Carbon Disclosure Project 2012

 

Carbon Disclosure Project 2012
In this interview James Hallam, PwC discusses the key findings of this year’s report with Frances Way, Co-Chief Operating Officer, of the Carbon Disclosure Project and Jonathan Grant from PwC.

Interviewer

The Carbon Disclosure Project have released their 2012 Global 500 Report. I am joined today by Frances Way from CDP and Jonathan Grant from PwC, we are going to talk about the report and some of the findings.

First of all though Frances, what does CDP do?

Frances

The CDP sends an annual questionnaire to the largest 500 listed companies in the world and we ask them about how climate change is going to impact their business and we do this on behalf of 655 institutional investors with $78 trillion in assets, we then take the data from their responses, PwC analyses them and together we write the report that we are going to discuss today.

Interviewer

Brilliant. Jonathan what does this report tell us?

Jonathan

Well over 400 companies responded to CDP this year and the 3 main findings are; first that climate change remains firmly on the boardrooms’ agenda, it’s clearly a critical issue at that level; secondly, in spite of the economic downturn companies are continuing to invest in actions to reduce their emissions although those are typically short term measures rather than long term investments; and thirdly that 82% of companies have set targets to reduce their emissions but those targets are not nearly ambitious enough.

Interviewer

OK. So what can they do to really increase this ambition?

Jonathan

Well, our analysis has shown that in order to achieve the goal that Governments have set of limiting climate change to 2 degrees, we will need to reduce emissions by 4% per year from 2020 based on current emissions projections. Now, the companies that are setting long term targets, ie post 2020 the average of those targets is only about 1% per year so it’s not nearly enough to achieve the Government’s ambition of the 2% target.

Interviewer

OK, well that’s really interesting to hear, but what can companies actually do to reach that 4%?

Jonathan

Well, I think that energy efficiency will play a key role and given the fact that we are in an economic downturn many companies are looking at cost cutting measures and energy efficiency is a key way that companies can reduce their energy costs and maintain their production. But in the longer term there will be required to be a lot more capital investment in low carbon technology.

Frances

.. and research and development and those sorts of things….

Jonathan

…yes, that will be achieved and I think that there were some examples of companies making major investments in R&D but not as much as is required.

Interviewer

OK, so what would you say the key drivers are for moving forwards?

Jonathan

Well the main drivers for corporate action that companies disclose were first regulation, second reputation and that might be both internally in terms of employee engagement, but also externally with stakeholders and thirdly the physical risks of climate change. Now 49% of companies said that regulation was the key driver for corporate action and what we need is for governments to convert their grand statements about 2 degrees and these grand statements that we hear in Rio and in Durban and in Copenhagen into real clear, long term legislation that sends a clear signal to business to make those investments. Because CEOs can’t make investment decisions based on a grand statement in Rio.

Interviewer

That makes sense, OK. Well Frances one of the things there was physical risks, can you talk to us a bit more about what companies are doing in terms of these?

Frances

Sure, in 2011 we’ve seen so many extreme weather events and they’ve really had a significant cost on business by disrupting supply chains actually impacting direct operations and we’ve really seen this come through in the responses this year. 81% of the companies report physical risks but whereas in 2010 only 10% of the companies said they saw these physical risks of climate change as being sort of present, now it’s over a third of companies actually seeing these as current risks and I think you can see the fact that despite the economic downturn – you know climate change has stayed on the boardroom agenda with 96% of respondents saying they have Board or Senior Executive oversight of climate change in the company, that’s because they are really beginning to have a tangible effect.

Interviewer

OK, that is very interesting to hear. One of the things I notice that CDP has a set of leaders? Do you want to just tell us about how the leaders are distinguishing themselves from the rest?

Frances

Sure, so we have the Carbon Performance Leadership index and these are companies that have demonstrated that they have actually taken action on climate change in the last year, achieved reductions and set good targets however when we look at that set of companies versus the whole it’s interesting to see they are also thinking long term. The whole report is on business resilience and resilience is all about not being reactive and being strategic, now 84% of the CPLI companies say that climate change has impacted their long term strategy, this compares to only 54% of the Global 500 respondents as a whole and that long term strategy thinking about resilience translates into investments in activities that have a longer term payback and actual reductions and longer term targets. So, the leaders are really setting an example of what needs to be done although everybody is going to have to really step up, be more ambitious as we see country ambition turn to legislation.

Interviewer

Well thank you Frances and thank you Jonathan, that’s been very good. So as you’ve heard the business are taking real action on climate change, these actions should really support governments in making progress at the next climate change summit in Doha.