BS4CL Climate Leadership

Uniting for the Planet’s Future

As leading European business schools, the founding members recognize the responsibility in driving the acceleration of business activities towards the goals of the Paris Agreement and the UN Framework Convention on Climate Change.

Business Schools for Climate Leadership has put together this digital toolkit to help business leaders pose key questions and assess their readiness to act effectively to tackle this planetary emergency.

The first four chapters take an ‘outside in’ perspective, asking where a climate constrained world is heading and what it means for business. Attention to these topics will shed light on where opportunities lie to have a positive impact and where the vulnerabilities that will be further exposed by climate change lurk.

The final four chapters take an ‘inside out’ perspective and ask whether companies’ business strategy and capabilities can be leveraged or need to be altered to meet the challenges of climate action.

CHAPTER 1 : Climate Change and Inequality

Many countries have seen inequality increase since 1980. In developed countries, the share of income and wealth held by the richest 1% of society has grown while the share held by the bottom 50% has fallen. Understanding how climate policies affect people of all incomes is important for business, as labour, capital and operations decisions all impact inequality.

Businesses have a role to play in improving inequality because corporate actions will affect societal outcomes of necessary climate change policies. Examples from the UK energy market, the UK electric vehicle market and Canada’s carbon market show how decisions can produce unequal results. With a focus on stakeholders, businesses should respond to climate policies by looking at potential impacts to communities and society at large. As more businesses commit to net-zero solutions and capital markets move to ESG, considering inequality opens opportunities to prosper in a fair and equitable energy transition.

CHAPTER 2: Climate Change and Nature: what business needs to do
Cambridge Judge Business School

Climate change and the destruction of nature are inextricably linked. The long-term sustainability of business and the economy requires climate actions that also restore and maintain nature – which sequesters and stores carbon, mitigating climate change, for free. Continued negative impact of business activity on nature will make it more difficult to implement nature-based solutions to climate change such as reforestation and nature-focused shifts in food, land and water use. This chapter outlines why the climate-nature link is important to business, and it details practical ways for business leaders to address this urgent issue, including: careful tracking of how reporting frameworks for nature integrate into climate action; ensuring that companies have accurate insight for their carbon offsetting strategies; new ways of thinking that incorporate inputs from diverse stakeholders; and prioritising nature-positive actions to address the most valuable biodiverse areas.

CHAPTER 3: Climate Change and Geopolitics
IESE Business School

The climate emergency is set to supercharge the current geopolitical situation, with extreme weather events fueling tensions and conflict in several regions and countries. Meanwhile, many companies base their strategy on the false assumption that the overall business landscape will remain stable for the foreseeable future. Consequently, firms have been caught out in recent years by seemingly ´sudden´ world events, such as the withdrawal from Afghanistan or Covid-19.

With business success closely linked to geopolitical stability and peace, it is crucial that leaders analyze and consider the potential impact of climate driven geopolitical tensions on their specific business. This involves understanding and managing their exposure to risk, analyzing regions across different timescales and scenarios, thinking through what these concerns mean for their business, determining concrete lines of action, and tracking the evolving situation so they can refine strategy as things develop.

CHAPTER 4: Climate Change and Technology
IE Business School

Sustainability is a powerful lever for innovation and technology development. Companies can find in the creation of innovative solutions their natural role to play in creating a sustainable economy, one that is consistent with their identity and capabilities. Rather than one game-changing breakthrough, the transition to a green economy requires an array of new solutions. Carbon intensive futures need not be cheaper than renewable intensive futures. It depends on the learning curve we choose to undertake. For example, renewable energy technologies are at a commercially viable stage for many applications. Innovations to promote energy and material efficiency, reduce carbon emissions while optimizing costs. However, technology also poses challenges. ICTs account for an ever-growing percentage of the world’s carbon footprint. Finally, innovations that are not intensive in technology, such as regenerative agriculture, will also have a critical role to play in the transition to a green economy.

CHAPTER 5: Climate change and Business Transformation
International Institute for Management Development (IMD)

As we act to mitigate and adapt to climate change, we are undergoing the biggest business transformation the world has ever faced. To capture some of the opportunities presented by this transformation, companies should anchor a commitment to climate in their purpose and set the tone from the top by integrating sustainability into the core of their strategy and across C-Suite level functions. Some leading examples are Neste, Orsted and Schneider Electric.

Firms that focus on issues that have the biggest impact on society will be rewarded by investors and consumers, leading in turn to lower financing costs or better cash flow. The most successful companies will be those that change systems to facilitate the transformation. For example, by tracking non-financial data, such as CO2 emissions, and using external auditing firms to increase confidence in the reporting or linking bonuses to sustainability goals.

CHAPTER 6: Climate change and Decarbonization
HEC Paris

In a market economy, businesses play a key role in reducing economy-wide carbon emissions. Pressure from consumers and regulators provide financial incentives for businesses to lower carbon emissions across their corporate value chains. The purpose of this chapter is to illustrate how market forces—the interplay of the firm, the consumers, and the regulator—drive product design and the overall carbon emissions of an organization. Effective decarbonization strategies typically follow the three-step process “measure, reduce, compensate” to achieve net-zero carbon emissions. Measuring carbon footprints is key for businesses to understand the nature and scale of their climate impact. Reducing emissions is governed by standard cost-benefit analysis. Compensating emissions amounts to offsetting the corporate carbon footprint by reducing, avoiding, or sequestering carbon emissions elsewhere. Understanding these steps is crucial to develop effective decarbonization strategies and successfully manage climate risk.

CHAPTER 7: Climate change and Risk Management
Oxford Saïd Business School

Climate change is not only a risk to humanity, but also an important risk to businesses in the short, medium, and long term. Executives—from CEOs to Risk Managers—are required to assess the transition and physical risks, consider alternative scenarios for how these risks might evolve, and to set strategies for risk mitigation. While climate risk historically sat outside the remit of risk managers, it is becoming a central part of their roles. As firms consider Green Energy Transitions (GET), what do risk managers, and executives who work with them, need to know? What organisational approaches might lead to effective enterprise-wide approaches to climate risk?

CHAPTER 8: Climate change and Enterprise Value
London Business School (LBS)

Big change is coming in the field of environmental, social and governance (ESG) reporting, with special reference to climate reporting. Until now, corporate sustainability reporting has been limited by a complete lack of common standards across the world, even within single jurisdictions. This has made difficult, if not impossible, the making of ESG comparisons from one company to another.

This is now set to change. After extensive consultation, the International Financial Reporting Standards (IFRS) Foundation, a non-profit body that promotes accounting standards, has put in train the establishment of a global set of ESG reporting criteria. This will have a profound effect on the value of individual firms as capital markets increasingly take account of such reporting and in light of this, business leaders need to think deeply about where their businesses sit in relation to climate and to ESG factors more generally.