Last year’s COP21 climate talks in Paris were historic for the level of commitment dozens of national governments made in order to limit global warming to 2 degrees Celsius this century.
But this treaty will go absolutely nowhere unless the international business community is on board. It is business which drives the economic activities that result in the greenhouse gas emissions causing climate change. But a punitive approach is not necessary: Recent years prove businesses understand that mitigating climate risk can generate economic opportunities.
A recent report that CDP issued this week, however, reveals that the world’s largest companies have a long way to go before society can come close to meeting COP21’s ambitious goals. In fact, the research suggests current company targets will only help the world reach 25 percent of its targeted, science-based emissions reductions.
In fairness, the CDP analysis is based on what companies publicly disclosed during 2015, which means much of the data analyzed was released before the COP21 talks in December. CDP’s report is also dependent on companies replying to its questionnaire in the first place; and considering the “survey fatigue” that understandably inundates corporate sustainability executives, its report does not necessarily paint a complete picture.
Most likely, the next annual release of corporate sustainability goals, and CDP disclosures, will show a spike in commitments when compared to those of last year. Nevertheless, for now CDP’s survey indicates there is plenty of work that can be done on carbon pricing, investments in clean energy technologies and energy efficiency.
But progress is clearly underway. More companies proved that reductions in their environmental impact did not have a negative impact on their profits. CDP describes these firms as being successful at “decoupling,” as in reducing their emissions by 10 percent annually while achieving at least a 10 percent growth in revenues. Companies that decoupled their carbon emissions from their revenue have largely benefited financially because of reductions in their energy consumption, an increase in operational efficiency or even due to the development of new products that can result in a far healthier ledger.
The numbers alone should be a wake-up call for business: This group of companies in aggregate increased their revenues by 29 percent over the past five years, while decreasing their emissions by 26 percent, according to CDP estimates. Companies within this group are all over the map, and include the British retailer Sainsbury’s, India’s IT giant Wipro and the Japanese building materials manufacturer Lixil.
The largest takeaway from this report, however, is that COP21 may very well prove to be the catalyst that sparks more companies into action. This trend can be seen in the increasing number of companies making their commitments to climate action public via the We Mean Business platform. This coalition, in which organizations such as Business for Social Responsibility (BSR), Ceres, WWF and the Climate Group join CDP, is encouraging companies to take on initiatives such as science-based climate targets, the establishment of a carbon price for accounting purposes and investments in renewables.
In early 2015, only three U.S. companies declared commitments to such programs: By the end of the year, that number surged to 50. And it is not only North American and European companies that are taking action on climate change: CDP notes that large firms in Brazil, India and China also signed on to this agenda, and most encouragingly, many of these companies are within the carbon-intensive manufacturing sector.
The downside of CDP’s report is that it is top-heavy on testimonials, which are laden with narratives that are great for a public relations brochure, but cheapen CDP’s sobering case to push more companies to take action. The summary of L'Oréal’s sustainability report, Sharing Beauty with All, is one example that elicits more than a few eye-rolls. Those criticisms notwithstanding, the statistics demonstrate that CDP’s research offers plenty of substance.
And the bottom line is that companies are feeling the heat from stakeholders who want bolder action on climate change, but are undecided on how to proceed. Such firms should consider internal carbon pricing, the report concludes. CDP estimates that 60 percent of companies surveyed said they have no immediate plans to implement such a plan. But a carbon-pricing policy can help a company identify inefficiencies and eventually lead to investments in renewables and energy efficient technologies, CDP asserted.
Microsoft, for example, is an early adopter when it comes to carbon pricing, and the company saved millions as a result. But at a higher level, the software multinational’s four-year-old carbon pricing initiative helped instill a culture of environmental awareness and innovation far beyond its headquarters in Redmond, Washington.
If success breeds imitation, then CDP’s latest report offers plenty of case studies as to why a commitment to a lower-carbon business model is not only good for the environment, but can also secure a company’s leadership within its sector.
Image credit: CDP/Alain Buu (used with permission)
Leon Kaye has written for TriplePundit since 2010, and became its Executive Editor in 2018. He's based in Fresno, CA, from where he happily explores California’s stellar Central Coast and the national parks in the Sierra Nevadas. He's worked an lived in South Korea, the United Arab Emirates and Uruguay, and has traveled to over 70 countries. He's an alum of the University of Maryland, Baltimore County and the University of Southern California.