September 20, 2010
As any football fan knows, college football and the NFL are off to a quick start with many surprises already this early in the season. As fans may agree, and depending on whom you’re rooting for, very often a bad call is made on the field. Or, rather, a bad call is made against your team.
NFL coaches have perfected the toss of the red flag to call for a review, and, of course, the official goes under the hood to look at the replay monitor.
What does he see?
First, today, the Carbon Disclosure Project (CDP) released its annual report with the survey conducted by its independent advisor PricewaterhouseCoopers (PWC). Please click on the link below to view the entire report.
Second, California voters see that the red flag has been thrown, and it’s called Prop 23. It proposes to freeze California’s effort to reduce greenhouse gas emissions (GHG’s) to 1990 levels until unemployment drops back to 5.5%. And, about which we have spoken before.
The CDP, which is celebrating its tenth anniversary this year, asks corporations to demonstrate the actions they are taking on climate change. Supported by 534 institutional investors with $64 Trillion of assets—- yes, TRILLIONS, NOT BILLIONS—, the questionnaires were sent to 4,700 global companies. 82% of the FTSE Global 500 companies participated along with 70% of the S&P 500 companies responding with 77% taking actions to reduce GHG’s.
A few key summaries:
- In 2010, 90% of the respondents indicated “significant opportunities” are arising from climate change including the opportunities of “marketing of green products.
- 48% are embedding climate change and carbon management into their group business strategy.
- 80% of the respondents are engaging with policymakers on climate change issues
- Business is playing a key role in the “race for green job creation and green growth.”
- 73% report GHG emissions in their annual reports while 50% report emissions targets. 61% have had their emissions data verified.
So, as we look under the hood to review the play, what do we see? Leaders in carbon performance leaders are:
- Integrating climate change into their overall corporate strategy,
- Establishing GHG targets,
- Identifying accountability for oversight and management,
- Providing GHG in regulatory filings, and
- Capitalizing on opportunities in their corporate business model.
These top companies include BMW, Johnson Controls, News Corp, Panasonic, Toyota, Royal Dutch, Bank of America, Siemens, and U.S. utilities Exelon, PG&E, and Public Service.
“Businesses that can adapt best to the challenge of climate change will be best prepared to continue providing reliable and relevant services.” “American Express has a green travel reporting and consulting program for Business Travel clients that tracks activities and measures environmental impacts.” Or Wal-Mart, “We recently announced an aggressive goal to eliminate 20 million metric tons of GHG’s from our global supply chain by the end of 2015.”
In summary, climate change will impact companies in many ways, and there will be both winners and losers.
So, let’s look under the hood again and go back to Prop 23 and see who are the losers in this battle to reduce GHG’s. Did the 30% of the S&P 500 companies that did not report to the CDP consider that there may be flaws in their business models? Or, in California, did these same companies realize that it is late in the game and try to throw a “Hail Mary” to turn the game around? Is Prop 23 a “Hail Mary?”
Barclays stated “Uncertainty in the scope and implementation of regulation can severely undermine market confidence…”, or as GlaxoSmithKline stated “Some GSK operations in the USA and Australia have seen availability restricted due to water rationing.” But, yet the Prop 23ers are not concerned.
With 72% participation by energy companies overall in the CDP, and 36 out of 39 oil and gas companies, participants concluded that the current opportunity is to diversify from traditional sources to low carbon alternatives. The risks are: increasing cost of compliance and risk to “corporate reputation” from non-compliance.
What is Prop 23 all about? Winners and losers? Is it about GHG reduction or job killing? Or, is it really not wanting to spend on R&D to reduce GHG? The winners don’t seem to be worried, and are not in favor of repeal. The winners recognize the need to adapt.
In the end, the voters will decide, but they should know the facts. The replay judge has the facts and the ability to review the tape before he removes the hood and returns to the field with a decision. Let’s hope that the California voters do the same. Let’s not forget the vote of $64 Trillion of asset owners.
Our suggestion: let’s call for a time out. Look at the data. Look at the respondents. Look at the responses. The respondents and asset owners see the risk and reward. Look at the 2,500 organizations around the globe who measure and disclose their GHG. From CDP, they can evaluate their actions and set targets to reduce GHG.
What do the Prop 23ers really see? What are we missing?
Who is really worried about “corporate reputation?” Stay tuned!