Ceres Companies Discussing How Climate Change Impacts Their Businesses
Financial filings, such as those required by the Securities and Exchange Commission (SEC) and state securities regulators, are an important opportunity for companies to disclose material sustainability issues. And according to Gaining Ground: Corporate Progress on the Ceres Roadmap for Sustainability, Ceres and Sustainalytics found that an increasing number of companies--nearly half of the largest 613 U.S. companies--are identifying and disclosing at least one material sustainability risk or opportunity in their 10-K. Andrea Moffat, Vice President of the Corporate Program at Ceres and author of Gaining Ground, finds that "one of the most interesting trends we’re seeing is the shift in terms of the number of companies that are actually wanting to engage the investor community in what they're doing on sustainability."
Several trends have spurred this improved disclosure. First, shareholders continue to ask for such disclosure in shareholder resolutions. Second, major data providers to the business community, such as Bloomberg, now gather and disseminate corporate sustainability information in platforms used by portfolio managers. The movement among major stock exchanges towards a sustainability listing standard may also be playing a role, as is the growing popularity of socially responsible investing.
Ceres works closely with its member companies to keep abreast of emerging trends and encourages robust disclosure of key material risks and opportunities in financial filings, and we've seen incredible leadership:
- Brown-Forman, a major distributor of wine and spirits, manufactures products whose basic ingredients are both climate-sensitive and water intensive. In its 10-K filings the company reveals that it sees sustainability as a way to build consumer relationships and enduring brands. It cites climate change, water scarcity and water quality as significant business risks.
- In its financial filings, EMC Corporation states that investing in sustainability makes the company stronger, builds long-term shareholder value, and creates immediate financial benefits; for example, by making operations and products more efficient and revealing new business opportunities. The company also discusses how the integration of sustainability principles into product design, operations and business decision-making enhances its resilience and agility in the global economy and helps attract and retain motivated employees.
- PepsiCo’s 10-K filing is highlighted for looking beyond the potential costs of climate change legislation to examine the risk of climate-change itself. The company identifies possible supply chain disruptions, including decreased supply and increased prices concerning water and agricultural output, which may occur following rises in temperature and the increased frequency of extreme weather conditions. PepsiCo also identifies the reputational risk, and subsequent negative impact on sales, of failing to maintain high ethical, social and environmental standards. This includes failing to meet goals concerning energy use and waste management, as well as sodium, saturated fat and sugar reduction in its products. PepsiCo’s proactive identification of these material risks better positions the company to address them, while prompting its investors to pressure peer companies to follow suit.
Physical Risks from Climate Change
To help companies and investors navigate these evolving disclosure expectations, Calvert and Oxfam released Physical Risks from Climate Change: A Guide for Companies and Investors on Disclosure and Management of Climate Impacts, which provides real world examples of business impacts, as well as key questions and steps to consider in disclosing the assessment and management of the physical impacts of climate change.