As a result, European companies from a wide range of industries are well ahead of their U.S. counterparts when it comes to climate strategy, says Doug Cogan, director of climate change research with shareholder services firm, ISS Proxy: "There's a different mindset in Europe. There, the debate about the science has been settled for some time and the questions are now all about whether people are doing enough, quickly enough." Most visibly, European oil companies like Royal Dutch/Shell, BP and Statoil have been publicly grappling with climate change for some time and are now already starting to be seen as part of the solution. U.S. oil majors are reluctant to acknowledge the problem, let alone the solution. But even these holdouts are starting to switch sides: On April 11, ConocoPhillips became the first U.S. oil company to back federal emissions legislation. The rest of Corporate America will also have to wake up, says Truman Semans, director for markets and business strategy with the Pew Center on Global Climate Change: "Any company that is not engaging with this issue does so at its peril. There's an emerging consensus that smart climate strategies can be the basis for locking in enduring competitive advantage and I wouldn't want to be on the wrong end of that."

Nestl?(C) started measuring and reporting its carbon emissions 10 years ago and has been cutting those emissions in two main ways: by trying to use less energy, and by using cleaner energy supplies, like natural gas instead of coal. For each ton of product that leaves Nestl?(C)'s factories, the company is now emitting 54% less carbon than it was a decade ago, says Conzelmann. That hasn't exactly crippled the company's business. He says that production capacity has increased by 93% over the same period (even with that increase, the company is releasing 14% less CO₂ than it was in 1997). And cutting emissions in a cap-and-trade scheme like the ETS can also have a knock-on commercial benefit. Companies that spend the money required to rein in their carbon pollution can recoup those costs by selling emissions credits to companies that have failed to stay within their limits. As governments make those limits tighter, and demand for credits grows, their value increases.

Similar rules are coming to the U.S. "We certainly believe there will be federal carbon emissions regulations relatively soon. That could mean something being passed as soon as 2009 or 2010. It will then take a couple of years to work out all of the details," says Kevin Leahy, managing director for climate policy with Duke Energy. That might seem some way off–but for companies which emit millions of tons of carbon every year from facilities which have a life span of decades, the time to start cutting is now–and that means potentially massive demand for new technologies.

Of course, the rest of the economy is pumping carbon into the atmosphere, and change will be needed here, too. There is disagreement about how to achieve this. Some experts want to see the whole economy included in a cap-and-trade system like the EU ETS. Others want to see just big industrial emitters in a cap-and-trade system, with industry-specific tools being used to curb emissions elsewhere: energy efficiency standards for residential and commercial property builders; and emissions rules for automakers, for example. Whatever mix of policies is eventually deployed, the point is the same: companies will be required to pump less carbon into the atmosphere, and faster-thinking organizations are already turning that into a source of value.

The WRI's Wellington advises companies to start by looking at their own impact on climate change–the so-called "carbon footprint." Here, some of the low-hanging fruit can be picked by simply taking a fresh look at where and how a company consumes energy, says George Venardos, the chief financial officer with Sydney-based Insurance Australia Group (IAG)–Australasia's biggest general insurer. As head of the group's energy committee, Venardos has been looking for ways to cut the company's emissions while simultaneously reducing costs. That's a mission that recently prompted him to train a beady eye on the company's Melbourne data room.

"The data room houses all of our IT equipment and servers for the business in Australia and New Zealand, and it's the biggest single consumer of electricity in the group," he says. A constantly whirring air conditioner system kept the room at a cool 18 degrees Celsius–but Venardos wanted to know if it really had to be that chilly. The firm which fitted the air conditioner said that setting the system at 18 degrees Celsius was standard practice. The insurer then spoke to the company that actually built the system, who said it would still do the job if the setting was increased to 23 degrees. In the end, Venardos and company found that setting the air at 21 degrees would deliver big savings while still being well within the safe range: "We're saving a hell of a lot of money just from doing that–and it's the same story elsewhere. The agenda is to bring costs down while running the business in a more sustainable way and it's improving our after-tax returns," he says.

There are more sophisticated responses as well, which go beyond the four walls of a company's own facilities and look at how its products are used by others. Take Rio Tinto as an example. The Anglo-Australian mining and minerals giant emits about 30 million tons of CO₂ annually, and Laurel Green, the company's aptly named group climate change executive, accepts that those emissions need to be cut. But the coal, iron ore and aluminum which Rio Tinto sells to its customers are then involved in fresh industrial processes which throw out even more CO₂, so the company is looking for ways to help its customers save energy–and, in doing so, Green says the company is also helping itself: "The emissions we generate in coal mining, for example, are significant. But there are further substantial emissions where the coal gets burned. So, we're working with our customers to develop low-emissions pathways for our products–and the results can be mutually beneficial."

