Philippine businesses’ response to climate change · physical impacts of climate change, in...

Philippine businesses’ response to climate change

www.pwc.com/ph/thinktank

Climate change and sustainability survey

June 2011

2 Climate change and sustainability survey 2011

Foreword

Recent environmental events or natural disasters prompted us to look back and ask, “What have we been doing?”

In the Climate Change & Sustainability Survey 2011, we delve into what Philippine businesses are doing to take action on the effects of climate change. We have benchmarked survey results with available PwC surveys on climate change and business practices to enable us to assess how the private organisations are doing against global peers. We strive to stimulate and scale up private sector involvement and action on both adaptation and mitigation.

We aim to gather and ultimately provide baseline information on climate change plans and actions of the Philippine private sector and help the businesses in:

Understanding what the priorities of the private sector are in terms of plans, •investments, and actions;Evaluating what other businesses, within and outside the Philippines, are •planning and doing with respect to responding to the effects of climate change; andAssessing common needs from other stakeholder groups, i.e. the national and •local government and its agencies, civil society/non-government agencies, media, scientificandtechnicalresearchproviders,andinternationaldevelopmentagencies.

This report likewise highlights the earnest need of harnessing private and public sector partnership. The Philippine Climate Change Commission, with the objective of raising public awareness on climate change and strengthening institutions and mechanisms, is currently embarking on greater engagement with the business sector in responding to the effects of climate change.

Let me take this opportunity to thank the survey respondents who shared their thoughts, time and expertise. Your participation is crucial to the success of this study. I am likewise grateful to the business and industry leaders who contributed to and supported this endeavour. Also, I would like to extend my gratitude towards the local Advisory and Marketing & Communications teams, PwC International Survey Unit (United Kingdom), and PricewaterhouseCoopers LLP (United Kingdom) for their invaluable effort and dedication to carry out this particular undertaking. We shall strive to cultivate and sustain these efforts to better establish private sector information not just in the Philippines but across South East Asia.

Our indispensable role as business leaders compels us to become socially responsible, promoting public and environmental interest above all. Some of us may have done well. Some of us are yet to take action. At any rate, all of us should bend over backwards to promote sustainable growth for the environment. And we, at PwC, shall keep that as a commitment.

Rossana S. JavierManaging Partner and CEOPricewaterhouseCoopers Financial Advisors, Inc.


Contents

Executive summary 1Background 3Response rate 6Survey structure 7Survey results and analysis 8Leading practice: The CEO view 30Conclusion 31Related reading 32Helping you grow your business 34Acknowledgment 36Key contacts 38


Executive summary

How are businesses in the Philippines responding to climate change?

How do they benchmark against each other and overseas peers?

Lack of baseline information about how businesses in the Philippines are responding to climate change prompted PricewaterhouseCoopers Financial Advisors, Inc. (PwCFA), a Philippine memberfirmofPwC(PricewaterhouseCoopers), to conduct the Climate Change and Sustainability Survey 2011.

The survey focused on businesses in the Philippines (57 company respondents from various industries) and aimed to solicit relevant information about thinking and action on climate change mitigation and adaptation. The results have been benchmarked against business responses in other parts of the world, using data from PwC surveys. We hope thatthefindings,summarisedbelow, and the summary of leading practice, help businesses, the government and other stakeholders to understand how best to further efforts to manage the risks and maximise the opportunities from climate change.


Key findingsThe majority of respondent businesses are very concerned about climate change and are thinking about the long-term impacts. Almost all of the respondents have climate change plans, of which only a third are formal. However,majorityofthemdonotthinktheyhavesufficientcapacitytomanageclimatechange. In order to maximise the opportunities and minimise the risks that climate change poses, a step change is needed in the capacity of businesses to act.

The impact of climate change on the economy and markets is thought to be the most significant impact that climate change will have, more so than physical damage, changing consumer preferences, resource supply and labour force issues. Over three quarters of respondent businesses see climate change as an opportunity and want access to information about climate change technology. Just over half will be increasing investment in their response to climate change over the next 12 months. However, few (25%) of businesses are incentivising employees for climate change related performance.

Ninety-five percent (95%) of respondent businesses are concerned about the physical impacts of climate change, in particular flooding, drought and changes in temperature. Businesses think awareness needs to be raised of climate impacts and information and training provided in adaptation leading practice.

Eighty-seven percent (87%) of respondent businesses perceive climate change regulation as a threat.However, some see the lack of regulation as a threat too. Businesses want more information and support from government and they want a clear policy framework. This needs to be consistent between the national and local level and it needs to be enforced. However, only 42% of businesses are engaging with policy-makers.

Survey responses indicate that businesses receive most support on climate change from business organisations.Non-government agencies, international development agencies and the media are also regarded as supportive. However, all types of stakeholders were considered by at least some respondents as both ‘never’ and ‘seldom’ supportive. This suggests a need to strengthen the climate change and business ‘community of practice’ in the Philippines. Without strong partnerships between the public and private sectors, tackling climate change is likely to take longer and be more expensive.

Respondents are taking some action to mitigate and adapt to climate change. But high cost is the main barrier holding back further progress. Businesseswantfinancialincentives,suchastaxbreaksanddutyfreeimportsforgreengoods and services, if they are to make more progress.


