In 2008, the Carbon Disclosure Project (CDP), an organisation based in the UK, published a report on the carbon disclosure results from 1550 companies. The CDP was formed with a view to building a global database on corporate and organisational self disclosure of carbon emissions, and has since moved on to include water resource usage disclosure as part of its remit. The CDP has had considerable success in getting major companies in the world’s advanced economies to sign up to its program, and over the last few years has been building a significant following in emerging markets. The title of its 2012 report: “Business resilience in an uncertain, resource-constrained world” goes a long way to explaining why it has enjoyed this success. Becoming aware of and managing “externalities” (i.e. the actual costs of doing business, such as adverse environmental impacts, that, in the past, companies were able to foist off onto the wider society) is increasingly seen as the key to mid to long term prosperity for corporate across all sectors.
The following quote from Logica, highlighted in the CDP report, says it all:
“Increasingly, our key stakeholders – our people, clients, shareholders and partners – expect us to operate our business in a way that is economically, socially and environmentally sustainable. Meeting these expectations helps us to function successfully as a business, attract and keep high caliber people, retain key contracts and take on new challenges.”
Three decades ago this statement would have struck many readers as either bizarre or ridiculously over-sensitive to fringe NGO pressure groups. Nowadays it is simply taken as good business sense and as such, unremarkable. All you have to do is generate a statement that reversed these sentiments with respect to two of the three criteria named by Logica, (economical, social environmental) and you immediately have an astonishing and – today – nonviable position. No serious business can now stand up and say something like: we run our business according to economic imperatives and be damned to the environmental or social consequences.
Actually, of course, they never could afford to say anything like this, but more than enough of them behaved precisely according to a “damn the externalities” policy. Corporate Social Responsibility (CSR) was all about giving to charity. What happened to the effluent flowing from your plants or the waste from your factories was a matter between you and the relevant government agencies, not something to bleat about in your brief CSR report. Those days are now all but gone and the CDP is testimony to their passing and to the new age of responsible reporting now struggling to come into existence.
As CPD CEO Paul Simpson, notes, one of the potentially positive impacts of the unprecedented debt crisis that rocked the global economy through the 2007/8 financial crash, is a growing understanding that, as he puts it, “short-termism can bring an established economic system to breaking point”. Taking the larger view it is clear, he argues, that nature’s system itself is under threat through the depletion of the world’s finite resources and the rise of greenhouse gas emissions. In today’s interlinked global economy floods in one area of the world can cause massive losses in seemingly unaffected regions. An instance in point is the way the unusually heavy flooding in Thailand generated a $1 billion revenue loss for Intel and a $450 million hit to profits for Toyota, simply because of the disruption to their electronic components supply chain. The best way of internalizing the cost of future environmental damage into today’s business decisions is to put an effective price on carbon, the CDP argues. The EU’s Emissions Trading Scheme (ETS) remains the global front runner in this, but there are also significant projects running in countries like Australia, California, China and South Korea.
The CDP sends an annual request to the Global 500 companies asking them to measure and report on what climate change means for their business. It’s authority for doing this comes from its 655 investor institutions, fund managers, pension funds, family offices and the like, who between them control some $78 trillion worth of assets. This year some 81% responded, which means that 379 of the global 500 are now taking the CDP seriously enough to put time into responding to a questionnaire aimed at assessing a) the degree to which they are taking climate change seriously, and b) their awareness of their own organisation’s environmental impact. However, what the CDP finds is that the average response, taken across all large corporates, amounts to a long term reduction target by big business of only 1% a year in carbon emissions. The low level of corporate ambition the CDP concludes, is a direct reflection of the failure of national governments to translate their declarations of intent at the Durban Climate Change Convention into more ambitious legislation. Regulation, it seems, rather than fear of the natural consequences, remains a major driver of corporate initiatives as far as global warming is concerned.
Further reading on sustainable business
- The Growth of Sustainability Reporting, by Wim Bartels
- Creating a Sustainable Development Policy: Checklist
- Integrated financial and sustainability reporting flying in India, by Anthony Harrington
Tags: carbon disclosure , Carbon Disclosure Project , CDP , climate change , Global 500 , global warming , Thailand , Toyota