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Report shows companies still don’t take climate change seriously

By Jo Confino (The Guardian) - September 12, 2013

For all the talk of companies taking the threat of climate change seriously, the latest evidence shows the corporate sector is failing to respond in a meaningful way to the threat of environmental catastrophe.

Global NGO CDP, which works on behalf of 722 institutional investors representing $87tn in invested capital, has just released its latest annual report on carbon emissions and it makes bleak reading, despite a few rays of light.

Even during a period of global recession, total direct emissions from the 500 largest listed companies in the world have not changed significantly in the past five years.

Worse still, the 50 largest emitters, which primarily operate in the energy, utility and materials sectors, have actually seen an increase of 1.65% to 2.54bn tonnes since 2009.

The report concludes: “The biggest emitters, who have the largest impact on global emissions and so present the greatest opportunity for large-scale change, need to do more to reduce their emissions. There is a disparity between companies’ strategies, targets and the emissions reductions which are required to limit global warming to 2C.”

That is the diplomatic way of saying that major corporations, for all their fine words on sustainability being integrated into the heart of their operations, are doing too little, too late with potentially disastrous consequences.

Malcolm Preston, global lead, sustainability and climate change, at PwC, which advises on the report, warns that the continuing lack of action means that tougher regulation will almost certainly be necessary.

“It raises questions for some organisations about whether they are focused on sustaining growth in the long term, or just doing enough to recover growth until the next issue arises,” he says. “With the initial IPCC report only weeks away, corporate emissions are still rising. Either business action increases, or the risk is regulation overtakes them.”

The analysis, based on the climate and energy data from 389 companies listed on the FTSE Global 500 Equity Index, also shows little progress in measuring, managing and reducing greenhouse gas emissions in supply chains, known as scope 3.

What the report shows is that companies are seeking to take the simplest route by measuring the easiest to reach aspects of their supply chains, even when they know they are having a negligible impact.

For example, nearly three quarters of the Global 500 companies measure emissions associated with business travel but this equates to just 0.2% of their overall reported scope 3 emissions.

For all their so-called expertise in metrics, finance companies are the worst offenders. Nearly all financial businesses are managing their travel emissions but only 6% are reporting the emissions associated with their investments. It does not take much brainpower to recognise this is madness.

The result of measuring the wrong metrics means that across all sectors as a whole, the emissions from nearly half of the most carbon intensive activities that companies identify across their value chains are yet to be measured.

This chimes with the results last week from the United Nations Global Compact’s annual survey of members, which showed company performance on supply chain management hasn’t improved for several years.

The CDP report states: “While companies are able to identify the most carbon intensive activities from their value chains, the emissions of nearly half of these activities are yet to be quantified.

“Overall, this suggest that current scope 3 reporting does not reflect the full impact of companies’ activities, and may mislead as to the full carbon impact of a company.”

Perhaps of most interest in the report is the finding that companies still find it easier to quantify risks rather than opportunities. This means that while sustainability professionals like to focus on how companies can innovate to drive profitability, most companies are still caught in the old paradigm of compliance and reputation.

The report says that more than half of the respondents quantified at least one risk while only 41% were able to quantify at least one opportunity. It concludes: “Companies tend to focus on tangible risks in areas such as carbon taxes or energy prices, whereas the benefits from climate-related opportunities are often less tangible, such as changing consumer behaviour.

“Companies are consequently less likely to quantify the impact of these opportunities. This suggests that businesses may be missing some significant risks and opportunities because valuation methods are unavailable.”

While 97 companies, such as Apple, Facebook and Amazon.com refused to take part in the survey, the report highlights those companies that lead the 500 corporations in terms of disclosure and driving performance improvements. The top 10 were BMW, Daimler, Philips Electronics, Nestle, BNY Mellon, Cisco Systems, Gas Natural SDG, Honda, Nissan, and Volkswagen.

Other key findings from the report include:

Financial incentives are driving emissions reduction

With the exception of the energy sector, companies using monetary rewards to encourage energy or emissions reductions are more likely to report improvements, with 85% of companies that provide monetary incentives to the board, executive team or all employees, reporting emissions reductions in the past year, compared with 67% of companies that did not offer incentives.

Longer payback times linked to strategic advantage

When considering capital investments in emissions reduction, companies can face challenges in justifying investments with longer payback periods (three years or more). However, companies that are making longer term investments are more likely to report that their climate change strategy affords them a strategic advantage over their competitors.

Rise in independently verified emissions ensures data quality

Nearly three-quarters of responding companies verified their emissions in 2013, a 29% increase from 2012 and almost double the percentage in 2011. Investors and shareholders have always demanded accuracy in a company’s financial information. Increasingly, they are demanding accuracy in non-financial information as well. This should increase trust in the data and therefore its use.