October 08, 2008
Carbon Disclosure Project Publishes Sixth in Annual Series Detailing Corporate Emissions
by Robert Kropp
Investors network elicits data from corporations globally and finds improved focus on risks and
opportunities of climate change.
When a global network of investors with assets of $57 trillion wants corporations to quantify and
disclose information on carbon emissions, boardrooms the world over increasingly accept the
strategic benefits of measuring and managing carbon emissions.
network in question is the Carbon Disclosure
Project, a UK-based organization which has recently released the sixth iteration of its annual
series of reports on corporate greenhouse gas emissions. Paul Dickinson, the organization's founder
and CEO, describes CDP as "By far the largest investor network in the world."
added, "CDP engages over 1500 corporations in its efforts to increase reporting on emissions. It
also works with some of the world's largest cities to do the same."
CDP's goals in
assembling the world's largest database of corporate greenhouse gas emissions are the management
and reduction of emissions and climate change impacts by private and public sector organizations.
Investors using CDP's reports gain a better understanding of the risks and opportunities from
climate change in their portfolios.
This year's output consisted of three reports: the
CDP6 Global 500 Report, which analyzed responses from 383 of the 500 largest corporations in the
FTSE Global Equity Index Series; the CDP6 S&P 500 Report, which received responses from 321 of the
US-headquartered companies of the S&P 500; and the CDP6 Asia Report, which sought responses from
the region's 220 largest corporations.
The reports, as well as several others by the
Carbon Disclosure Project, can be found on the organization's web site.
According to the CDP6 reports, the mindset
in corporate boardrooms has evolved over the past decade, from characterizing concerns over climate
change as the work of an environmental fringe to a more proactive role in monitoring and, in some
cases, addressing the impact of carbon emissions.
In Dickinson's view, "The single most
important positive trend to emerge from these reports is that many corporations have reduced their
"Global warming occurs because of human activity, and worldwide
emissions continue to rise. When corporations begin to employ energy efficiencies that reduce
emissions—a couple of examples are attention to supply chains and the use of teleconferencing to
replace air travel—they have a positive impact, one that has grown through the years of our
In its CDP6 Global 500 Report, the Carbon Disclosure Project recorded a response
rate of 77% to its requests for information, a response consistent with CDP5. Leading the way was
the response rate of 83% among European companies, attributed by the CDP to the "relative maturity
of the climate change issue in the region."
The North American response rate, up from 76%
to 82%, reflected "increasing engagement on the climate change issue," according to the report. On
the other hand, only 50% of Asian Global 500 companies responded.
Among the leaders in
reporting from carbon-intensive industries were BASF, Iberdrola, Nissan Motor, and Bayer. Leaders
from among the non-carbon-intensive industries included Barclays, Merrill Lynch, Taiwan
Semiconductor Manufacturing and Tesco.
Members of the CDP Leadership Index are the
companies with the highest scores for disclosure in response to the CDP6 questionnaire.
Overall, the CDP6 Global 500 Report found an increased corporate engagement with climate change
issues. As climate science has grown more unequivocal about the extent of global warming,
improvements in policy and the growth of carbon markets has led companies to take more active and
public stands on climate change. Increased consumer awareness has prompted companies such as
Wal-Mart to focus on carbon emissions along their supply chains.
Kevin Biernacki of EMC, a
Massachusetts-based high tech company whose score of 98 placed it atop the CDP Leadership Index,
said, "One of the areas we found more difficult to evaluate was the emissions along the supply
chain. So we went to CDP asking for help, and we've begun working with other companies in our
industry—many of whom share the same supply chain companies—to gather and report accurate
information about such emissions."
On the other hand, the report also found much room for
further improvement. Companies seek consistent guidance from regulatory agencies in order to
"define organizational boundaries and carbon accountability." For example, utility companies that
are seeking to build new facilities need a predictable regulatory environment. "These facilities
are used for decades. What would the financial impact be if because of regulatory uncertainty the
wrong materials were used in construction?" said Dickinson.