Background

ThefirstClimateChange&Sustainability Survey in the Philippines

Studies over the past few years have confirmedthatsubstantialclimatechangeis now happening and will continue throughout the 21st century. The changing climate is impacting businesses across the world and creates both risks and opportunities. Increasingly, businesses are responding to climate change, though many still are not.

Until now, there has been no data about how businesses in the Philippines are responding to climate change or how these responses benchmark against in-country and overseas peers. It is for this reason that PwCFA has undertaken research, by means of a survey, to establish baseline information on the initiatives of businesses in the Philippines.

Our survey explores how businesses are interacting and cooperating with the national and local government in developing, implementing andfinancingclimatechangesolutions. Furthermore, the


survey seeks to understand how these businesses from various industry sectors adapt to or mitigate against the effects of climate change.

The survey leveraged the relationships that PwC has with its clients and existing networks. Survey results were analysed by PwC climate change experts and benchmarked against other data sources, including the Carbon Disclosure Project, for which PwC acts as global advisor and report writer, and the Business Leadership on Climate Change Adaptation report that PwC wrote for the United Nations Framework Convention on Climate Change (UNFCCC).

Limitations of the surveyInvitations to participate in the survey were emailed to various businesses and business organisations. A print advertisement was published to stimulate responses. Responses to the survey came from an array of sources not under the control of PwCFA.

Data protection and confidentialityPwCFA collaborated with PricewaterhouseCoopers LLP (PwC UK) International Survey Unit (ISU) in running the surveytoensureconfidentialityandanonymityofresponse.PwC ISU is accredited under the Market Research Society Code of Conduct in the United Kingdom and is a member of the European Society of Opinion and Market Research. Responses to the survey were sent directly to a secure webserverallowingforindependenceandconfidentiality.ThewebserversareaccomodatedinanISO27001certifieddata centre managed in Germany.

At no stage will individual responses be attributed to any organisation, without the expressed permission of the organisation concerned.

MethodologyThe survey was undertaken to the following timetable:

Task Date

Project initiation 17 January 2011

Paper survey finalisation 23 February 2011

Online survey build and internal testing 24 February 2011

Pilot survey 02 March 2011

Survey launch 07 March 2011

Survey close 31 March 2011

Data file delivery 05 April 2011

Report drafting 06 April 2011

Report publication 10 June 2011

Survey launchOfficialsurveyinvitationsweresentouttobusinessesandbusiness organisations from 7 March 2011.

Prior to the survey launch, local climate change and sustainability experts from various industry sectors were consulted about survey design. A pilot was used to test the format and viability of the online questionnaire. Consultees included representatives from:

Ayala Foundation, Inc.•EARTH Institute Asia, Inc.•Lopez Group of Companies•Management Association of the Philippines•MFI Foundation, Inc.•Philippine Business for the Environment•Philippine Chamber of Agriculture and Food, Inc.•Philippine Exporters Confederation, Inc.•UN Secretary-General’s Advisory Board on Water and •Sanitation.

The survey was run from 7 to 31 March 2011.

Table 1. Timetable


Final reportThesurveyiscomposedof40questionsfiltereddependingon the responses for each question. For purposes of this report, data gathered is presented in text, tables and graphics to facilitate reader interpretation.

Analysis of some of the responses includes reference or is benchmarked to global surveys or reports including the Carbon Disclosure Project, for which PwC serves as global advisor and report writer, and the Business Leadership on Climate Change Adaptation report that PwC wrote for the UNFCCC.

In no case shall this report be perceived as exhaustive in terms of coverage. Recipients of this report must exercise diligence and prudence in the use of the report.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.


ICT/telecom5%Utilities/

energy7%

Retail2%

Services25%

Financial14%

Others17%

Manufacturing16%

Agribusiness14%

Response rate

57respondents

More than 100 organisations were invited to participate in the Climate Change and Sustainability Survey 2011. Out of this number, 98 registered as respondents to the survey and 57 valid responses were counted and considered in the analysis andfinalreporting.Senior members of the organisation, knowledgeable of the climate change and sustainability initiatives of the company, were requested to accomplish the survey.

Figure 1. Industry sector classification

Industry classificationThe make up of the 57 valid responses is set out in Figure 1. Of the valid responses, 67% were from local businesses and 33% multinationals. The businesses that were engaged represent those that are critical to the response to climate change, such as utilities, agribusinessesandfinancialservices and by their size and reputationabletoinfluencethinking and action on business and climate change in the Philippines.


Survey structure

1 32 4Climate change impact and understandingThis section explores basic information about the organisations’ understanding of climate change and its impacts. It deals with the general aspects of climate change that may be of interest to the organisations as well as the organisations’ sources of information about climate change. It discovers the possible impacts on businesses, the level of concern the organisations feel about climate change impacts, and the aspects of operations that would be most affected by climate change. Risks and opportunities, in terms of regulatory requirements and physical impacts, as well as investments on climate change are also explored.

Climate change planning and strategyThis section discovers the level of preparedness the organisations have against the effects of climate change. It pins down the number of businesses having dedicated or formal, management-approved climate change plans.Itidentifieshowmany organisations have strategies such as monitoring climate change plans, achieving emissions reduction targets, rewarding climate change related performance, and engaging with policy-makers on possible responses to climate change. It also explores the barriers to takingsufficientactiononclimate change.

Climate change action

Thissectionidentifiestheactions that have been undertaken, are currently being undertaken, and will be undertaken by the organisations to mitigate or adapt to the effects of climate change. It also explores whether businesses publicly disclose information about climate change and how this is carried out.

