resource and fluxes available, potential associated carbon and projected
costs (US$ 2006) in 2030 for a range of energy resources and carriers.
Energy resources
and carriers
Technical
potential EJ
a

Approximate
inherent carbon
(GtC)
Present energy
costs
c
US$ (2005)
Projected costs in 2030

Investment
US$/We
d

Generation
US$/MWh
Oil 10,000-
35,000
e

200-1300 ~9/GJ ~50/bbl
~48/MWh
n/a 50-100
Natural gas 18,000-60,000 170-860 ~5-7/GJ ~37/MWh 0.2-0.8 40-60 +CCS
60-90

Coal 130,000 3500 ~3-4.5/GJ
~20/MWh
0.4-1.4 40-55 +CCS
60-85

Nuclear power 7400
(220,000)
f

*
b
10-120 1.5-3.0 25-75
Hydro > 10MW 1250 * 20-100/MWh 1.0-3.0 30-70
Solar PV 40,000 * 250-1600/MWh 0.6-1.2 60-250
Solar CSP 50 * 120-450/MWh 2.0-4.0 50-180
Wind 15,000 * 40-90 MWh 0.4-1.2 30-80
Geothermal 50 * 40-100/MWh 1.0-2.0 30-80
Ocean large * 80-400/MWh ? 70-200

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Biomass - Modern 9 6000 30-120/MWh 0.4-1.2 30-100
heat and power 8-12/GJ
Biofuels 1.2 * 8-30/GJ ? 23-75 c/l
Hydrogen carrier 0.1 ? 50/GJ ? ?
Notes:
a
From APENDIX 2 TABLE 1.1 Generalized potential for extractable energy: for fossil fuels the remaining
extractable resources; for renewable energy likely cumulative by 2030
b
* = small amount
c
Prices volatile. Include old and new plants operating in 2006. Electricity costs for conversion efficiencies of 35%
for fossil, nuclear and biomass
d
Excluding carbon dioxide capture and storage
e
Includes probable and unconventional oil and gas reserves
f
At 130 US$/kg and assuming all remaining uranium, either used in once-through thermal reactors or recycled
through light-water reactors and in fast reactors utilizing depleted uranium and the plutonium produced (in
parentheses)
Source: Data from IEA, 2005a; IEA, 2006b; Johansson et al., 2004; IEA, 2004a; Fisher, 2006; IIASA/WEC, 1998;
MIT, 2003.
Source: Adapted from Intergovernmental panel for climate change (IPCC), Mitigation of Climate Change:
working group report III. (2007)
4.5. Adaptation for the climate change:
Businesses are taking many major initiatives in response to climate change. In the Figure 5
below the activities of the companies being undertaken is shown. Measuring or reducing
carbon footprint is the most frequently mentioned activities typically involve reducing or
managing carbon related activities. This includes:
From figure 5 following things can be noticed:
New technologies, to improve energy efficiency. Mentioned by 53% of respondents

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To measure the carbon usage Carbon footprint of all the organizations, this is 36%
of companies response as an initiative.
Increase the use of renewable energy sources. 30%
Few companies have launched new products for example whole food have bring the
idea of Organic food as a response to climate change. The response for the companies
is 26%
The employee training and communication strategy is taken by the 26% of
companies.

Figure 5: Company initiatives to handle the climate change. (%)
Source: Graph complied by me based on data (Appendix B)
18% of companies have reconfigured their supply chain to reduce the carbon emission. For
example Wall Mart has sorted all the 3PL suppliers who are not energy efficient. They have
0 10 20 30 40 50 60
Technologies to improve energy efficiency
Measuring and/or reducing your CO2 footprint
Increasing the use of energy sources
Internal policy formulation
Carbon offset strategy
Employee training/Communication strategy
New product and services
Consumer information
Supply chain reconfiguration
Other Initiatives
Company Initiatives
Company response

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transferred there logistics such as they have exchange Train logistics in place of cargo.
Moreover about one fifth of the companies have no initiative for the climate change.
4.5.1 Risk/ Cost and Opportunities for the Business in terms of climate change:
Companies think that climate change will increase the cost of doing business rather than
creating new opportunity and all the industry thinks that climate change will not bring any
new opportunities for their business. Below is the corporate strategy of Cost and
opportunity.

