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- The integration of sustainability performance management into their operations enables businesses not just to map their sustainability landscape but also to navigate their way through it and scale up their efforts.
- The integration of sustainability performance management into their operations enables businesses not just to map their sustainability landscape but also to navigate their way through it and scale up their efforts.
From A for
A new global index based on “companies that exhibit leadership through action to mitigate climate change” outperforms the
CDP assessed almost 2,000 listed companies that replied to its annual request for information about how companies are tackling climate change and created the index of 187 companies, based on those that achieved an A grade, the highest ranking. Every year, CDP asks the world’s biggest businesses for information on the issue on behalf of investors representing more than a third of the world’s invested capital.
The research is published in The A List: The CDP Climate Performance Leadership Index 2014 (CPLI). The index includes companies from all sectors of the economy that collectively have reduced their total carbon emissions by 33 million tons in the last year alone, which is the equivalent of turning all of London’s car owners into cyclists for two and a half years.
“The impact of climate events on economies around the world has increasingly been splashed across headlines in the last year, with the worst winter in 30 years suffered by the USA costing billions of dollars. Australia has experienced its hottest two years on record and the UK has had its wettest winter for hundreds of years, costing the insurance industry over a billion pounds,” says Paul Simpson, chief executive of CDP. “Over three quarters of companies reporting to CDP this year have disclosed a physical risk from climate change. Investing in climate change–related resilience planning has become crucial for all corporations.
“The unprecedented environmental challenges that we confront today – reducing greenhouse gas emissions, safeguarding water resources and preventing the destruction of forests – are also economic problems,” he adds. “One irrefutable fact is filtering through to companies and investors: the bottom line is at risk from environmental crisis.”
In this video, Lord Adair Turner, Former Chairman of the Financial Services Authority, James Bevan, Chief Investment Officer at CCLA and Paul Simpson talk about the report and its implications.
According to CDP, an A List leader will: yield win-win results; apply a business lens to climate change; raise the bar on investment; and shift away from short-termism.
Win-win results
Investments by companies on the CPLI to cut their emissions lead to average annual reductions of 9% per company while also achieving an average internal rate of return (IRR) of 57% for each project. For example, carmaker General Motors redesigned delivery routes and switched deliveries from road to rail, helping to cut emissions by 244,000 metric tons a year and save the company $287 million a year.
Applying a business lens to climate change
A List leaders understand the business implications of their contribution to climate change better than their competitors and have also managed to identify business opportunities from activities to tackle the issue. Construction group Samsung C&T Corporation, for example, says that it can increase its profits by at least 9% over the next seven years by responding to increased demand for green products.
Raising the bar on investment
The A List represents just 9% of the 1,971 companies ranked by CDP this year but accounts for $23 billion or almost half of the $50 billion those companies invested to cut emissions. “Leaders go beyond the easy-to-achieve approach of energy efficiency,” CDP says. Spanish industrial technology firm Abengoa, for example, is saving close to $1 billion a year thanks to the installation of two solar power plants.
Moving away from short-termism
Projects to cut emissions have an average life span of 12 years, and so they require a willingness to invest for the long term. However, there is a mismatch between that willingness to invest and targets that tend to extend no further than the 2016/17 financial year, which suggests a lack of long-term strategy to meet the global carbon budget. With companies on the A list citing policy as both a risk and an opportunity, “it is likely that a lack of clear long-term policy is stalling corporate progress toward ambitious long-term targets,” says Simpson.
The sectors most represented in the Climate Performance Leaders Index are Information Technology, Financials, Consumer Staples, Consumer Discretionary and Industrials, which between them make up around 86% of the index.
Climate leaders (and others) are benefitting from the huge amount of information available to them and an increasing ability to put it to good use, says Christoph Wilfert, chief executive of sustainability consultancy PE International. “ The integration of sustainability performance management into their operations enables businesses not just to map their sustainability landscape but also to navigate their way through it and scale up their efforts.
“True leaders in the field are using their sustainability information to become stronger businesses and to make better decisions based on what they have learned. They understand that analysing, reporting and benchmarking the data they have gathered can help to boost revenues, strengthen brands, cut costs and manage risks.”
The businesses that have made it on to the CPLI debunk economic arguments against cutting emissions, says Simpson, but he adds: “Global emissions continue to rise at an alarming rate. Businesses and governments must raise their climate ambition. The data shows that there is neither an excuse nor the time for lethargy.”
Almost half of the performance leaders are based in Europe, with a further third located in either the US or Japan. More than a quarter of the Spanish and Belgian companies that took part in CDP's climate change program were awarded an A rating, while Portugal, the Netherlands and South Korea also performed well in this regard.
By contrast, Canada, Switzerland and Australia are poorly represented and there is just one company from the Greater China region (Taiwan’s Delta Electronics). Of those corporations that failed to disclose vital climate change data, the three largest in terms of market capitalisation are Berkshire Hathaway, Amazon and Comcast.