Perceptions of climate change stakeholdersThis section explores the perceptions of the organisations about other stakeholders such as the national and local government, government and nongovernment agencies, other business organisations, the media, and international development agencies. The level of satisfaction or dissatisfaction is recognised for each stakeholder group in terms of initiatives and performance, and partnership and cooperation. Furthermore, the “should-be” priorities of and the support required from the government and other stakeholder groups in terms of adaptation and mitigation have been identified.


Survey results and analysis

1Climate change impact and understanding


Most popular sources of information for the following aspectsofclimatechangewereidentified:

Developments in climate science: Media, Business Community,NationalGovernment,andScientificandTechnical Research Providers

Developments in climate policy and regulation: National Government, Media, Business Community Developments in technology: Business Community, Media, andScientificandTechnicalResearchProviders

Developments in climate finance and business: Business Community, National Government, Media

Others: Risk Assessment and Management, Mitigation and Adaptation best practices.

Figure 2. Aspects of climate change of interest to the organisations

Number of respondents

50

40

30

20

10

0Developments in climate science

Developments in climate policy and regulation

Developments in technology

Developments in climate finance and business

Others None

Base: All respondents (57)

The UNFCCC/PwC report on Business Leadership on ClimateChangeAdaptationidentifiesdevelopments in climate policy and regulation as well as developments in technology as the aspects of climate change of most interest to the surveyed organizations. The most popular sources of information are the government, the business community, and scientific and technical research providers.

Responses from businesses in the Philippines are consistent with those of businesses in other countries, with most interest in policy and regulation and tecnhology. The importanceoffinanceandbusinessisalsohigh.Businessesare primarily looking to governments for information on policyandregulations,butalsoonscienceandfinance.However, businesses are not looking to government for information on technology. Instead the business community, media and science & technology research providers are seen as primary sources. Lower levels of overall interest in science suggest businesses are interested in how to respond more than in what is happening.

“We need to keep abreast with the current developments to know the risks involved”


Figure 3. Extent of impact to businesses Figure 4. Level of concern

To some extent35%

To a great extent65%

Very concerned67%

Somewhat concerned28%

Neither concerned or not concerned

3%

Not very concerned2%

Base: All respondents (57) Base: All respondents (57)

The message is clear. All respondents expect climate change to impact their organization, the majority to a great extent. ThePhilippineshasbeenidentifiedasoneofthetoptenmost vulnerable countries in the world in respect of the impact of climate change. In its Fourth Assessment Report, the Intergovernmental Panel on Climate Change (IPCC) found that the mean average annual maximum temperature in the Philippines has increased by 0.14 degrees celsius between 1970-2000. Annual mean rainfall and the number of rainy days have also increased, as have incidences of landslides,floodsandcyclones.1 This changing climate impacts businesses; survey responses show that this trend is expected to continue.

The vast majority of respondents are concerned about the ability of their organization to manage the impacts of climate change. Combining this response with the expectation that the majority of organizations will be impacted demonstrates the need for a ‘step change’ in capacity, so that businesses in the Philippines are not put at risk from the impacts of climate change. This lack of capacity in businesses is also evident in government agencies. Various development assistance projects have been set up to increase the institutional capacity of the Philippines to respond to climate change.

“With the environment landscape changing rapidly, climate change is a critical concern to our shareholders as well as stakeholders.”1 Intergovernmental Panel on

Climate Change. (2007). Fourth Assessment Report.


2 Stern, N., et. al. (2006). Stern Review: The Economics of Climate Change.3 Asian Development Bank. (2009). The Economics of Climate Change in Southeast Asia: A Regional Review.

Businesses in the Philippines expect the largest impact of climate change will be on the economy and markets. The second largest impact is expected to be damage to physical assets or infrastructure. It is estimated that the costs of climate change in a business as usual scenario will be 5-20% of global GDP annually.2 The costs to the Philippines of climate change are calculated as 6-7% of GDP.3 The Philipines is a bio-diversity rich archipelago, and has an economy dependent on the natural environment for resources and resilience to natural disasters.

Economies and markets will be most impacted by climate change

25

20

15

10

5

0

Changing consumer behavior

Rank 1 Rank 2

Impacts on economies and markets

Damage to physical assets or infrastructure

Challenges in obtaining resources (supply)

Impacts to workforce location and availability

Administration of health/safety hazards

Induced changes in human and cultural environments, e.g., migration

Figure 5. Aspects of the organization most impacted by climate change

Base: All respondents (57)Note: Rank 1 indicates the number of respondents who considered each element (horizontal axis) as most important.

Recent events such as Ondoy and Pepeng have shown how costly natural disasters can be, with estimated damage of US$4.4bn and 600 lives lost. Businesses are aware of the risks and are expecting a variety of impacts. This signals the need for planning and capacity building to mitigate risks and maximise opportunities.



The majority of respondents believe that climate change regulations present risks to their organisation. Uncertainty over future regulations is one of the most common responses. This is consistent with views expressed by business through other PwC surveys. International negotiations are ongoing and to date, do not provide certainty regarding overall targets and legal form. At a national level, climate change plans are being drawn up, including in the Philippines, however the implications of suchplansforspecificbusinessesarenotclearandcouldtake a number of different forms (e.g., taxes, standards, obligations and incentives).