Figure 5.1: Climate change risk or opportunity, corporate strategy.
Source: Adapted from UN Global Compact (2011).

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Proactive companies can develop strategies to address climate change risks in their
operations and supply chain, as well as strategies to capture new market, and engage
customer and communities to meet needs amid changing climate conditions.

Figure 6: Perception of the cost, business opportunities and revolution of climate change
(%) Source: Graph complied by me based on data (Appendix B)
From figure 6 it is seen that 80% of Indian companies think initiative towards climate
change will increase their production cost as well 78% Japanese also think like the same
way. On the other hand only 52% of companies think climate change will create new
opportunities for their firm. The percentage of opportunity in the US market is only 38%.
Companies in China have no believe in the change of climate change, only 4% company
executive thinks that climate change will bring revolution to their company. Whereas 40% of
companies think climate change will bring revolution within 5 years. For example The Tata
group of India have taken many initiatives in their corporate strategy to create opportunity
in response to climate change.
0
10
20
30
40
50
60
70
80
All China Germany India Japan UK US
Perception of cost , opportunity and revolution
Revolution within 5 year Cost Increase Opportunity Create

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Also in Japan Toyota automobile have introduced Hybrid car as a response to create climate
change which has create a huge market all over the world. This is the worlds first energy
efficient car.

4.5.2 Constrains of taking action in response to climate change:
While many companies feel responsibility to climate change have started to take initiatives,
others have finding difficulties to understanding the implication to climate change.

Figure 7: Businesses are struggling to understand the implication of climate change (%).
In the Figure 7 above it is shown that more than half of the companies find it difficult to
understand the implication of climate change in their industry although they want to show
approach towards climate change. This means that businesses are lack of understanding of
the regulations under which they may operate their industry operation as a responsibility to
climate change. For example in UK companies send a letter to the Prime minister to clarify
53%
24%
23%
Agree
Disagree
Neither agree nor disagree

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the common carbon reporting standard which was clumsy by the conflicting scientific
viewpoints. (FT, 2007).

Figure 8: Response to, the companies positioned to deal with climate change (%).
Companies all over the world are almost equally divided with their strength. In Figure 8:
39% of companies agree that they are well positioned to deal with climate change. 31%
companies they are not sure yet what they will do. Others have completely disagree, which
means there company in not in good position to deal with the impact of climate change.
This rate is higher in China.
39%
30%
31%
Agree Disagree Neither agree nor disagree

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Figure 9: Businesses facing Top challenges in respond to climate change (%)
Implementing internal action in response to climate change is challenging. From the above
Figure 9 it can be seen that 26% companies think that launching new technologies is the
biggest challenge they are facing. This means that companies have insufficient knowledge of
the green technologies also lack of understanding of the offer they can give in proportion to
business requirement of climate change. 25% of companies think that changing the internal
behaviour is the second most pressuring internal challenge. This means preparing the
organization for the future to create high awareness of carbon consumption also to get
habituate of the right system and process. To cope with new regulations is another
challenge for the executives according to 19% respondents. Pointing to the key role played
by the regulators and to understand the future regulatory environment.
Managing stakeholder expectations is another challenger companies are facing, 14%
respondents agreed with it. How business deal with the stakeholders might have serious
consequences for the profit, image and overall high performance. Among all the
0 5 10 15 20 25 30
Others
Updating performance metrics
Re-engineering internal/business processes and
systems
Managing stakeholder expectations
Coping with new regulations
Changing internal behaviors
Introducing new technologies

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stakeholders, from the Figure 4 Government is the most powerful. Government is playing
the entire key to the legislation.
4.5.2. Regulatory environment to be considered:
A wide array of regulatory instruments have been mechanised by the Government in
response to the issue of Climate change. Some of the regulatory approaches like taxes and
subsidiaries aim to internationalize the impact of emissions by altering market incentives to
producers. National difference is more likely visible in the following Figure 10. Japan is in
Top with the value of 89% of the likelihood to the regulatory implement for low carbon /
renewable incentives. While UK is only in 60% of the likeliness.

Figure 10: Perceived likelihood various regulatory measures being implemented (% by
market
More than half of the companies from US and China are also in a mood for implementing
the low carbon incentive in their company. Apart from Germany, more than 50 % of
Companies from China, India, Japan and U.S targets to reduce carbon emissions (figure 10).
0
10
20
30
40
50
60
70
80
90
100
China Germany India Japan UK US
Low carbon/ renewable
incentives
Targets to reduce carbon
emissions
Consumer information
Tax on energy use
Cap and trade

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49

India and U.S is ahead in the matter of consumer information for example labelling
products. Whereas 48% companies of Germany thinks the matter of Consumer
information.(Figure 10)
Taxes on energy incentive products and services, incentives to use renewable energy and
targets to reduce energy emissions are more likely to be seen as having a big impact on
business than are consumer information and carbon trading scheme Cap and trade. In
general, Business leaders from developed economics such as the United Kingdom, Germany
and Japan were more likely to see such measures having an impact on their business while
Chinese businesses were inclined to ascribe little impact to these measures.

4.5.1 Businesses seek both International consistency and industry flexibility:
Climate change is a Global issue by its nature. So it requires a consistent and coordinated
policy approaches at the International Level. Executives all over the world have described
their hunger for more synchronized regulations across the different countries. The fact is
that, different regulations in every individual country leads to extra complexity and impose
additional cost of doing business.
At the same time the implications of climate change are often radically different across
industries. Energy incentive user such as manufacturers or resource companies necessarily
have a different view of climate change than less energy intensive industries, for example
services. The message is that businesses want regulation that is flexible by industry but more
consistent across international boundaries.

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5. Research Findings:

There are some major findings from these research that been conducted based on the climate
change and Business.
First of all finding of the research question 1 is following:
1. Why business need to aware about the climate change and to mitigate the greenhouse
gas; how energy sector is reforming?

The Evidence of climate change shows that temperature of the earth increased by
0.8 C since 1880. Increase of couple of degrees more will take the world to the ice
age again. Source: earthobservatory.nasa.gov

The ozone hole is getting bigger day by day, the bad impact of it that the sunlight
will not be filtered in those zones from the damaging UV ray. CFC gas is responsible
for this. Source: earthobservatory.nasa.gov

Each year 9 GT of Carbon mix in to the year due to the Human activities such as
fossil fuel, Industrial activities and land use change. Source: U.S. DOE. 2008

United States and China is in the first rank of energy use as well the rising of the
temperature. With the time United States is reducing the CO2 emission since 2007.
But china is still increasing the emission. Source : International Energy Agency

Among the entire industry Energy sector is mainly responsible for the CO2 emission
on the air which is more than 90% of the total emission.

For the energy sector corporate reputation, regulations and investment opportunity
are the main factors for the energy industry. Source: Mckensy Quartly (2007)

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51

For transforming the energy sector cost analysis shows the projected cost of the year
2030. Source : IPCC (2007)

IPCC shows the policy to reduce the CO2 emission from the air these policies apply
for the renewable energy, Carbon capture storage and Energy efficiency and energy
source switching. Low carbon and the renewable incentives is the policy that every
country is adapting.

2 How businesses are seeing the cost and opportunities of Climate change in their

53% of the companies are changing their technology to become more energy efficient.
(Accenture, 2008)

In the survey shows all the companies all over the world they think climate change
will increase their cost of business rather than opportunity. (Accenture, 2008)

39% companies are well positioned to deal with climate change. (Accenture, 2008)

53% of companies are struggling to understand the implication of climate change.
(Accenture, 2008)

Introducing new technologies to adapt the climate change is the top challenge for the
business. (Accenture, 2008)

Companies need to adapt new strategies in their operations, market strategy and
stakeholders engagement to get more opportunity from the climate change. ( UN
Global Compact, 2011)

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52

Companies need to influence the policy development process. Policies will change
the landscape of the business. Government cannot build policy which will be cost
effective for all the business as they dont have the capacity to understand the
implication of the different policy options on all sectors of the economy.

6. Conclusion:

The world is getting warmer day by day. From the Evidence of NASA it is very much clear
that the temperature has risen significantly over the last 100 years. The reason for the
temperature rise of the earth may not be 100% Human activities; nature is also having active
part in it. Nature has its own carbon cycle which is balanced but industry activities
especially fossil fuels, cements and land use changes are adding extra 4% carbon each year
(Figure 4.1.2) in the atmospheric which is responsible for the vanishing of the protecting
ozone layer from the earth surface. According to CAIT Apart from CO2 many other gases
like CH4, N2O, PFCs, HFCs, SF6 are also mixing in the atmosphere which is keeping active
part to the increase of the earth temperature by capturing the heat of the sun.

From the comparison of the sectors the GHC emission is higher in energy sector which is
92%. The countries which are on top rank in temperature increase due to energy
consumption are US, China, EU, Russia, India, Japan, Germany, Canada, France, Brazil,
United Kingdom (Figure 4.2.2). This emission of CO2 is significantly rising from year to year
specially in China, India. (Figure 4.2.1). This are the reasons Business need to aware about
the climate change.

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53

From the Energy Industry the factor they are influenced to consider about climate change
are reputation, regulation and Investment opportunity but not the welfare of the humanity.
(Figure 4.2.2)
There are policy developing from the energy supply sector this policies is intend to be
processes in the different ways which are voluntary agreement , Dissemination of
information and strategic planning and Technological RD&D and deployment , this are also
different for the each policy options.(Table 4.3). The rise of the cost will be higher in the next
20 years to change the energy industry for the reduction of CO2 (Table 4.4).
In the General look majority Companies are taking initiatives to improve technologies to
become energy efficient alone with reducing CO2 footprint, use of energy sources and
carbon offset strategy (Figure 5).
Unfortunately the companies are suffering from the increase of the cost rather than the
opportunity, the rise of the cost and revolution in the industry is significantly varies in all
the major industrial counties of the world (Figure 6)
In the operation and strategy Industries are facing difficulties to introducing new
technologies, changing internal behaviours, and to cope with new regulations. Among all
the industries 53% of companies think that they are still struggling to understand the
implication of climate change which is new regulations been introduced in different counties
such as cap and trade, tax on energy use, target to reduce carbon emission, as well consumer
information. While only 39% thinks that their companies is in good position to deal with
climate change. Companies also seeking for a harmonized regulation in every part of the
industrial world so that Global business will not face complexity and additional cost of
doing business.

Page
54

Bibliography:
Books:
1. Pinkese, J & Kolk, A, 2009, International Business and Global climate change, From Rio
to Beyond Kyoto: Synopsis of international climate policies, Routledge Taylor and
Fransis Group, Page 26.
Journals:
2. Biddle, I (2008), 'CLIMATE CHANGE AND BUSINESS MARKETING
OPPORTUNITIES', BusiDate, 16, 2, pp. 1-4, Academic Search Premier, EBSCOhost,
viewed 23 April 2011
3. Jonathan, & Wellington, & Fred, COMPETITIVE ADVANTAGE ON A WARMING
PLANET', 2007, Harvard Business Review, March, Business Source Premier,
EBSCOhost, viewed 13 April 2011
4. Kolk, Ans and pinkse, J (2004), Market Strategies for Climate change, European
Managment Journal, Vol 22, Issue 3, PP 304-314
5. Moerman, F, Weller, J, & Zheng, Z 2008, 'Green Investment: Opportunity
Knocks', China Business Review, 35, 5, pp. 42-45, Business Source Premier,
EBSCOhost, viewed 23 April 2011
6. Monks, H 2006, 'A climate of change', Money Marketing, p. 50, Business Source
Premier, EBSCOhost, viewed 23 April 2011
7. Schwartz. P, 2007, Risk: Investing in Global Security, Climate Business/ Business
Climate, Harvard Business Review, Issue 10.
8. Smith, JN 2009, 'Measuring the Carbon Footprint', World Trade, 22, 1, p. 50, Business
Source Premier, EBSCOhost, viewed 24 April 2011

