Little by little, the windows are opening.
By Zoe Tcholak-Antitch
New Carbon Disclosure Project (CDP) analysis shows that S&P 500 companies are making significant strides in transparency and progress toward carbon goals when compared to the Global 500. The results highlight a tipping point in the actions being taken in American C-suites and boardrooms to integrate a sustainability agenda into overall business strategy despite a lack of comprehensive regulatory requirements in the United States.
The CDP S&P 500 Climate Change Report, released in September and co-written by CDP and professional services firm PwC, on behalf of 655 institutional investors representing $78 trillion in assets, provides an annual update on greenhouse gas emissions data and climate change strategies at America’s largest public corporations.
It reveals that the average disclosure score, calculated by CDP to reflect each company’s transparency on climate change, has increased by 13 percent, and the average disclosure score required by companies to achieve a position in the Carbon Disclosure Leadership Index (CDLI) has increased by 11 percent to 92. This is now on par with the minimum score of 94 required for a position on the Global 500 CDLI and shows that the quality of reporting in the U.S. continues to improve.
Further, the average S&P 500 performance score, which ranks companies according to the scale and quality of their emissions reductions and strategies, increased 44 percent, with the addition of 24 companies eligible to receive performance scores.
These findings, based on 338 company responses to the investor request for information, provide evidence that more S&P 500 companies are taking actions to mitigate their impact on climate change, in spite of the vacuum created by regulatory and legislative inaction. Among the S&P 500, 92 percent of the survey respondents reported board or executive-level oversight, compared to 86 percent in 2011. And 25 percent of respondents disclosed greenhouse gas information in their annual reports, up from 18 percent in 2011.
Globally, according to the CDP Global 500 Climate Change Report (released simultaneously), this year has seen a 10 percent increase year-on-year in companies integrating climate change into their business strategies (2012: 78 percent, 2011: 68 percent), contributing to a 13.8 percent reduction in reported corporate greenhouse gas emissions from 3.6 billion metric tons in 2009 to 3.1 billion metric tons in 2012. The fall is equivalent to closing 227 gas-fired power stations or taking 138 million cars off the road. A third of companies (31 percent), however, reported no emissions reductions.
Said CDP Executive Chairman Paul Dickinson: “The best interests of investors are catalyzing U.S. companies to improve the management of environmental risk, which is vital if we are to forge a more sustainable economy. This report shows us that the powerful American corporation is responding to a growing market demand and increasingly understands that transparency and action on climate change is a business imperative. Failure to act could result in a competitive disadvantage.”
Said Doug Kangos, partner for sustainable business solutions at PwC: “The takeaway from this year’s report is clear. More S&P 500 companies have begun to view climate change as critical to their long-term resilience. As a result, they are embedding the physical risks of climate change into their business continuity plans, making headway in reducing GHG emissions, preparing for potential GHG oversight, and improving GHG disclosure. Leadership on the path forward to operating in a lower-carbon economy is coming from their own ranks, not from the public sector.”
The CDP disclosure and performance indices are used by investors to assess corporate preparedness for national or international emissions regulation and to guide investment decisions. CDP’s performance leaders report having lower energy costs, increased productivity, and obtaining the proprietary knowledge needed for development of current and future low-carbon, energy-efficient products and services.
1. The Global 500 are the largest companies by market capitalization included in the FTSE Global Equity Index Series.
2. 343 companies had responded by the time of printing of the report. Companies on the S&P 500 CDLI have the highest carbon disclosure scores and provide perspective on the range and quality of responses to the CDP questionnaire. This year’s CDLI includes the top-scoring 10 percent of responding S&P 500 companies, 53 in total.
Zoe Tcholak-Antitch is the director of CDP North America.