CDP: How corporate pioneers are driving climate action

starting blocks
CPD
Cover image of the new CDP report "Out of the Starting Blocks: Tracking Progress on Corporate Climate Action."

The Paris Agreement could help trigger a new era of business engagement with climate-related risks and opportunities, but the vast majority of blue chip firms are still yet to deliver ambitious decarbonization strategies in line with the international treaty.

That is one of the conclusions from a major new report released Tuesday by CDP, which argues that while a handful of multinationals have embraced science-based emissions targets, most are yet to develop strategies that are compatible with the 2 degree Celsius temperature goal agreed by the world's governments.

The new report, developed in partnership with international green business group We Mean Business, is intended as the first in an annual series designed to track the corporate response to global efforts to deliver a net zero emission economy this century, as agreed in the soon-to-be-ratified Paris Treaty.

It draws on climate change and carbon emission data disclosed to CDP by 1,089 listed companies in response to data requests submitted by the NGO on behalf of the 827 institutional investors it represents. Combined, the companies studied account for 12 per cent of global greenhouse gas emissions.

The report, "Out of the Starting Blocks: Tracking Progress on Corporate Climate Action," reveals carbon targets have become the norm amongst the world's blue chips, with 85 percent of the companies in the sample already boasting at least one greenhouse gas emission reduction target.

It also reveals companies that have managed to deliver significant cuts in emissions tend to have also seen increases in revenue.

"Over a five-year period, 62 companies have succeeded in cutting their emissions by 10 percent or more while increasing their revenue by the same margin," CDP said. "Collectively, revenue has increased by 29 percent and emissions reduced by 26 percent amongst this group, while the rest of the companies in the sample saw a 6 percent decrease in revenue alongside a 6 percent rise in emissions."

However, while most firms accept the need to cut carbon emissions, the report warns the vast majority are yet to adopt the kind of long-term and science-based targets that would be compatible with the Paris Agreement's twin goals of keeping temperature increases "well below" 2 degrees Celsius and building a net zero emission economy this century.

The analysis of CDP data shows just 14 percent of companies have set emissions goals for 2030 or beyond, while just 9 percent have committed to targets that could be described as "science-based."

The report warns that if companies were to achieve their existing emissions reduction targets it would take the firms in the sample just one-quarter of the way to the level their emissions should drop to in order to be consistent with keeping global warming below 2 degrees Celsius.

CDP's chief executive officer Paul Simpson said the report was based on data that related to companies' activities ahead of the Paris Agreement.

"It shows that while many are already on the right path, there is still a large gap to close," he said, adding there were reasons to be optimistic the international treaty would help close that gap.

"With hundreds of companies already disclosing to CDP that they anticipate substantive changes to their business resulting from the Paris deal, we expect to see a shift to longer-term, more science-based targets in future years. As investors look to reduce risk by shifting investments to less carbon-intensive infrastructure, the spotlight will shine more intensely on corporate actions. There is still all to play for in the race to seize the opportunities from this transition."

His comments were echoed by We Mean Business chief executive Nigel Topping, who said there was growing evidence businesses could bolster their competitiveness by embracing ambitious decarbonization strategies.

"We know that global business is instrumental in creating a below 2 degree world; this report shows that some companies are already reaping the business benefits of early action on climate," he said. "Future editions of this report will be the tool for the We Mean Business coalition to track how companies are capitalizing on the low-carbon transition, and bringing the global economy ever closer to its climate goals."

CDP said the report has some notable absentees given a number of the world's largest companies continue to refuse to provide information to investors in response to climate change data requests. For example, the three biggest companies by market capitalization that failed to disclose information to the CDP this year are Berkshire Hathaway, Facebook and Amazon.

However, the group said it had selected a group of over 700 non-disclosing companies that it will continue to monitor and will include in future editions of the report if they start to provide climate-related information.

Listed companies are expected to face mounting pressure to provide more detailed information on their climate strategies in the coming years, given the Financial Stability Board's Taskforce on Climate-related Financial Disclosures (TCFD) is due to publish new recommendations on how firms should disclose climate risks later this year.

The new report was released alongside CDP's 2016 "Climate A List," which highlights those companies with the most comprehensive and impressive climate disclosures in the past year. This year's list will feature 193 companies with household names such as Apple, Colgate Palmolive Company, Sky plc, Sony, Toshiba and Wipro singled out for praise.