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55

Articles:
9. Centrica: climate risk index ranking offers investor appeal' 2010, MarketWatch:
Energy, 9, 8, p. 15, Business Source Premier, EBSCOhost, viewed 23 April 2011
10. CLIMATE BUSINESS/BUSINESS CLIMATE', 2007, Harvard Business Review, October,
Business Source Premier, EBSCOhost, viewed 23 April 2011
11. Goyder, M, & Egan, D 2006, 'Climate change: Threat or opportunity? (cover
story)', European Business Forum, 2006, Business Source Premier, EBSCOhost, viewed
23 April 2011
12. Kell, G 2009, 'RESPONSIBLE INVESTMENT: WHY SHOULD PRIVATE EQUITY
ARE?', International Trade Forum, 4, pp. 7-9, Business Source Premier, EBSCOhost,
viewed 24 April 2011
13. L., LL 2008, 'Going Green: Opportunity or Threat?', Convenience Store News, 44, 7, p.
78, Business Source Premier, EBSCOhost, viewed 23 April 2011
14. Le Pla, R 2006, 'NINE REASONS WHY BUSINESS MUST CARE ABOUT CLIMATE
CHANGE. (cover story)',New Zealand Management, 53, 3, pp. 26-35, Business Source
Premier, EBSCOhost, viewed 24 April 2011.
Reports:
15. Accenture: High performance delivered (2008), Achieving High Performance in an Era
of climate change, Accenture, United States.
16. IBM, Dell among top firms for handling climate risk. Pensions & Investments,
12/22/2008, Vol.36, Issue 26.
17. Intergovernmental panel for climate change (IPCC) (2007), Mitigation of Climate
Change: working group report III.

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56

18. Mckinsy Quartly (2007), How companies think about Climate Change: A Mckensy Global
survey: Mckensy and Company.
19. U.S. DOE. 2008. Carbon Cycling and Biosequestration: Report from the March 2008
Workshop, DOE/SC-108, U.S. Department of Energy Office of Science. (p. 2-3)
20. UN Global Compact, UN Environment Programme, Oxfam and the World
Resources Institute(2011), Adapting for A Green Economy, Companies , Communities and
Climate Change, A Caring for climate Report
21. US DOE. Climate Placemat: Energy-Climate Nexus, US Department of Energy Office of
Science. (p. 2)
22. Vijn. S, (2006), Reporting the Business Implication of Climate change in
Sustainability reports, A survey conducted by the Global Reporting Initiative and
KPMGs Global Sustainability Services, www.globalreporting.org, Viewed 23 April
2011
Website:
1. Climate analysis Indicator tool, World resource Institute Website, http://cait.wri.org
Viewed 20
th
July , 2011.
2. Climate change , 2009 , www.copperwiki.org, viewed 30 April 2011
3. Dawson, G, (2009), The Impact of climate change on Business, adapted from
www.qfinance.com, Viewed 25
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March 2011.
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http://earthobservatory.nasa.gov/Features/WorldOfChange/decadaltemp.php, Viewed 14
th

July, 2011.
5. International Energy Agency, Data services, http://data.iea.org Viewed 22
nd
July, 2011.

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57

Appendix A
Table 1.1 Generalized data for global energy resources (including potential reserves), annual rate of
use (490 EJ in 2005), share of primary energy supply and comments on associated environmental
impacts.
Energy
class
Specific energy
source
a

Estimated available
energy resource
b
(EJ)
Rate of use
in 2005
(EJ/yr)
c

2005 share of
total supply
(%)
Comments on
environmental
impacts
Fossil
energy
Coal
(conventional)
>100,000 120 25 Average 92.0
gCO2/MJ
Coal
(unconventional)
32,000 0
Peat
d
large 0.2 <0.1
Gas (conventional) 13,500 100 21 Average 52.4
gCO2/MJ
Gas
(unconventional)
18,000 Small Unknown, likely
higher
Coalbed methane >8,000? 1.5 0.3
Tight sands 8,000 3.3 0.7
Hydrates >60,000 0
Oil (conventional) 10,000 160 33 Average 76.3
gCO2/MJ
Oil
(unconventional)
35,000 3 0.6 Unknown, likely
higher
Nuclear Uranium
e
7,400 26 5.3 Spent fuel disposition
Uranium recycle
f
220,000 Very small Waste disposal
Fusion 5 x 109 estimated 0 Tritium handling
Renewable
g
Hydro (>10 MW) 60 /yr 25 5.1 Land-use impacts
Hydro (< 10 MW) 2 /yr 0.8 0.2
Wind 600 /yr 0.95 0.2
Biomass (modern) 250 /yr 9 1.8 Likely land-use for
crops

