Costs drive big firms to act on climate change

15th September 2011


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More of the world's largest companies are taking action to cut carbon and energy-use as senior management better appreciate the links between environmental and financial sustainability, according to the Carbon Disclosure Project (CDP).

Results from the CDP’s annual survey of the world’s 500 largest companies and their work to cut carbon emissions, reveal that a record number are including sustainability in their overall business strategy.

Of the 396 companies that fully participated this year, 68% said they had embedded climate change at their heart of their strategies, up 20% on last year’s figures, with 74% confirming they had targets to reduce greenhouse gas (GHG) emissions in place (65% in 2010) and 45% saying they had actually cut emissions, in comparison to just 19% in 2010.

According to the CDP pressure to tackle the impacts of rising energy costs and a greater recognition of the cost effectiveness of energy-efficiency projects have helped to drive engagement with the sustainability agenda.

The firms surveyed revealed that more than half (59%) of their emissions reduction activities had achieved payback within three years. Meanwhile, further CDP analysis found that those companies with a “strategic focus on climate change” provided investors with around 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,” argued Paul Simpson, CDP CEO.

“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, sustainability and climate change partner at PwC, which carried out the survey, said the results prove that traditional interpretations of financial performance are being challenged by the impact of climate change on long-term profitability and growth.

“Today's investors have different information needs which are leading to unforgiving examinations of the contribution of business to society,” he said. “We are accelerating towards newer reporting models that better balance financial and non-financial performance.”

Despite McGill’s comments, however, the 2011 survey data reveals that a third fewer companies disclosed their GHG emissions in annual corporate reporting than in 2010, and only 37% were able to meet the CDP’s new tougher criteria for acceptable independent verification of GHG emissions.

Alongside the 80-page report, the CDP ranked the top firms in terms of carbon disclosure and carbon performance with the top 10 companies led by Dutch electronics firm Philips, followed by motor manufacturers BMW and Honda. The only UK firm in the top 10, Tesco, was ranked fourth.

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