|September 25, 2011|
Corporations with climate change strategies perform better
|Latest Carbon Disclosure Project Global 500 report shows commercial interests are driving greenhouse gas emissions reduction at world's largest companies|
For the first time in its ten year history, the Carbon Disclosure Project (CDP) Global 500 survey report reveals the majority of the world's largest public corporations have climate change actions embedded as part of their business strategies.
The survey also finds that companies with a strategic focus on climate change provided investors with approximately double the average total return on their investments.
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 396 of the world's largest companies, reveals 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' situation for business, he added, noting that the short ROIs that 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 said.
The report also notes that 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
Steve Waygood, head of sustainability research & engagement at Aviva Investors, the asset manager, said "We believe that the external costs of greenhouse gas emissions will become internalized into company cash flows and profitability. Managing greenhouse gas emissions is therefore essential to delivering sustainable shareholder returns."
There still remains huge potential in companies for achieving cost effective emissions reductions, he added.
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: