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Carbon emissions: Business fails to reduce footprint

By Sarah Murray
Financial Times
Most corporate responsibility reports include information on the company’s carbon footprint and an ambitious reduction goal. However, while leading companies are making progress, some experts argue that business as a whole is falling behind.

Most corporate responsibility reports include information on the company’s carbon footprint and an ambitious reduction goal. However, while leading companies are making progress on lowering carbon emissions, some experts argue that business as a whole is falling behind, with a vast gap between actual reductions and those that scientists estimate are needed to halt climate warming.

Judging by the results being reported, some companies are making impressive strides. This year, 78 per cent reporting to the Carbon Disclosure Project (CDP) said they were integrating climate change into their business strategies. This is up 10 per cent from 2011.

The CDP uses the power of 655 institutional investors with $78tn in assets to persuade companies to disclose and manage their emissions. Targets set are publicly available on its website and elsewhere.

“The establishment of public targets does have a significant impact in focusing the mind on achieving them,” says Paul Dickinson, executive chairman and one of the CDP’s founders.

Recent CDP results support this view. They reveal that companies participating in its programme had reduced reported emissions from 3.6bn metric tons in 2009 to 3.1bn metric tons this year – the equivalent of taking 138m cars off the road.

However, other figures show business falling woefully behind when it comes to reporting and reducing carbon footprint. A third of CDP companies reported no emissions reductions at all.

A study of 600 companies by Ceres, a network of investors and environmental groups that works on issues such as climate change, found only a third were setting targets.

“We’re not seeing enough companies even setting time-bound greenhouse gas emission goals,” says Mindy Lubber, president of Ceres. “Our expectation is that companies need to set a 25 per cent reduction target for greenhouse gas emissions by 2020 from a 2005 baseline. Not many companies are getting there yet.”

Those that do set goals have objectives that vary between intensity-based targets (reductions per dollar generated in revenue) and absolute goals within a stipulated time.

“You have to look at what kind of targets they are setting and whether it is forward looking or not,” says Boyd Cohen, climate strategist and the co-author of The Way Out: Kick-starting Capitalism to Save Our Economic Ass.

Mr Cohen argues a lot of companies set retroactive targets or disclose selectively, such as only reporting on what they define as their most important business lines. “Whereas, with a forward-looking target to reduce overall emissions by 50 per cent by 2020”, he says, companies could not “weasel out”.

A lack of reporting standards adds to the difficulties of getting a clear picture of global corporate sector emissions. The CDP has emerged as a leader in this respect, collecting information from thousands of companies on their greenhouse gas emissions.

Not all the world’s companies participate in the CDP’s programme and while it provides a powerful platform for transparency on corporate carbon emissions, it does not provide a standard. While many companies use the Global Reporting Initiative, and the integrated reporting movement is gaining momentum, no universally accepted reporting format for sustainability practices exists.

The bigger question is whether companies can make a sufficient reduction in carbon footprint to meet what scientists say will be needed to avoid more rises in global temperatures.

“You’re talking about everything being produced with 10 to 15 per cent of the energy and carbon intensity that it is now – and it needs to operate at that level too,” says Peter Lacy, Asia-Pacific managing director of sustainability services at Accenture, the consultancy. “There’s no way of describing that as anything other than an industrial revolution.”

Yet while leading companies are making impressive progress in lowering their carbon intensity, market mechanisms, shareholder demands and corporate strategies all point to the production and sale of more goods and services.

Mr Dickinson does not believe that this will necessarily lead to increased greenhouse gases. He cites tremendous opportunities to use technology to reduce transport related emissions or the fact that carbon-efficient retailers could start to replace inefficient ones.

“I’m reasonably positive about the potential to have healthy growth and to reduce greenhouse gas emissions at the same time,” he says.

Mr Lacy is less optimistic. “At this point, even the leaders are only on an incremental change curve and the rest of the world is heading south,” he says.

He does point out one bright spot. “It’s not that the technology doesn’t exist and we don’t know what needs to be done,” he says. “The technology, the knowledge and the capacity for us to scale solutions and tackle the problem is available to us now.”

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