Eighty-seven percent (87%) believe that climate change regulations present risks to their organisation. However, 51% also believe lack of regulation is also a risk.

4 Mercer. (2011). Climate Change Scenarios – Implications for Strategic Asset Allocation.

Emission/environmental reporting obligations

Uncertainty of future regulation on climate change

Fuel taxes

Air pollution limits

Product efficiency standards

Planning regulations

Lack of regulation on climate change

Carbon taxes

Voluntary agreements

Cap-and-trade schemes (carbon trading)

International agreements

Others

0 5 10 15 20 25 30

Figure 6. Regulatory requirements that present risks to the organisations

Base: 47 respondents

A study of institutional investors by Mercer found that regulation of GHG emissions could cost $8 trillion globally by 2030 whilst the cost to the environment, health and food security could range from US$2 trillion to US$4 trillion. The studyalsofoundpotentialbenefitsofregulation,predictingthat low carbon technology investments could be worth from US$3 trillion to US$5 trillion.4

Just over half of the respondents to the Philippine survey saw lack of regulation as a risk. They are not alone. Thousands of businesses around the world have been calling for climate change to be regulated at a national and global level. This has been driven in part by a desire for green jobs, for a clean energy future and to ensure competitiveness with businesses in other countries.



Carbon Disclosure Project results show that 68%-69% of the respondents think that current and/or anticipated regulatory requirements and physical impacts related to climatechangepresentsignificantriskstotheircompanies.

Ninety-fivepercent(95%) believe that physical impacts present risks to their organisation.

Increased frequency of extreme weather events

Change in temperature

Induced changes in natural resources

Changing landscapes

Others

Flooding or sea level rise (including decreased precipitation)

Drought or water scarcity (including reduced precipitation)

0 10 20 30 40 50 60

Figure 7. Physical impacts that present risks to the organisations



Belief in the risks posed by the physical impacts of climate change to businesses in the Philippines is higher compared to Carbon Disclosure Project respondents. This is likely to reflectthevulnerabilityofthePhilippinestoclimatechangeimpactssuchasthosehighlightedinthesurvey–flooding,droughts and changes in temperature – as well as the low adaptive capacity of the government and businesses themselves.


Figure 8. Respondents who believe that regulatory requirements present opportunities

Figure 9. Respondents who believe that physical impacts present opportunities

No25%

Yes75%

Base: 53 respondents Base: 53 respondents

Amongst the regulatory requirement opportunities identifiedbybusinessesinthePhilippineswerethefollowing:

Local ordinances or regulations focused on reducing the •effects of climate change, e.g., environmental or resource depletion controls, carbon emissions reduction, tax incentives, waste segregation, carbon trading/offsetting, etc.Compliance to the Kyoto Protocol• 5

Organicproduce/goodscertification.•

Amongst the physical impact opportunitiesidentifiedbybusinesses in the Philippines were the following:

Maximised use of green facilities or buildings•Use of recyclable materials•Capitalising on capabilities and global access to •technically advanced suppliersManufacture of green materials for local and international •marketsOpportunities for innovation.•

No21%

Yes79%

5 “Kyoto Protocol is an international agreement linked to the United Nations Framework Convention on Climate Change. The major feature of the Kyoto Protocol is that it sets binding targets for hundreds of industrialised countries and the European community for reducing greenhouse gas emissions.” - United Nations Framework Convention on Climate Change


Eighty-eight percent (88%) consider the longer-term impacts of climate change in their strategic plans or investment decisionsBase: All responses (57)

Incorporated in some long-term investment decisions (including long-life assets - 20+ years)

Incorporated in all long-term investment decisions (including long-life assets - 20+ years)

Incorporated in some long-term strategic plans

Incorporated in all long-term strategic plans

Incorporated in some short-term investments/operations (0-6 years)

Incorporated in some medium-term investments/operations (6-20 years)

0 5 10 15 20 25

Figure 10. How longer-term impacts of climate change are considered in strategic plans or investment decisions


These responses reveal a high level of forward thinking amongst survey respondents with regard to the impact of climate change on strategic plans and investment decisions. The same question, when asked of businesses in other countries as part of the UNFCCC/PwC Business Leadership on Climate Change Adaptation report, revealed that 90% are likewise thinking in this way. Trends show that the majority of the global respondents have also invested through some long-term strategic plans, some medium-term plans (6-20 years), and some short-term plans (0-6 years).

Consideration of climate change in the long-term plans of respondents is likely to be driven by concern over the physicalimpactsofclimatechangeandalackofconfidencein the capacity to respond, as evidenced by survey responses.



There will be a reduction of investment for climate change

There will be a delay in investment for climate change

There will be an increase in investment for climate change

There will be no change on existing climate change investment

There will be no allocation of investment on climate change

0 10 20 30 40

Figure 11. How climate change investment will be affected in anticipation of the impacts in the next 12 months


Just over half (52%) of survey respondents stated that they will increase investment for climate change in the next 12 months. This highlights how climate change is not simply an environmentalissuebutafinancialconsiderationthatcanimpactonprofitandloss.Italsodemonstratesthepotentialopportunity that climate change presents for businesses that provide goods and services that help organisations respond to climate change. Other responses indicate that investment in climate change will stay the same (30%), whilst a minority (18%) will delay, reduce or not invest at all in climate change.

