CDP 2009 Preview: Carbon Reduction Targets Are Evolving from 'Nice-to-Have' to Must Do

CDP 2009 Preview: Carbon Reduction Targets Are Evolving from 'Nice-to-Have' to Must Do

What concrete actions are firms taking to tackle climate change in 2009?

This week Paul Dickinson -- CEO of Carbon Disclosure Project (CDP) -- will try to answer this question by offering a daily "sneak peek" at the results of this year’s CDP Global 500 and S&P 500 Reports, produced by PricewaterhouseCoopers, in advance of the organization's September 21 launch date in New York.


Backed by 475 institutional investors with assets of more than U.S. $55 trillion, Carbon Disclosure Project’s climate change questionnaire was sent to 3,700 of the world’s largest corporations to discover how businesses are managing their carbon emissions and climate change risks and opportunities.

The leaders and laggards on corporate performance and climate change strategy disclosure will be revealed in full on September 21 with the launch of our reports.

But what we can reveal today is that -- despite challenging economic conditions for companies -- this year's Carbon Disclosure Project reports received the highest response rate to date, the highest disclosed emissions and the greatest detail ever from the world's largest corporations on their climate-change related activities.

So, what are the key trends coming out of this year's S&P 500 Report, and what can we conclude about U.S. firms' corporate policy towards climate change?

Corporate carbon reduction targets are now a "need-to-do" not a "nice to have;" additionally, more firms are setting reduction targets than ever seen before.

The number of companies reporting emissions targets rose sharply in 2009 -- from 32 percent (102) to 52 percent (169), a 66 percent leap. In this sense, this is a real departure from setting targets as a cost-cutting exercise and a step toward setting targets as a clear, thought-out climate change strategy. We have found from recent research that company reduction targets tend to be motivated by market drivers, such as increased efficiencies, risk reduction, competitive advantage and stakeholder pressure -- from investors and customers.

Type of Scope 3 emissions tracked by sector. Click for full-sized. CDP chart 2
… and these reduction targets are becoming more aggressive.

The bar for target emissions commitments has been raised from those that were reported to CDP in 2008. It is striking that more and more companies are choosing an annual reduction of between 1-1.5 percent in addition coupled with a significant increase in companies reporting an annualized reduction target of 5 percent or more. Nine percent of S&P 500 companies who reported to CDP now have targets which will deliver more than 5 percent reductions per annum. This means that these companies are delivering reductions in line with scientific requirements to cut emissions by 80 percent in developed economies by 2050. We applaud these improvements and with many targets still behind the science, we encourage other companies to follow their lead.

Companies are also taking strong steps to better understand their indirect impact and exposure caused by scope 3 emissions, such as employee travel. CDP’s supply chain program has encouraged companies to measure and manage their supply chain emissions.
Type of Scope 3 emissions tracked by sector. Click for full-sized. CDP chart 2
This year saw a marked increase in efforts to capture indirect emissions across sectors. We are seeing strong scope 3 reporting from the financials, health care and consumer sectors, with IT leading the sector in reporting scope 3 emissions, boasting 57 percent (29) respondents, up from 48 percent (23) last year. Google's scope 3 data included "employee commuting, business travel, data center construction and manufacturing of our servers." Cisco Systems shared targets on employee air travel -- with a goal of reducing business air travel by 25 percent completely by 2012.

So, what are we seeing across the board?

We are seeing a marked shift in the approach of S&P 500 companies to carbon management. Not only are the majority of those companies who report through CDP now setting reduction targets, but the scope and ambition of targets is becoming far more aggressive.

Paul Dickinson is the Chief Executive Officer of the Carbon Disclosure Project. More information about CDP is available at www.cdproject.net and by following the organization on Twitter @CDProject

Smokestack photo CC-licensed by Flickr user __Dori__.

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