September 21, 2011
US Companies Don't Wait for Regulation, Address Climate Change to Compete
by Robert Kropp
The Carbon Disclosure Project's survey of S&P 500 companies finds that the number integrating
climate change into business strategies nearly doubles.
Last week, the Carbon Disclosure Project
(CDP) published its annual Global 500 report, and the
news from the world's largest investor-led depository of corporate emissions data was surprisingly
good. Despite a global economy that shows little sign of improvement, and a lack of political will
to enact regulatory changes to hasten the transition to a low-carbon economy, for the first time a
majority of respondents report that they are integrating climate change into their business
Nowhere in the world is a lack of political will coupled with such high
per capita emissions as in the United States, and in fact the Global 500 report identified
companies in the US as lagging behind those in leading countries such as Australia, Germany, Italy,
Switzerland, and the UK. Because of that analysis, the release this week by the CDP of its annual
report was greeted as always with interest by investors. But it would not be surprising if hope
for meaningful improvement were hedged.
Fortunately, the report does find meaningful
improvements in managing carbon emissions by many of the nation's largest companies. As was the
case with the Global 500 report, the number of S&P 500 companies now reporting that they integrate
climate change policies into their overall business strategies nearly doubled, from 35% in 2010 to
65% this year. And the percentage of companies that set emissions reduction targets improved from
51% to 64%; as recently as 2008, that percentage was only 32%.
Even in the absence of a
regulatory framework, CDP noted, companies in the US are addressing climate change to reduce
overall energy costs and seize the opportunity to develop low-carbon products and services. In
addition, companies are finding that managing emissions reduces financial and reputational risks,
and appeals to investors who recognize that doing so improves the long-term performance of
The most common emissions reduction programs reported addressed energy
efficiency, supported both by capital investments and changes in staff behavior. Most companies
reported that the payback period for such programs was less than three years.
Tcholak-Antitch of CDP North America told SocialFunds.com, "One of the things we're quite proud of
at CDP, despite this difficult climate in which companies have to operate, is that we've kept their
feet to the fire. It doesn't surprise us that so many companies report to CDP, as there a lot of
drivers for that. And we've seen improvements in a lot of the areas that count."
a lot of uncertainty about fuel prices, and that's driving companies to take action to improve
efficiency," she continued. "There have been many more extreme weather events this year, which are
focusing companies' attention on potential risks. But I think what's really happening is companies
are waking up to new revenue and product opportunities."
Asked to account for the reasons
why more companies are now focusing on opportunities in addition to risks, Tcholak-Antitch said,
"The US companies we work with are huge global names. They've got customers and operations all
around the world. They're doing business in other markets that have got political leadership on
climate change, so they have to keep up with the game."
"There's a reason why companies
are working climate change into their overall business strategies, and that is that they are trying
to figure out how to be competitive," she continued. "It's really about being profitable in a
Of course, the news is not all good. Of the companies in the Index,
339 responded to CDP's request for information; the number, Tcholak-Antitch said, "Is almost the
same as last year."
The list of largest S&P 500 non-responders in 2011 includes a number
of names that will be familiar to the least attentive of consumers. Headed by Apple, Amazon.com,
and Warren Buffett's Berkshire Hathaway, the list also includes Comcast, Honeywell, and DIRECTV.
In a recent interview, Paul Simpson, CEO of
CDP, addressed the non-reporting status of Apple, saying, "They are growing very fast, and I would
imagine their emissions are also growing very fast. However, companies still need to be disclosing
that and reporting on it and we would expect them to do so. A company that is well managed would
take climate change seriously."
Tcholak-Antitch said, "It's difficult to generalize, but
how do investors know if companies that are not disclosing are at risk or not? The reasons for not
disclosing can range from companies not having the information available, to companies not having
the top-down approach that we're seeing from the leaders."
The top-down approach referred
to by Tcholak-Antitch can be seen in the report's finding that 87% of US respondents now have
senior executive or board oversight of their company's climate change programs, up from 68% in
"Those companies don't have the resources internally to deal with this,"
Tcholak-Antitch said. "That's unfortunate for them, because they are going to be playing catch-up
and that's going to be more expensive."
"We've already got the EPA with a mandatory
reporting rule, and the SEC has already updated its guidance for companies on reporting climate
change risks," she continued. "If you can't get your act together and report through CDP, it's
going to be tough for you to do it through those agencies."
In fact, 63% of US companies
cite regulatory risk as a primary driver for their climate change strategies. Every company in the
high-emitting industry sectors of Energy and Utilities report that concerns over potential
regulatory action represent the greatest risk for them.
According to CDP, the
highest-performing companies in the S&P 500 include UPS in Industrials, Cisco Systems in
Information Technology, and Consolidated Edison in Utilities. The Carbon Disclosure Leadership
Index, which includes the top-scoring 10% of S&P 500 companies, is led by Bank of America, Spectra
Energy, and Simon Property Group.
Companies were scored according to their performance in
the areas of strategy, governance, stakeholder communications, and achievement.
important that we're seeing such improvement against a backdrop of regulatory uncertainty,"
Tcholak-Antitch saind. "There's still a long way to go for US companies. We want to see them better
represented in the global report. It's all about being competitive, and that's what Americans are