The UNFCCC/PwC Business Leadership on Climate Change Adaptation report states that “early recognition of climate risks can help identify impacts and develop more effective business continuity strategies. Understanding how climate risks could impact operational effectiveness can help decision making on investments that can manage or lower longer-term operational costs.”



2Climate change planning and strategy


Thirty-three percent (33%) have formal management-approved planBase: All respondents (57)

Figure 12. Level of preparedness to manage climate change impacts

60% Somewhat prepared

14% Very prepared

2% Somewhat unprepared

24% Neither prepared nor unprepared


Survey responses show that the majority of businesses are very concerned about their ability to manage the impacts of climate change. However, only 14% of respondents are very prepared for these impacts and the vast majority are only somewhat prepared. There is a clear mismatch between the level of concern and the level of preparedness.

Evidence of the level of preparedness can, in part, be found in the existence of plans or strategies. Survey results highlight that a third of respondents have a formal management-approved plan. Of these:

sixty-three percent (63%) focus on • both adaptation and mitigationtwenty-one percent (21%) focus only on • adaptationsixteen percent 16% only on • mitigation.

The majority (67%) either had only an informal plan (56%) or no plan at all (11%).

Regardlessoftheformalityoftheplan,84%ofrespondentssaidtherearespecificindividualsintheirorganisationtaskedwith monitoring their climate change plan.


Sixty-one percent (61%) do not have emissions reduction targetBase: All respondents (57)

Fifty-eight percent (58%) do not engage with policy-makersBase: All respondents (57)

Seventy-fivepercent(75%) do not have reward mechanismsBase: All respondents (57)

Despite the majority of respondents signalling the existence of formal or informal climate change plans, 61% do not have an emissions reduction target. This is more than double the response of businesses covered by the Carbon DisclosureProject,whichidentifiesonly29%oftherespondents who do not have an emissions reduction target. However, when the lack of a regulatory driver for emissions reductions in the Philippines is considered, the fact that 39% of respondents actually have a target demonstrates how seriously businesses consider the need to reduce GHG emissions.

Compared with businesses in other countries, fewer businesses (42%) in the Philippines engage with government policy-makers. Globally, according to the UNFCCC/PwC report on Business Leadership on Climate Change Adaptation, 50% of the organisations surveyed engage with policy-makers, i.e. the national government, onadaptation.TheCarbonDisclosureProjectidentifies80% of the respondents who engage with policy-makers on responses to climate change. As 87% of business in the Philippines think that regulation poses a risk to their business, there appears to be a gap between concern over regulation and engagement with policy-makers to mitigate the perceived risk. Businesses have a critical role to play in shaping national and international climate change policy and leading practice encourages engaging with policy-makers.

TheCarbonDisclosureProjectidentifiesonly36%ofthe respondents who do not provide incentives for the management of climate change issues, including the attainment of GHG.


Themostsignificantbarriertoactiononclimatechangefor businesses in the Philippines is high capital costs. This is followed by the lack of government policies and fiscal incentives. Lack of knowledge and capacity to act is also key.

High cost holds back climate change action

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Low R

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Other

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Mitigation Adaptation

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ROI too r

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Figure 13. Key barriers to take action on mitigation and adaptation


Globally, organisations consider lack of government policies and fiscal incentives as well as uncertainty in future environment as the key barriers to take action. Responses in the Philippines are therefore consistent with other countries with regard to the role of government. However, they indicate that surveyed businesses in the Philippines need more help in order to take further action. Inparticular,theyneedfinancialsupportandcapacitybuilding for knowledge and skills.



3Climate change action


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rainwater harvesting

Urban greening

Water efficiency

Shoreline defence

Action has been undertaken

Action is currently being undertaken

Action will be undertaken in the future

None

Other

Flood and assistance shelters

Figure 14. Actions on adaptation


Businesses can take a variety of actions to adapt to climate change. These actions will vary from one business to another and by geography. The most common climate change adaptation action of businesses in the Philippines istousewaterefficiently.Thisisfollowedbyurbangreening,actiontomanagethethreatoffloodsinlandandgroundwater/rain harvesting. Very few have taken action on shoreline defence.

These responses demonstrate an awareness amongst businesses of how to adapt to climate change and of the potential for ‘autonomous’ adaptation. However, approximately one quarter of responses across all categories indicate that no action is being taken.


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Tree planting and/or watershed protection

Solid waste management

Behavioural change

Offsetting

Transportation: use

Transportation: fleet

Process emission reductions

Action has been undertaken

Action is currently being undertaken

Action will be undertaken in the future

None

Low carbon energy installation

Low carbon energy purchase

Temporary fugitive emissions

Energy efficiency: Building services

Energy efficiency: Process

Energy efficiency: Building fabric

Product design

Figure 15. Actions on mitigation


Mitigation actions also vary by business and geography. Responses show that businesses in the Philippines are taking or planning to take action to reduce GHG emissions. The most popular responses are tree planting/watershed protection and solid waste management. Both these actions havewiderbenefitsbeyondemissionsreduction.

The least common actions are low carbon energy installationandoffsetting.Energyefficiencyemergedasamiddle ranking action in contrast to the predominance this mitigation response commands in many other countries around the world as evidenced in the Carbon Disclosure Project.Thisisbecausethelinkbetweenenergyefficiencyand climate change mitigation may not be well understood or appreciated by Philippine businesses as they view this more of a cost saving strategy rather than a climate strategy.


