Just one in ten businesses globally are fully monitoring their overall carbon impact

• One in four European firms have a director in charge of environmental issues
• European firms are looking for a regulatory lead from governments

Businesses are not keeping up with the growing carbon awareness of a general public disturbed by predictions of climate change, but more firms are starting to focus on the issue, according to an independent report from the Economist Intelligence Unit. A Change in the Climate Is business going green?, commissioned by UK Trade & Investment, reviews the corporate response to climate change.

Nearly one-third of companies surveyed (32%) do not monitor direct carbon emissions or indirect effects such as supply chain activities and have no plans to start doing so, according to the 634 executives globally who responded (including 227 from Europe). About one in five companies (18%) simply measure energy efficiency, while a further 25% monitor some or all emissions across parts of the business. Just one in ten companies comprehensively monitors its entire carbon impact across the whole business, though in Europe the figure rises to 12%.

Even so, there are signs of action. Nearly one in five companies have a scheme in place to reduce some of their carbon impact, and another 28% expect to have one up and running by 2010, although less than half (45%) have no plans at all. Change is also creeping into other aspects of the business: 35% of respondents' firms either have already reduced their air travel, or plan to do so, although more than half (54%) are resistant on that point. Similarly, while only 18% of respondents said their firms use low-emission vehicles today, another 26% plan to introduce them within three years. And 40% either already use renewable energy or intend to do so within three years. But most activity is focused on individual behaviours, such as switching off lights and powering down computers at night: 54% already promote such activities and another quarter plan to within three years.

Europe is particularly notable for the growing number of firms with a specific director with responsibility for environmental issues. One in four companies has such a post already, and another 12% plan to create one within three years.

The survey also highlights the central role of government regulation in shaping businesses' response to carbon issues. Compliance with existing rules is the biggest single factor influencing carbon reduction strategies—particularly in Europe, where nearly three-quarters (74%) of respondents envisage a significant impact from appropriate tax incentives.

"Although relatively few companies are taking action to reduce their carbon impact today, it is interesting to see that business wants clarity from governments over this issue,” said James Watson, the report's editor. “They don't see carbon reduction as a major cost, but they want to know how far they have to go."

According to Andrew Cahn, chief executive of UK Trade & Investment, “This report further emphasises the need for government to continue working with business to ensure we have the right incentives and framework to maintain our competitive position and at the same time tackle climate change. The UK remains a leader in developing solutions to the challenges posed by climate change."

But while public interest in carbon emissions may be high, consumer behaviour has yet to respond. As a result most firms still do not view their environmental strategy as affecting their market position, and only 10% see it as a potential liability. Thirty-seven per cent of respondents cite enhanced credibility with the wider public as an attractive benefit of carbon reduction, but only 15% see it as a marketing opportunity and only 7% as a tool for differentiating their products. More than half – 56% – say their carbon policies have no discernible effect on their customers.

Other key findings from the report include:

• European firms want a clear carbon framework from governments. More European respondents (55%) say regulations have a highly significant or significant effect, compared with 50% worldwide, and 41% of Europeans cite the desire to stay ahead of future requirements as a highly significant or significant motivation. More than two-thirds (67%) of respondents also agreed that appropriate government involvement is a spur to greater efforts from business.
• Cutting carbon isn't necessarily expensive… Those businesses that are taking carbon reduction measures are not spending heavily. The majority of European firms spend less than 1% of operating expenses, in line with global averages. By 2010, more than half (54%) of these executives expect these efforts to either impose no costs on their business, or else result in a net positive impact, mostly through savings on energy bills and increased sales for enhanced brands. Just 12% think it will have an overall negative impact on costs, with the balance unsure.
• …but the learning curve remains steep Those companies that are making a serious attempt to monitor and control their carbon impact face the usual challenges of the early adopter. There is little “best practice” and some thorny issues are yet to be resolved – for example, what kind of strategy is needed if the biggest proportion of the firm's carbon footprint is produced by customers using the product.
• Firms are uncertain about offsetting, but it remains an important option Carbon offsetting schemes have received a lot of publicity recently. But while European businesses view such schemes as a temporary expedient rather than a long term solution (46%), across the world, firms already engaged in carbon reduction expect its importance to continue to grow and 38% of them expect their efforts to be internal, such as getting employees to plant trees.

www.eiu.com/climatechange2007
&
www.ukinvest.gov.uk/10530/en_GB/0.pdf

Notes for editors:
A total of 634 executives worldwide took part in the survey. Respondents were split between manufacturing, energy, transport and other heavy industries (46%) and service-based businesses, such as banking, healthcare and information technology (54%). Around 31% of respondents were based in western Europe, 28% in the Asia-Pacific region and 26% in North America. A total of 42% of respondents were C-level executives, including 152 CEOs, managing directors and presidents. In terms of size, firms were split roughly evenly between those with revenue above US$1bn (37%) and those with revenue below US$500m (39%); the balance of companies had revenue between US$500m and US$1bn.

Top 10 countries of origin (percentage of respondents)

United States of America	115
United Kingdom	62
Germany	46
India	44
Mexico	43
South Africa	40
Canada	38
Netherlands	38
Sweden	38
Italy	36

The Economist Intelligence Unit bears sole responsibility for the content of this report. The Economist Intelligence Unit's editorial team executed the online survey, conducted the interviews and wrote the report. The findings and views expressed in this report do not necessarily reflect the views of the sponsor.

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About the Economist Intelligence Unit
The Economist Intelligence Unit is the business information arm of The Economist Group, publisher of The Economist. Through our global network of 700 analysts, we continuously assess and forecast political, economic and business conditions in nearly 200 countries. As the world's leading provider of country intelligence, we help executives make better business decisions by providing timely, reliable and impartial analysis on worldwide market trends and business strategies.

About UK Trade & Investment
UK Trade & Investment is the government organisation that helps UK-based companies succeed in an increasingly global economy. Its range of expert services are tailored to the needs of individual businesses to maximise their international success. We provide companies with knowledge, advice and practical support. UK Trade & Investment also helps overseas companies bring high quality investment to the UK’s vibrant economy – acknowledged as Europe’s best place from which to succeed in global business. We provide support and advice to investors at all stages of their business decision-making. UK Trade & Investment offers expertise and contacts through a network of international specialists throughout the UK, and in British Embassies and other diplomatic offices around the world. For further information please visit www.uktradeinvest.gov.uk or telephone +44 (0)20 7215 8000.