This is what will push businesses towards a greener future

In this video clip of a Motley Fool Live interview, recorded on April 11Climate Impact Partners CEO Vaughan Lindsay responds to a question from contributor Rachel Warren about the barriers that prevent many large companies from taking more decisive climate action and what kind of pressure they will be under to do their part.

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Vaughan Lindsay: What are the key elements that prevent people from taking action? I think people need to realize that actually you can argue it two ways. First, it is a moral imperative and we must all play our part in the fight against climate change. The reality just makes business sense. The reason most companies do things is because they worked, it’s both the right thing to do and it’s also good business.

Consumers are increasingly making product and service choices based on climate benchmarks, as public awareness of climate change has always been high, but it has never been higher. What has changed is that this concern now translates into consumer choice. If I have to buy a cup of coffee and one says it’s climate neutral and the other isn’t and they cost the same, I’ll go for the one that’s climate neutral.

Businesses are realizing that it actually makes good business sense. Consumers vote with their feet, choosing products and services based on their opinion of companies’ climate credentials. Companies are reacting to this as they should. Of course, what will happen is that as they respond to them, they will be challenged to determine the strength of those engagements. It’s not quite accurate and you need to improve. But it’s a good natural evolution because people are held to account.

In addition, what companies find are investors, the financiers who give them the capital to develop also make choices based on people’s climate commitment. But their motivation is slightly different. They worry about stranded assets, they worry about highly charred business models that could somehow become a stranded asset and lose value.

They’re putting a lot of pressure on companies to say, “You really need to show us what your decarbonization strategy is because if you don’t, you’re going to be discovered in the auto industry. Electric vehicles are now dominating the market value and those who don’t realize this, investors are getting very nervous.

Companies are galvanized into action by consumer pressure from below and investor pressure from above. Most good forward-thinking advice sees this. That’s why our conversations have shifted from ESG territory to the boardroom. We talk to the President and CEO because they see it’s critical to the business and so they should, rightly so.

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