Figure 16. Public disclosure of climate change action

No47%

Yes53%

Base: All respondents (57) Base: 30 respondents

Just over half of respondents publicly disclose information about climate change action. Methods of communicating action include environmental and sustainability reports, company websites, annual reports and other company publications.

Thefirststeptowardsmitigatingandadaptingtoclimatechange is to measure emissions and assess impacts. Disclosing this information so that investors, corporations, policy-makers, customers and other stakeholders can see ithelpscreateconfidenceinthemanagementofclimatechange and allows benchmarking across businesses and industries.

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Environmental/sustainability report

Company website

Annual report

Other company publications


4Perceptions of climate change stakeholders


Not satisfied at all

Not satisfied at all

Not very satisfied

Not very satisfied

Neutral

Neutral

Very satisfied

Very satisfied

Quite satisfied

Quite satisfied

N/A

N/A

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Figure 17a. Level of satisfaction with stakeholders’ climate change initiatives and performance

Figure 17b. Level of satisfaction on partnership or coordination with other stakeholders



Results show that the surveyed organisations are generally quite satisfied with non-government organisations such as business organisations, media, and international development agencies whereas they are generally not very satisfied with governmental units. This trend encompasses both the initiatives and performance as well as the level of partnership or coordination with stakeholders.

These responses are consistent with business responses in other countries. A common theme that emerged from other PwC business and climate change surveys is a desire for greater clarity from governments regarding national climate change plans as well as the need for public-private partnerships.

Local government

Local government

Government agency (environmental)

Government agency (environmental)

Government agency (economic)

Government agency (economic)

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Non-government agency

Business organisations (environmental)


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Media

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agencies

Local government units


Non-government agencies (environmental)

SeldomNever

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Often Always N/A

Government agencies (environmental)

Media

Figure 18. Frequency of support received from stakeholders


Survey responses indicate that business receive support most often from business organisations. International development agencies and the media are also regarded as supportive. However, all types of stakeholders were considered by at least some respondents as both ‘never’ and ‘seldom’ being supportive.

The PwC 14th Annual CEO survey states that 54% of the respondents believe that collaborative government and business efforts will mitigate global risks such as climate change.

This suggests a need to strengthen the climate change and business ‘community of practice’ in the Philippines. Without strong partnerships between the public and private sectors, tackling climate change is likely to take longer and be more expensive.


Behavioural change

Low carbon energy purchase

Energy efficient: Process

Tree planting and/or watershed protection

Temporary fugitive emissions reductions

Process emissions reductions

Low carbon energy installation

Transportation: fleet

NoneMitigation

Adaptation

Flood and assistance shelters

Groundwater or rainwater harvesting or desalination

Urban greening

Water efficiency

Other

Shoreline defence

0 5 10 15 20 25

Solid waste management and/or recycling

Energy efficiency: Building fabric

Energy efficiency: Building services

Figure 19. “Should-be” climate change priorities of the National government and other stakeholders


Other responses include:

education and awareness•incentives for mitigation and adaptation•poverty alleviation.•

Note: Rank 1 response only.

Respondents think behavioural change should be the priority response to climate change mitigation from the government and other stakeholders. Low carbon energy use wasconsideredthesecondpriority.Energyefficiencyisalsoseenasimportant,includingefficiencyinfabric(materials),services and processes.

For adaptation, the most important response is considered to be urban greening. This is followed by a number of water management options.


Table 2. Support from stakeholders

National government Local government units

Government agencies Other business organisations

Other key players

Clearly defined master plan and implementation

Local policy development and strict implementation of climate change measures

Disaster risk management education and systems preparedness

Sharing of leading practices amongst industries

Sharing best practices on disaster risk reduction and climate change

Strict implementation of environmental laws and regulations

Environmental awareness programmes or campaigns

Up to date information on climate changes

Voluntary efforts in reducing waste, carbon emissions, use of plastics, and recycling regardless of the cost

Information dissemination (media)

Information drive Consistency with the national government

Training on disaster risk reduction and climate change

More partnerships with other industries and government

Frequent evaluations of actual practices versus plans

Tax incentives and duty free imports of green building materials

Incentives to participating companies

Awareness and more aggressive evacuation and emergency response campaigns

Promote CSR and publicise how businesses address climate change

Formal dialogue and joint action in partnership with the government

Funding or financial assistance

Improved and impartial enforcement of laws and consistent drive for change

Resource mobilisation Environmental awareness or information drive

Behavioural change

Responses highlight a variety of areas where support is needed on mitigation and adaptation. Despite this variation, four common themes emerged, as follows:

Raising awareness of and providing information about 1. climate change is key.Businesses want to know leading practice, in particular 2. how to adapt to climate change.A clear policy framework is essential. This needs to be 3. consistent between the national and local level and it needs to be enforced.Businessesneedfinancialincentives.4.

There is a gap between what respondents think the priorities of the national government and other stakeholders should be and their own actions, for example, with regard to behavioural change, urban greening, water managementandenergyefficiency.However,lowcarbon

energy purchase is seen as a more important response for the national government and other stakeholders. This may reflecttheneedforpublicinterventiontomakelowcarbonenergy viable. The same is also true of shoreline defence.


Leading practice: The CEO view

Leading practice in responding to climate change requires businesses to do more than simply minimise risks. Climate change presents both risks and opportunities for businesses across the world.

