The 2011 edition of the annual Carbon Disclosure Project (CDP) Global 5001 report examining carbon reduction activities at the world’s largest public corporations, has found for the first time in the ten year history of the survey, that the majority have climate change actions embedded as part of their business strategy.
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.
The report, entitled Accelerating low carbon growth, analyzed disclosures from 404 of the world’s largest companies (representing 81% of the Global 500), which revealed 68% have climate change at the heart of business strategies, compared with 48% in 2010. There was also a marked rise in the number of companies reporting reduced greenhouse gas emissions as a result of emissions reduction activities (45%, up from 19% 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.
Paul Simpson, CEO of the Carbon Disclosure Project, said:
“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. 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.”
Alan McGill, partner, sustainability and climate change, PwC said:
“Historical financial performance is being exposed by climate change as an outdated model to assess long term business profitability and growth, when you consider the much wider range of financial and non – financial risks associated with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. 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. We are accelerating towards newer reporting models that better balance financial and non – financial performance.”
Rising oil prices, energy supply risks and growing recognition of the commercial returns on investments in emissions reduction activities contributed to the growth in importance of climate change as a boardroom issue. Over half (59%) of reported emissions reduction 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% of companies, compared with 49% in 2010.
Other key findings from CDP’s Global 500 report
- 73% of Global 500 respondents reported emissions reduction targets, up from 65% in 2010
- The majority of respondents (93%) reported board or senior executive oversight for climate change (up from 85% 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, implying growing recognition by companies of the commercial benefits of emissions target setting
- Utilities is the sector with the best average climate change performance (band B)
- Telecommunications is the only sector not represented in the CPLI this year; a surprising finding given expectation that this sector will support emissions reduction activities
- The Energy sector lags others sectors with the lowest proportion of companies setting targets (55%) and underrepresentation in both the CDLI and CPLI
- Just 37% of respondents currently verify their emissions to acceptable standards, despite the importance of providing investors with validated climate data
1 The Global 500 are the largest companies by market capitalization included in the FTSE Global Equity Index Series
1. The Carbon Performance Leadership Index and Carbon Disclosure Leadership Index are revised annually based on company submissions and present the leaders of the Global 500 in carbon performance and disclosure respectively. The top 10 best performing companies on both measures this year are:
USA: Bank of America, Cisco Systems
Japan: Honda Motor Company, Sony Corporation
Germany: Bayer, BMW, SAP
United Kingdom: Tesco
Netherlands: Philips Electronics
Australia: Westpac Banking Corporation
2. There are 14 new entrants to the 2011 Carbon Performance Leadership Index, which counts just 29 companies due to more demanding criteria applied by CDP. These are:
USA: Air Products & Chemicals, Lockheed Martin, Morgan Stanley
Japan: Honda Motor Company, Sony Corporation
France: AXA Group, Schneider Electric
Italy: ENEL, FIAT
United Kingdom: British American Tobacco, BG Group, Glaxo SmithKline
Full copies of the Global 500 report 2011 are available here: https://www.cdproject.net/en-US/Pages/global500.aspx.
4. Top Global 500 companies recognized on both the Carbon Disclosure Leadership Index and the Carbon Performance Leadership Index:
The Carbon Disclosure Project (CDP) is an independent not-for-profit organisation holding the largest database of primary corporate climate change and water information in the world. Some 3,000 organisations across the world’s largest economies now measure and disclose their greenhouse gas emissions, water usage and assessment of climate change and water risk and opportunity through CDP, in order that they can set reduction targets and make performance improvements. This data is gathered on behalf of institutional investors, purchasing organisations and government bodies and made available for integration into business and policy decision making. For more information visit www.cdproject.net.
PwC firms provide industry-focused assurance, tax and advisory services to enhance value for their clients. More than 161,000 people in 154 countries in firms across the PwC network share their thinking, experience and solutions to develop fresh perspectives and practical advice. See pwc.com for more information. PwC’s sustainability and climate change is a global network of 700 people. PwC are a leading adviser on sustainability, climate change and green growth working with clients in the public, private and not for profit sectors internationally, helping them to embed sustainability in their strategies and throughout their organisations. For more information, visit www.pwc.co.uk/sustainability.
ContactsRowena Mearley Tel: +44 (0) 20 7213 4727
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