- How can firms proactively manage your climate and environmental image to their advantage?
Riyadh - Mubasher: It can take decades to build the desired reputation and the press of a button to destroy one. From financial services to fast-moving consumer goods, firms are beginning to see the perception of their climate image as a critical component of their business proposition and a key to attracting employee talent, consumers, and investors.
In 2015, the Task Force on Climate-Related Financial Disclosures (TCFD) set up by the Financial Stability Board (FSB) developed voluntary, consistent climate-related financial disclosures for use by companies, banks, and investors in providing information to stakeholders.
It was thought that increasing the amount of reliable information on firms’ exposures to climate change would highlight potential dangers and opportunities, consequently, strengthening the global economic system and facilitating the transition to a lower-carbon economy.
Why should firms manage their climate image proactively?
Changing consumer sentiment towards climate issues is driving firms to consider how to proactively manage their public climate image and avoid potential damage to their reputation that comes with environmentally controversial activities or partnerships.
Social media and digital news channels create a platform for consumers, employees, investors, and others to scrutinise and discuss how a firm is perceived to be supporting climate-related action, how it is reacting to policy or technological developments to support the transition to a lower-carbon economy, or who the firm chooses as its partners and suppliers.
Shareholders, insurers, lenders, and other involved stakeholders are increasingly demanding that firms provide climate-related risk disclosures and devise response strategies.
Climate image is now seen as an essential component for managing a wide range of risks and the value of the company to its shareholders and customers.
Some firms, particularly large technology companies, have recognised business benefits and have integrated climate image as a key part of their strategy to attract and retain customers.
The threats of not managing climate-related image
There have been numerous examples of institutions getting involved in controversial activities that were directly or indirectly linked to environmental issues, leading to implications on their share price and reputational damage. These could have been anticipated and managed proactively had those firms fully assessed and understood key risks, negative drivers, and influential players that need to be actively managed to neutralise climate image threats.
Managing climate image dynamically is the way forward
Assessments of news headlines or internal risk assessments through questionnaires and workshops only provide a limited view, particularly in the fast-moving digital world where public perceptions can change very quickly.
A core element of an effective solution to enable proactive management of a firm’s climate image is its ability to quickly access and analyse vast quantities of relevant data, including public policy changes, technological advancements, and social media feedback from the firms’ stakeholders. Once analysed, the results of the assessment need to be presented in a way that clearly shows how certain triggers are impacting a firm’s climate image and where, who, or what is specifically driving its positive or negative climate image.
Most importantly, the right solution should use a combination of the latest analytical techniques to enable firms to dynamically monitor the changes in their climate image, to assess whether the actions they are taking are having the desired effect on their climate image, and enable them to course-correct quickly, thus avoiding costly reputational consequences.
Realising the benefits of a dynamic approach
A solution which is powered by digital technologies and data-science techniques would provide unparallel insights on climate image to senior management and boards when compared to more traditional methods, including:
Coverage: digitally enabled solutions will provide an unparallel capability to consume, interrogate, assimilate, and automatically track changes across vast quantities of data from multiple data sources globally.
Precision: ability to pin-point key factors and identify relevant dimensions and influencers on a net positivity or negativity image perception scale, whilst providing flexibility to analyse climate image differences across a firm’s geographical footprint.
Dynamic: ability to measure the evolving impact that a firm’s actions are having on their climate image.
Insight: highlighting where hidden or unwanted consequences could be materialising before they manifest.
Measurement of climate image cannot be a one-off activity
The complexity of the actions and sometimes inactions that are being taken globally remain multifaceted, from policy changes that have second-order implications to those involving the supply chain or technological change.
The potential financial implications and impact on a firm’s reputation of climate image are complex, especially in a newly disrupted global economy and cannot be adequately managed on a re-active basis.
Firms should integrate by thinking more deeply about climate image considerations in their business strategies to realise commercial benefits that a well-managed climate image can create.
This article was written by Senior Managing Director, FTI Consulting, Jamilia Parry, and Senior Director, FTI Consulting, Winn Faria.