For example, it is estimated that the costs of climate change would be 5-20% of global GDP annually.6 When it comes to opportunities, the value of the low carbon and environmental goods and services industry is estimated to be US$5 trillion and is projected to grow by 5% year on year until 2014.7

The ability of a business to understand and respond to climate change will be critical to ensuring business success. This applies to businesses with a clear link to climate change such as those in the power sector, but also to the broad spectrum of industries that will be affected by the impact of climate change. Responses to PwC’s 14th Annual CEO survey show that around 64% agree or strongly agree that developing products and services that are environment friendly should be an important part of their innovation strategy; roughly 15% say they are to raise commitment significantlytoaddressingclimatechange.

How businesses should respond is a critical but complex question. In order to shed light on this, PwC gathered the thoughts of 10 Councilors from the Copenhagen Climate Council who head companies in different industry sectors indifferentpartsoftheworld.Theseleadersdistilledfive‘leading practices’ that simplify the business response. These practices, ‘Climate change success and survival – Five key roles’ are:

Role 1 Seizing growth opportunitiesRole 2 Preparing and protecting your businessRole 3 Setting an exampleRole 4 Empowering othersRole 5 Helpingtodefineclimatechangepolicies

Some of these roles are crucial for survival, e.g., preparing andprotectingthebusiness;othershelpdefinesuccess,not just in tackling climate change, but to gain a strategic advantage over competitors. These roles are underpinned by the understanding of the links between climate change and business, including everything from physical and regulatory risks to growth and market opportunities.

6 Asian Development Bank. (2009). The Economics of Climate Change in Southeast Asia: A Regional Review.7 Department for Business Innovation & Skills. Low Carbon Business Opportunities.


Conclusion

Reviewing the responses to the survey in the light of the climate change leading practice as distilled by the 10 CEOs highlights the strengths and weaknesses in the response of businesses in the Philippines.

The perception of climate change as an opportunity not just as a risk for both adaptation and mitigation should be welcomed. Tapping into global markets presents an opportunity for businesses in the Philippines, whilst domestically, opportunities exist for new products and services that can help make the Philippine economy and society more resilient to climate change.

The importance of preparing and protecting businesses is partiallyreflectedbyresponsestothesurvey.Overhalfofrespondents have climate change plans but more businesses need to formalise these.

The same is true when it comes to setting an example. Whilst responses to the survey show that many businesses are thinking about climate change, including in the long-term, and are undertaking a variety of actions, more need to set emissions reduction targets and disclose information about climate change.

When empowering others, businesses in the Philippines needtothinkaboutwhotheycaninfluenceandhowtheycan play a supportive role. This includes incentives for employees, contracts with suppliers and communications with consumers and other stakeholders. Survey responses indicate a general level of satisfaction with the support the business community is providing but there is room for improvement. More action is also needed to incentivise employees.

Finally,CEOsflaggeduptheimportanceofbusinesseshelping to shape the climate change policy agenda. Only 42% of businesses engage with policy-makers. Whilst the

need for businesses to focus on their customers and the bottom-line is recognised as a priority, it is critical that climate change policies are developed with input from businesses. This is evident from the survey responses – 87% see climate change regulation as risk and respondents called for greater clarity and consistency in climate change policy making. Businesses want incentives to help them do more.

Shaping the policy agenda does not have to be an onerous task. Views can be captured by surveys and events. Governments and international development agencies should help facilitate business inputs to climate change policy development. The climate change and business community of practice in the Philippines needs to be enlarged and strengthened. This is the aim of the Philippine Business Climate Imperative (Imperative), launched in 2009, and steered by the Philippine Business for the Environment and its partners. The Imperative has laid the foundation upon which to scale up the role of businsses in the Philippine response to climate change upon which additional support and guidance will be needed from the public and private sectors.

Respondents to the survey should be proud of the overall results which show businesses in the Philipines to be making some progress in responding to climate change. However, much more still needs to be done. Questions remain about the activity of businesses that did not respond to the survey. Future surveys should secure higher numbers of respondents. Those businesses that are actively engaging are positioning themselves for the enormous opportunities that climate change presents. Such interest is essential so thattheinnovation,investmentandefficiencyoftheprivatesectorcanbeharnessedinthefightagainstclimatechange.


Related reading

Carbon Disclosure Project 2010(December 2010)

The Carbon Disclosure Project, to which PwC has been appointed global advisor and report writer, provides institutional investors with a unique analysis of how the world’s largest companies are responding to climate change.What is loud and clear this year is that, despite the lack of a global climate change agreement, many of the world’s largest companies believe carbon management is becoming a real strategic business priority and competitive driver. So it is no surprise that more Global 500, S&P 500 and FTSE 350 companies have responded to CDP this year, with a particular increase this year from the BRIC countries (Brazil, Russia, India and China).

Appetite for change

Based on almost 700 interviews conducted in 15 countries, Appetite for change examines attitudes in the international business community towards environmental regulation, legislation and taxes.

Executives shared their views on the impact of climate change, their preferred environmental policy tools, the role of government in protecting the environment, and the ingredients necessary for a global climate change deal.


