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April 27, 2010
Emissions of Largest US Companies Are on the Rise
    by Robert Kropp

A Carbon Disclosure Project assessment of companies in the S&P 100 finds that the current emissions trajectory will produce a 3.66% absolute increase by 2020.

In a report entitled S&P 100 Carbon Chasm, the Carbon Disclosure Project (CDP) analyzed emissions data reported to it by the US companies in the S&P 100, and found alarming evidence that overall emissions are actually on the rise.

To discern the trend of emissions by S&P 100 companies, the CDP used the data of the 51 companies that have reported emissions data to it over the three-year period of 2007-2009. The report found that emissions increased over that period by a rate of 0.36% per year.

Furthermore, according to the report, emissions are expected to increase even more as the economy recovers. According to the US
Energy Information Administration (EIA), the economic recession has led to a 6.1% decrease in emissions from fossil fuels in the past year.

To meet President Obama’s commitment to greenhouse gas (GHG) emissions reductions by the US of 17% by 2020, absolute emissions will have to be reduced by 1.05% per year, according to the CDP’s calculations. To meet the more stringent reduction levels of 80% by 2050, as recommended by the
Intergovernmental Panel on Climate Change (IPCC), the recommended average annual reduction is 3.9%, according to the CDP. spoke with Joanna Lee, the Chief Partnerships Officer at the CDP, about the findings of its report.

“The corporate sector is responsible for the majority of emissions, either directly or indirectly,” Lee said. “Emissions are actually increasing. That companies are getting better at reporting may be a factor, but that’s certainly not all of it.”

Asked why the data compiled by the CDP includes the reporting of only 51 companies in a universe of 100, Lee said, “A lot of companies in the S&P 100 didn’t report emissions data in 2007, so we weren’t able to use them. The response rate has gone up year over year. In 2009, the figure increased to 80 companies, so we are certainly seeing a trend moving in the right direction.”

“In the UK, we have a 95% response rate among the top 100 companies,” Lee continued. “European companies have tended to be ahead of US companies in reporting, but reporting by US companies has improved significantly.”

In order to determine the most recent levels of absolute emissions by industry sector, the CDP used the data reported by the 80 companies in 2009.

The four heaviest-emitting industry sectors—utilities, energy, materials, and industrials—account for 90% of total emissions. “While the Materials and Energy sectors have shown an average decrease in emissions over the last three years,” the report states, “Utilities, which accounts for 37% of emissions within the S&P 100, has experienced an annual growth in emissions of 1.64%. Industrials mirrors this trend, with an annual increase of 2.03%.”

Echoing the
interpretive guidance on climate change reporting recently issued by the Securities and Exchange Commission (SEC), Lee said, “Climate change is a material issue for these high-emitting sectors.”

“The SEC guidance is important in that companies have to look at climate change from a material risk perspective,” she continued.

A look at tables in the report that detail both absolute emissions and emissions intensity by industry sector provides evidence of the many variables that factor into corporate reporting on the issue at a time when such reporting is still voluntary for the most part in the US. The industry sector that reported the greatest increase in absolute emissions over the three-year period was health care, while the sector reporting the greatest increase in emissions intensity was financials.

“There are one or two pharmaceutical companies in the health care sector whose absolute emissions have gone up considerably, which may have been because of an acquisition or some other form of growth within those particular companies,” Lee said.

“The intensity of emissions compares absolute emissions to revenue,” she continued. “Because revenue has dropped in the financials sector in recent years, its intensity levels have increased.”

As the report states, “Although we see a significant increase in absolute emissions from the Health Care and IT sectors, their impact on US wide emissions is far less significant than high intensity sectors such as Utilities.”

The question of which particular companies in the health care sector reported such significant increases in absolute emissions, and therefore why emissions increased by so much, remains unknown to the general public. Companies reporting to the CDP can request that their data remain non-public, to be provided only to investors.

“Approximately 20 to 25 percent of companies request that their data be kept non-public and only go to their investors,” Lee said. “More companies in the early stages of carbon data reporting tend to ask us to keep their reporting non-public.”

Asked if the CDP report implies any recommendations for companies based on its findings, Lee said, “If companies don’t measure their carbon emissions, then they can’t manage them. As they go through the measurement process, companies often find cost savings associated with emissions reductions and energy efficiency. And companies that measure their emissions are much better prepared to deal with regulation as it comes.”

“Regulatory certainty is important for companies to begin to make the investments they need to reduce their carbon emissions,” Lee concluded.


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