For example, the iron pellets that Rio Tinto supplies to steel manufacturers for use in blast furnaces are roughly formed blocks of metal. Green says that the company is now making an effort to deliver pellets which more closely fit the customer's specification–meaning that less energy is needed to transform it into the end product, but also potentially requiring more energy to be used on Rio Tinto's side. Often, there are opportunities for net energy reductions across the life-cycle of the product: "If we use a bit more, but they use a lot less, there's a net environmental benefit," she says. That benefit then needs to be translated into the language of business–dollars and cents. There are different ways of doing this, says Green: "If they are saving energy, they are saving costs–so we might be able to reflect that in a mark-up in prices, or the customer might agree to make us their preferred supplier. There are different ways to work it out, but there needs to be some sort of relationship benefit."

This kind of sophisticated life-cycle or supply chain analysis is something that more companies could be doing. Says WRI's Wellington: "Working out your own impact on the environment is just the first step. Companies need to go further–to look at how their products are used, what their customers need, and provide solutions that help them to minimize their own emissions, their own risks." If you fail to do that, warns Wellington, you'd better cross your fingers and hope that your competitors make the same mistake. "Climate change will increasingly be all about competing."

That's a message which GE has heard loud and clear, so–while its wind business might be the most visible symbol of Ecomagination–the company has also just launched a new range of energy efficient locomotives and is exploring the use of hybrid fuel technologies in that business. It has invested in LEDs, which are a far more efficient alternative to neon and fluorescent lighting. It has also been looking at technologies that could be deployed in the coal industry to reduce emissions.

The idea is not just to survive as carbon emissions become costly, but to thrive on the changes that result. ISS Proxy's Cogan says that when GE launched Ecomagination, the company attached revenue targets to its portfolio of green technologies–the aim is to be earning $20 billion in annual revenues from those products by the year 2010. "If you sold those businesses off by themselves, that would be a Fortune 50 company," he points out. Consumers will also play a big role in this. Although households aren't yet being compelled to think about the contribution they make to global warming, a growing awareness of climate change is prompting many people to look for more environmentally friendly products. Companies who cater to this emerging trend are carving themselves out a competitive advantage–as Californian home-builder, Grupe Homes, can testify. At a site in Rocklin, Calif., Grupe is one of 10 builders that are constructing a new 1700-home community. On average, Grupe's homes are outselling its competitors' by a rate of two to one, says Mark Fischer, senior vice president and head of construction with the company in Stockton, Calif. Buyers are snapping up the new homes because they deploy a range of energy-saving technologies–like solar panels and tankless water heaters–to use about a third of the energy that would be used by a comparable home without those features. The annual savings on energy bills per household is projected at up to $2,000 a year, says Fischer–and, at the moment, those savings are what most buyers cite as the homes' main attraction. But, Fischer is convinced that the threat of global warming will increasingly become a motivation for buyers, and sees further investment in low-energy homes as both a commercially and environmentally smart decision for the builder. "I'm kind of a bleeding heart. I want people to do this because they think they're doing good things for the planet. In the future, I think that's what we'll see."

In the U.K., leading supermarket operator Tesco is also preparing for a future in which environmental concerns shape its customers' behavior. Earlier this year, the company announced plans to label all of its products in a way that shows how much CO₂ was emitted during their production and transport–so watercress grown in the U.K. would be clearly marked as less damaging to the environment than watercress which had been flown into the U.K. from across the Atlantic. Trevor Datson, media manager at the retailer's London headquarters, calls it "carbon calorie" labeling: "We know people look at nutritional labeling and use it to make informed decisions about what to buy, and if we give our 15 million customers in the U.K. the ability to make greener choices when shopping, we think it will be an unbelievably powerful tool," he says.

Tesco's belief is that businesses will be forced to respond as consumers go looking for more environmentally friendly products. Already, other U.K. retailers are promoting their own environmental strategies and solutions: "It's useful to have competition on the environment. One of the benefits of a market economy is that if consumers want change, it doesn't take long for that to happen. In that sense, business can be a force for good."