Respondents were often
unwilling to provide emission forecasts, believing them to be too commercially sensitive for
publication. And while 74% of respondents reported having greenhouse gas emissions reduction
targets in place, only 56% would disclose them.
The CDP6 S&P 500 Report found that 64% of
North American companies responded to the CDP's requests for information, up from 47% in 2006. The
number of respondents reporting greenhouse gas emissions rose to 73%. The report also found that an
increasing number of companies are developing emissions target programs.
According to the
report, "More companies are viewing climate change risk not simply as an environmental or public
relations issue, but as a game-changing set of business imperatives." Companies displayed a growing
trend away from reporting generalized risks associated with climate change, instead revealing more
thoughtful conclusions about risks personalized for their specific business operations.
Biernacki of EMC said, "In order to rank as the highest-scoring company in CDP6, we spent a
great deal of time assembling information in response to the questionnaire. Our goal was
transparency, and to accomplish it we had to provide as much information as we could on such data
as emissions rates and population rates."
Furthermore, the report found that more
companies are beginning to view climate change as an economic opportunity. "Forward thinking
companies are recognizing that a strategy for addressing climate change can drive significant cost
savings and efficiency improvements," the report states. "Companies are also seeing new-found
opportunities in the carbon-constrained economy."
Katie Keita, Senior Manager of Global
Investor Relations for EMC, said, "In the past couple of years, the convergence of mainstream and
social investing has accelerated and is likely to continue to do so for the next few years at
least. Our policy of open dialogue with our investors—we meet twice a year with them, and
sustainability issues increasingly accompany interest in profitability—place us at strategic
advantage for attracting responsible investors."
However, the report also found that US
companies lag behind their European counterparts in addressing the issue of climate change. Only
33% have greenhouse gas emissions reduction targets in place, compared to 74% of respondents in the
CDP6 Global 500 Report. Emissions trading schemes were relatively untested in the US until the
first carbon dioxide emission permit auctions were held in the Northeastern U.S. in September 2008
under the Regional Greenhouse Gas Initiative.
When asked why the US lags so far behind Europe in the application of emissions trading—a
practice that originated in the US—Dickinson said simply, "The law. Cap and trade programs are
mandatory in Europe. The few voluntary programs in the US are just games."
say that the recent auctions held in the Northeastern U.S. should lead to a more widespread
practice. "Regulations making such programs mandatory at the federal level have to be passed for
the programs to be effective," he said.
Among the US leaders in reporting from
carbon-intensive industries were PPG, Exelon, FPL and Consolidated Edison. Leaders from among the
non-carbon-intensive industries included EMC, Merrill Lynch, Comerica and ProLogis.
Despite a relatively low response rate to the third version of the CDP6 Asia Report, the CDP
nevertheless detected several heartening improvements. "The findings highlight the extent to which
Asian companies critically affected by climate change are moving rapidly from a basic understanding
of the issues to the implementation of practical corporate policies," the report states.
Companies have begun to view the risks from extreme weather as a function of climate change, a
change in focus probably due to the recognition of the implication for corporate operations of such
events. Additionally, global brands have encouraged Asian supply chain companies to begin reporting
on carbon emissions.
Among the countries involved in the study, Taiwan had the most
respondents—44 percent of the companies from which the CDP requested information. Korea followed,
with 33 percent of companies responding (Japan was not included in the CDP6 Asia Report).
Overall, the report found that as market capitalization increased, so did the pressure to
improve reporting on emissions. The report theorized that shareholder pressure was largely
responsible for this phenomenon. An exception to this trend was China, where "relatively few large
Chinese companies currently possess the systems or management commitment needed to address climate
change issues at the company level."
Dickinson believes that improvements in corporate
reporting over the years of the CDP studies give cause for cautious optimism. He stated, "Companies
that do not address climate change as a force behind decision-making will only get poorer and
poorer. Those that do will find opportunities to get richer and richer."