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September 10, 2010
Leading Companies are Not Waiting for Climate Change Legislation
    by Robert Kropp

A new report from the Carbon Disclosure Project details the risks and opportunities for business from climate change impacts, and highlights the innovations of leading companies.


Climate change legislation in the US may be going nowhere, as well-funded organizations that encourage climate science skepticism and bewail the onerous effects on business of such legislation seem to have won the ears of many in Congress. However, the reality of climate change is considered beyond dispute by all but a small handful of climate scientists. Furthermore, despite the efforts of the US Chamber of Commerce to derail climate legislation, purportedly on behalf of its many dues-paying member companies, some companies have taken leading roles in addressing the issue.

Organizations such as the UN Global Compact and the World Business Council for Sustainable Development (WBCSD) together have as members thousands of companies that have committed to addressing climate change mitigation in their business operations, not only because of the risks associated with climate change but the business opportunities as well.

In the US,
Business for Innovative Climate & Energy Policy (BICEP) and the United States Climate Action Partnership (USCAP) are business organizations whose members have been vocal in calling for federal action on climate change, in large part because their long-term business strategies require consistent regulatory and legislative support.

"The politicians in the US are completely failing, and everybody understands that," Paul Dickinson, CEO of the
Carbon Disclosure Project (CDP), told SocialFunds.com. "But the one thing about business people is they can read a graph."

No organization has been more instrumental in compiling consistent and comparative data on corporate greenhouse gas (GHG) emissions than the CDP, which, on behalf of 534 institutional investors holding $64 trillion in assets under management, requests disclosure of GHG and climate change mitigation strategies from some 5,000 organizations every year.

Dickinson told SocialFunds.com that the number of companies complying with its request for GHG emissions disclosure has been steadily increasing. Last year, 82% of the 500 largest global companies reported to the CDP. Ninety-five percent of the largest companies in the UK now do so, as do 66% of companies in the S&P 500 in the US.

SocialFunds.com spoke with Dickinson on the occasion of the publication of a new report by the CDP, entitled
The Carbon Management Strategic Priority. Based on interviews conducted by Verdantix with executives of global corporations with revenues of over $1 billion, the report is described by its authors as qualitative, and does not necessarily break new ground. Nevertheless, it offers insight into the degree to which companies have integrated climate change considerations into their daily business operations.

According to the CDP, "Carbon management is being propelled to the forefront of business across multiple sectors through a number of market drivers, including energy costs, the growing cost of carbon, brand reputation, energy supply risks, employee expectations, investor requests and competitive positioning." Executives surveyed for the report expect that the impacts of these multiple drives will grow over the next five to ten years.

"The movement toward emissions reduction is moving in one direction," Dickinson said. "It may be a wavy line, but it's moving in one direction."

The major factors identified by the report as driving business response to climate change include climate science, risks associated with resource scarcity, government and social response, and, perhaps most critically, especially in the US, market response. As the report states, corporate "awareness and engagement increased dramatically when peers announced carbon management plans."

In addition to mitigating risks associated with regulation, brand reputation, and resource scarcity, corporate mitigation strategies can uncover new sources of business opportunity, the report finds. By "examining product life-cycle emissions and mapping emissions to business processes," the report states, companies "can spark innovation across the value chain."

Dickinson mentioned a partnership launched in 2007 by the CDP and Wal-Mart, designed to assist companies in the retail giant's supply chain in reporting GHG emissions data to the CDP. Described by Dickinson at the time of the launch as "a significant milestone in corporate action to mitigate climate change," the partnership has contributed to Wal-Mart's objective of eliminating 20 million metric tons of GHG emissions from its global supply chain by the end of 2015.

"In 2009," the report states, "Wal-Mart requested CO2 emissions data from 100,000 suppliers."

The report includes case studies of companies that are leaders in carbon management, one of which, according to the report, is HP. HP's sustainable objectives, the report finds, include "reductions in…operational footprint, reductions in the environmental impact of their products, development of new products that reduce customers' environmental footprints and advocating public policy to drive comprehensive action on climate change."

One ambitious goal announced by HP is its commitment to reduce GHG emissions in its products and operations by 40% below 2005 levels by the end of 2011.

Another important factor in driving corporate disclosure of GHG emissions data has been the influence of investor organizations such as the United Nations'
Principles for Responsible Investment and, in the US, Ceres. The report cites recent Securities and Exchange Commission (SEC) guidance on disclosure by corporations of the impact that business or legal developments related to climate change may have on their business operations as an example of successful investor involvement, as well as the increasing number of sustainable investment indexes.

Inclusion in such indexes, the report observes, "has become a key objective for some firms."

Overall, Dickinson said, "Investors are encouraging companies to take action."

Certainly, one area in which investors have engaged successfully with companies has been encouraging the publication of corporate sustainability reports. A recent academic
report found that the number of standalone CSR reports issued by companies between the early 1990s and 2007 in 24 countries increased from fewer than 100 to over 1,000. More recently, a movement calling for integrated reporting, in which financial data is brought together with environmental, social, and governance (ESG) information in a single report, has gained considerable support.

Dickinson referred to the
Climate Disclosure Standards Board (CDSB), which was formed in response to demands for standardized reporting guidelines on the inclusion of climate change information in mainstream reports, as a separate initiative that addresses corporate sustainability reporting. The CDP serves as secretariat for the CDSB.

"What we're doing is a big job," he said. "I think the existence of the core data set of information reported to the CDP gives companies the opportunity to think about how they track energy sources."

Noting that the CDP's website allows for public searches of climate data submitted to the organization by companies, Dickinson said, "We want to provide the maximum amount of information to help people respond rationally to climate change, and profit by it."

 

 
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