Business Leadership on Climate Change Adaptation (December 2010)

The Business Leadership on Climate Change Adaptation report has been produced by PricewaterhouseCoopers LLP (UK) in collaboration with the United Nations Framework Convention on Climate Change. The report highlights the critical role that businesses can play in adapting to climate change across different sectors of the economy. In order for this to happen, new partnerships are needed between the public and private sectors so that risks can be managed and new opportunities discovered.

Low Carbon Economy Index(2010)

By the year 2050, the world will need to reduce its carbon intensity by around 88% if it hopes to limit climate change to 2°C of warming.

So concludes PwC’s Low Carbon Economy Index, a report assessing the G20 countries’ achievements in reducing their carbonintensitylevels—definedastheratioofemissionstoGDP—since 2000, and analysing the distance each nation must still go to meet G20 carbon reduction targets by 2050. The report is an update to a previous analysis in 2009 before the UN Copenhagen climate summit.


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PwCFA is the financial advisory arm of PwC in the Philippines

PricewaterhouseCoopers Financial Advisors, Inc. (PwCFA) isaPhilippinememberfirmofthePwCglobalnetwork.IslaLipana&Co.isalsoaPhilippinememberfirmofthePwC global network.

PwCFAisthefinancialadvisoryarmofIslaLipana&Co.Both Isla Lipana & Co. and PwCFA are committed to provide excellent and distinctive services to its clients. For 88 years, we stick to the highest quality standards in delivering audit and assurance, tax and advisory services within and outside the Philippines.

Our clients include government agencies and leading corporations, both local and foreign, across different industries. We mainly serve these industries:

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Our diverse team of experienced professionals includes accountants, tax advisers, systems analysts, economists, human resources professionals, sustainability and climate change experts, project development managers, industial engineers, and investment advisors.

Our people are active in various professional, public and private sector organisations and participate in public forums involving taxation, investment incentives and advocacy issues. We make sure we keep up with the latest developments so that we can give clients informed advice on different issues that might affect their business.

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Acknowledgment

PricewaterhouseCoopers Financial Advisors,Inc.,aPhilippinememberfirmof PwC (PricewaterhouseCoopers), would like to thank the following organisations or groups who participated and contributedtothefirstClimateChange&Sustainability Survey.

We received additional support from a number of individuals and organisations, in particular, the Philippine Business for the Environment through Howard Belton (President) and Lisa Antonio (Executive Director), Grace Favila (Adviser), and Olivia Castillo (Adviser), EARTH Institute Asia, Inc. through Dr. Corazon Claudio (President), Management Association of the Philippines through Arch. Felino Palafox, Jr. (President) and Tammy Lipana (Chairman, Environment and Sustainable Development Committee), Far Eastern University through Dr. Lydia Echauz (President), Asian Institute of Management through Prof. Juan Miguel Luz (Associate Dean, Center for Development Management), and the participants of the pilot survey.

We likewise acknowledge those organisations and groups who have responded but do notwishtobeidentified.


AsiaPacificProjects,Inc.

Banco de Oro Unibank, Inc.

BDO Capital & Investment Corp.

Brain Trust: Knowledge and Options for Sustainable Development, Inc.

Central Philippine University: College of Agriculture Alumni Foundation

Cleantech Innovations, Inc.

Cummins Sales and Service Philippines, Inc.

Development Bank of the Philippines

Department of Education, Pantabangan District

DKSH Group

DiversifiedTechnologySolutionsInternational,Inc.

EARTH Institute Asia, Inc.

ePLDT Inc.

First Philippine Holdings Corporation

FirstWesternVisayasBiofiledsCorporation

Holcim Philippines, Inc.

Hongkong and Shanghai Banking Corporation

IslaLipana&Co.,thePhilippinememberfirmofPwC(PricewaterhouseCoopers)

Land Bank of the Philippines

Lopez Group Foundation, Inc.

Manila Water Company

Manly Plastics, Inc.

Manila Electric Company

MFI Farm Business Institute

MindanaoMicrofinanceCouncil

Naprossi Security Services, Inc.

Palafox Associates

Petron Corporation

Philip Morris Philippines Manufacturing, Inc.

PhilpacificInsuranceBrokers,Inc.

Pilipinas Shell Petroleum Corporation

Platinum Island Farm

Robert Bosch, Inc.

SGV & Co./EY Philippines

Sun Life Financial Philippines

Tambunting/Powernet Systems

The Medical City

United Laboratories, Inc.

Union Galvasteel Corporation

Vision A&E, Inc.


Key contacts

The survey was principally written by PricewaterhouseCoopers Financial Advisors, Inc. jointly with PwC UK Sustainability and Climate Change practice.

We would like to thank everyone involved in the development and conduct of the Climate Change & Sustainability Survey 2011 for their contributions and support.

For further information on the survey, please contact:

PricewaterhouseCoopers Financial Advisors, Inc. Philippines

Rossana S. JavierManaging Partner and CEOD: +63 (2) 459 3016T: +63 (2) 845 2728 ext. 3016 or [email protected]

Gene Alfred S. MoralesExecutive Director, ConsultingD: +63 (2) 459 3003T: +63 (2) 845 2728 ext. [email protected]

PricewaterhouseCoopers LLPUnited Kingdom

Dan Hamza-GoodacreAssistant Director, Sustainability and Climate ChangeD: +44 (0) 20 [email protected]

www.pwc.com/ph/thinktank

© 2011 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers Financial Advisors, Inc. All rights reserved. In this document, “PwC” refers to PwC Financial Advisors, Inc., which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

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