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58

Biomass
(traditional)
37 7.6 Air pollution
Geothermal 5,000 /yr 2 0.4 Waterway
contamination
Solar PV 1,600 /yr 0.2 <0.1 Toxics in
manufacturing
Concentrating
solar
50 /yr
h
0.03 0.1 Small
Ocean (all sources) 7/yr (exploitable) <1 0 Land and coastal
issues.
Notes:
a
See Glossary for definitions of conventional and unconventional.
b
Various sources contain ranges, some wider than others (e.g., those for conventional oil cluster much more
closely than those for biomass). For the purposes of this assessment of mitigation potentials these values,
generalized to a first approximation with some very uncertain, are more than adequate.
c
Hydro and wind are treated as equivalent energy to fossil and biomass since the conversion losses are much
less (www.iea.org/textbase/stats/questionaire/faq.asp)
d
Peat land area under active production is approximately 230,000 ha. This is about 0.05% of the global peat land
area of 400 million hectares (WEC, 2004c).
e
Once-through thermal reactors.
f
Light-water and fast-spectrum reactors with plutonium recycle
g
Data from 2005 is at www.ren21.net/globalstatusreport/issuesGroup.asp
h
Very uncertain. The potential of the Mediterranean area alone has been estimated by one source to be 8000
EJ/yr (http:/www.dlr.de/tt/med-csp)
Sources: Data from BP, 2006; WEC, 2004c; IEA, 2006b; IAEA, 2005c; USGS, 2000; Martinot, 2005; Johansson,
2004; Hall, 2003; Encyclopaedia of Energy, 2004.
Source: Intergovernmental panel for climate change (IPCC), Mitigation of Climate Change:
working group report III. (2007)

Page
59

Appendix B

Secondary data Source:
There are few secondary data sources used in this project one of them based on the
Research report of the Accenture (2008), focused on the business context created by
responses of business to climate change, Government regulations, and recommendations for
the companies to accomplish the challenge of climate change. The selected country
performance is also provided.
Due to finite data access to the geographical area the focus of the dissertation is on the main
leading business countries of the world which are China, India, Germany, Japan, United
Kingdom and United States and each company had annual revenue of US $50 million. These
countries hold the worlds top class economy. The survey was done on 504 companies of
five different categories. The survey was conducted via telephone interview with C-level
executives of those companies. The companies were both local and global with the
employees varies from 200 - 10000. All respondent had some responsibility of corporate
strategy for their organizations. The following industries were taken into consideration
2
,
Communication and high tech (C&HT): Electricity, Electronics and High tech, Media
and Entertainment, communications.
Financial services: Bank, Insurance, Capital Market

2
Government agencies been excluded for a subsequent result

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60

Consumer and Industrial(C&I): Consumer goods, Manufacturing and
Pharmaceuticals, Health services, Industrial equipments, Automotive, freight and
logistics, transportation and travel services.
Government: Aerospace and defence, Education, Postal services, Revenue, Public
services.
Resources: Chemicals, Gas, water and utilities, paper, Waste and disposal services,
Forest products and Metals and mining.

Figure 1 Categories of industry and the size of survey Companies.
Source: Graph complied by me based on Accenture: High performance delivered (2008)

The statistical data is provided below, that have been used in this dissertation adapted
from Accenture: High performance delivered (2008).

