Business Strategies Actually Have Carbon Emission Actions – PwC

Michelle Remo, “Big 4″ observer
September 15, 2011 /

For the first time in the ten-year history of the annual Carbon Disclosure Project (CDP) Global 500 report, it was found that there actually have been carbon emission reduction efforts embedded in business strategies.

The 2011 edition of the annual Carbon Disclosure Project (CDP) Global 500 reportexamines carbon reduction activities at the world’s largest public corporations. The Global 500 are the largest companies by market capitalization included in the FTSE Global Equity Index Series.

The report, written by global professional services firm PwC on behalf of CDP, attributes this to growing board-level awareness of the link between energy efficiency and increased profitability.

Accelerating low carbon growth” analyzed disclosures from 404 of the world’s largest companies (representing 81 percent of the Global 500), which revealed 68 percent have carbon reduction efforts at the heart of business strategies, compared with 48 percent in 2010.

The report also showed a marked 45 percent rise in the number of companies reporting reduced greenhouse gas emissions as a result of emissions reduction activities, up from 19 percent in 2010.

A correlation was also established between higher stock market performance over time, and representation on CDP’s Carbon Performance Leadership Index (CPLI) and the Carbon Disclosure Leadership Index (CDLI).

Companies with a strategic focus on climate change provided investors with approximately double the average total return of the Global 500 from January 2005 to May 2011.

“The improved financial performance of companies with high carbon performance is a clear indicator that it makes good business sense to manage and reduce carbon emissions,” Paul Simpson, CEO of the Carbon Disclosure Project, said.

According to Simpson, this is a win win for business – the short ROIs many emissions reducing activities have, can help increase profitability.

“Companies yet to take action on climate change will have to work hard to remain competitive as we head towards an increasingly resourced constrained, low carbon economy,” he added.

“Historical financial performance is being exposed by climate change as an outdated model to assess long term business profitability and growth, when you consider the much wider range of financial and non – financial risks associated with business today,” Alan McGill, partner, sustainability and climate change, PwC said.

“Today’s investors have different information needs, which are leading to tougher verification regimes, more emphasis on executive and staffing responsibilities and incentives, and much more unforgiving examinations of the contribution of business to society,” McGill said.

The growth in importance of climate change as a boardroom issue was aided by the rising oil prices, energy supply risks and growing recognition of the commercial returns on investments in emissions reduction activities, PwC noted.

Over half (59 percent) of reported reduced carbon emission activities delivered payback in three years or less according to company submissions. These include energy efficiency projects (building fabric, building services and processes), low carbon energy installations and staff behavioural change.

Employee incentives to reduce emissions are now offered by 65 percent of companies, compared with 49 percent in 2010.

Other key findings from CDP’s Global 500 report revealed that 73 percent of Global 500 respondents reported emissions reduction targets, up from 65 percent in 2010.

Moreover, majority of respondents (93 percent) reported board or senior executive oversight for climate change (up from 85 percent in 2010) demonstrating the importance of climate change as a management issue.

Over 30 new companies targeted by CDP’s Carbon Action request (see notes to editor) have now set reduction targets, suggesting a growing recognition by companies of the commercial benefits of emissions target setting
Utilities is the sector with the best average climate change performance.

Telecommunications is the only sector not represented in the CPLI this year; a surprising finding given expectation that this sector will support carbon emission reduction activities.

The energy sector lags others sectors with the lowest proportion of companies setting targets (55 percent) and underrepresentation in both the CDLI and CPLI.

Finally, just 37 percent of respondents currently verify their emissions to acceptable standards, despite the importance of providing investors with validated climate data.


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