This report shows that a majority of Fortune 100 companies have set a renewable energy commitment, a greenhouse gas (GHG) emissions reduction commitment or both. The trend is even stronger internationally, as more than two-thirds of Fortune’s Global 100 have set the same commitments. Through two dozen interviews with Fortune and Global 100 executives and analysis of public disclosures, the report finds that clean energy practices are becoming standard procedures for some of the largest and most profitable companies in the world, including AT&T, DuPont, General Motors, HP, Sprint, and Walmart.
Large corporations are increasingly turning to renewable energy to power their operations. Companies are investing in renewable energy because it makes good business sense: renewable energy helps reduce long-term operating costs, diversify energy supply and hedge against market volatility in traditional fuel markets. It also enables companies to achieve greenhouse gas (GHG) emissions reduction goals and demonstrate leadership on broader corporate sustainability and climate commitments.
Fifty-nine percent of the Fortune 100 and nearly two-thirds of the Global 100 have set GHG emissions reduction commitments, renewable energy commitments or both. As corporations turn to renewable energy to reduce GHG emissions and meet specific sourcing goals, companies are driving significant new investments in renewable energy. Though these pockets of activity are encouraging, with the proper policies, companies could set even stronger renewable energy commitments.
Among the combined Fortune 100 and Global 100 companies, two dozen have set public, voluntary renewable energy commitments. These include globally recognized brands like AT&T, Dow Chemical, General Motors, Google, HSBC, Procter & Gamble, Volkswagen and Walmart.
Global corporate renewable energy commitments are driving global purchasing. For many of the Fortune 100 and Global 100 firms, action on renewable energy is not limited to regional or national levels; it is planned across a global scale. In order to meet their renewable energy targets, companies are developing comprehensive purchasing strategies in every market where they have a significant presence—often in countries core to their supply chains.
Looking at corporate targets by sector, in the Fortune 100, the Materials and Telecommunications sectors have the highest share of companies who have set both GHG and renewable energy commitments. The Industrials and Financial sectors have the highest share of companies that have set GHG targets only. The Energy sector, followed by Health Care, lags in setting either a GHG or renewable energy target (see chart, opposite top).
By sector in the Global 100, the vast majority of utilities have set both GHG and renewable energy targets. Consumer Discretionary companies lead in setting GHG targets, followed by Materials and Consumer Staples. The Energy, Healthcare and Industrials sectors lag in setting targets (see chart, opposite below).
The global transition to a lower carbon economy is accelerating due to rising public concern about climate change. This large-scale trend presents an opportunity for companies to meet corporate climate commitments and diversify their energy sources by purchasing and investing in renewable energy.
In 2011, renewable energy investments reached a record high of $260 billion worldwide.1 At the same time, renewable energy costs continue to decline, with dramatic gains over the past 20 years in wind and solar in particular. Global renewable energy power generation is expected to continue to grow rapidly over the next five years, according to the International Energy Agency.2
As companies become more sophisticated in their renewable energy procurement methods, more and more of them are pursuing diversified approaches to renewable energy that often include a combination of Renewable Energy Certificates (RECs), which are a market-based means of tracking who produces and who uses renewable energy; Power Purchase Agreements (PPAs), which are contracts to buy power over a negotiated period; and on-site direct investment.
Many companies with a history of predominantly purchasing RECs have transitioned instead to favoring PPAs and on-site direct investment, driven by longer-term commitments to emissions reductions and renewable energy. These companies are looking to capture the long-term value of renewable energy, like electricity price certainty, instead of year-on-year purchases of RECs. In some cases companies are able to get closer to cost parity (the price at which renewable energy is cost competitive with fossil fuel) with long-term PPAs or on-site direct investment. Companies also increasingly recognize that RECs do little to incentivize new investments in renewable energy. By investing directly or signing PPAs, companies are directly adding renewable capacity to the grid.
Principle barriers to accelerating corporate renewable energy purchasing include:
A desire by most companies to purchase renewable energy at cost parity or better, which differs across geographies;
Internal competition for capital funding that must otherwise drive top-line growth; and
Short-term, inconsistent policies that hinder companies from setting and meeting renewable energy commitments, particularly, unstable renewable energy support and an inability for companies to sign PPAs.
In order to meet their corporate sustainability commitments and invest in renewable energy, companies have developed innovative solutions to overcome many of these barriers. Walmart is prioritizing long-term PPAs above other financing models as a way of procuring long-term, low-cost renewable energy. Johnson & Johnson launched a CO2 project capital relief fund to overcome internal competition of capital and to drive implementation of energy efficiency and renewable energy projects at their sites around the world.
Additionally, companies are increasingly engaging in policy advocacy to expand their access to renewable energy and reduce costs. While many companies have aggressive public commitments to renewable energy, the lack of strong, consistent and long-term policies can create uncertainty regarding the price, supply and deployment of renewable energy. In many markets, government incentives for renewable energy help make projects feasible, such as solar RECs in New Jersey or the renewable energy feed-in tariffs in Germany and the United Kingdom. Not all markets allow companies to seek PPAs with renewable energy providers, for example. As a result of renewable energy policy uncertainty, many companies with corporate renewable energy commitments, including Hewlett-Packard, Johnson & Johnson and Sprint, are engaged in policy advocacy, both directly with legislators and in support of key policies such as the Production Tax Credit (PTC) for wind. Others are seeking to change the rules so they can sign PPAs and choose where and how they source their energy. As large electricity consumers with significant political clout, corporate purchasers of renewable energy are, in many cases, redefining the very politics of renewable energy.
Corporate commitments are driving renewable energy investments. The combination of a sluggish recovery from the global economic crisis and austerity measures to tackle budget deficits has had a significant impact on renewable energy deployment across nearly every market, drawing down financial support from government incentives, which typically have been a key driver for renewable energy investment. Corporate investment in renewable energy, therefore, is even more important as a driver of renewable energy markets in the near term. Investing in renewable energy has become an integral part of what it means to be a sustainable company in the 21st century, which has significant implications for electric utility companies as more large electricity consumers shift to renewable energy. The findings of this report also have implications for policy makers, who should be moving to expand availability of renewable energy to lower prices in order to meet the growing demand among the world’s largest corporations.