22%
51%
27%
Company size of survey respondent
US$50-100m
US$100m- US$1bn
US$1bn+
8%
47%
5%
6%
24%
10%
Industry catagory according to survey
C&HT
C&I
Financial Services
Government
Resources
Others

Page
61

Statistical data
Country All China Germany India Japan UK US
Action & initiatives
What initiatives are currently undertaken by the company relating to climate change?
(%)
New products and
services
24 6 5 64 11 30 41
Consumer information 19 2 22 44 2 25 28
Supply chain
reconfiguration
17 2 13 30 8 28 25
Technologies to improve
energy efficiency
53 4 61 72 50 51 67
Increasing the use of
renewable energy
sources
32 2 42 32 22 33 47
Measuring and/or
reducing your co2
footprint
39 6 36 36 47 55 36
Internal policy
formulation
28 0 28 48 11 34 46

Carbon offset strategy 29 6 30 40 34 21 36
Employee
training/communications
strategy
27 2 32 66 9 33 28
Other initiatives 10 16 7 0 3 21 10

Drivers
What is the most significant challenge facing your business in response to climate
change? (%)
Changing internal
behaviours
24 24 14 32 23 42 17

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62

Re-engineering internal
business process and
systems
9 16 7 18 7 6 6
Introducing new
technologies
25 30 41 32 19 17 17
Updating performance
metrics
4 4 2 2 5 0 10
Coping with new
regulations
20 4 17 10 31 15 33
Managing stakeholder
expectations(e.g.,
consumers, shareholders
etc)
15 16 18 6 15 15 15
Others 1 0 2 0 0 1 0

Regulatory environment
How likely it is that tax on high-energy products and services will be implemented in
your country? (%)
Very likely 20 30 36 14 5 26 13
Likely 34 36 27 34 50 30 24
Neither likely nor unlikely 21 20 18 26 22 14 29
Not likely 14 10 9 16 18 11 20
Not at all likely 6 4 4 10 5 2 12
Already in existence 5 0 6 0 0 15 1

How likely is it that incentives to use renewable energy/ low carbon technology will be
implemented in your country? (%)
Very likely 32 46 25 34 34 25 38
Likely 42 38 36 44 55 35 40

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63

Not likely 5 2 6 4 2 11 4

How likely is that consumer information schemes will be implemented in your
country? (%)
Very likely 25 24 28 22 22 25 26
Likely 33 32 20 46 41 27 38
Neither likely nor likely 22 20 24 16 25 24 20
Not likely 3 2 5 4 2 2 3

How likely it is that cap-and-trade scheme will be implemented in your country? (%)
Very likely 19 28 15 28 17 17 17
Likely 27 50 22 12 30 25 29
Not likely 13 10 11 18 10 17 16

How likely is it that targets to reduce carbon emissions/carbon Content will be
implemented In your Country? (%)
Very likely 26 28 19 28 30 33 22
Likely 39 52 29 42 42 31 42
Not likely 7 2 12 8 5 3 8

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64

General
To what extent to you agree with the statement: Climate change will revolutionize my
industry over the next five years (%)
Strongly agree 6 0 4 2 3 14 7
Agree 17 4 10 38 16 25 10
Neither agree nor
disagree
30 16 28 26 38 27 36
Disagree 25 48 24 24 28 24 14
Strongly disagree 23 32 34 10 15 10 33

To what extent to you agree with the statement: climate will increase the cost of
doing business (%)
Strongly agree 20 6 21 16 22 25 26
Agree 47 52 50 64 56 32 35
Neither agree nor
disagree
17 18 19 6 13 30 13
Disagree 12 20 7 10 5 13 20

To what extent to you agree with the statement: climate will open up many new
opportunities for my business (%)
Agree 29 38 21 46 31 23 26
Neither agree nor
disagree
26 20 30 18 27 28 25
Disagree 22 30 20 24 24 26 16

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65

To what extent to you agree with the statement: my business is well positioned to
deal with climate change (%)

Agree 30 12 42 48 22 30 19
Neither agree nor
disagree
31 20 28 34 32 42 29
Disagree 19 50 8 10 29 14 20

To what extent to you agree with the statement: business are struggling to
understand the implications of climate change (%)
Agree 40 44 18 50 41 44 52
Neither agree nor
disagree
24 22 25 18 36 24 11
Disagree 17 28 34 22 11 14 4
Source: Adapted from Accenture: High performance delivered (2008)

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