Bayer, Nestle Lead Carbon-Cutting Effort as Climate Risk Grows
Bayer AG (BAYN) and Nestle SA (NESN) are leading efforts to measure and cut emissions as companies increasingly view extreme weather events caused by climate change as a threat to their business, the Carbon Disclosure Project said.
About 37 percent of respondents in a survey of the 500 biggest companies reported an immediate danger to their operations from disruptions ranging from floods that shut factories in Thailand to drought that’s decimated crops in the U.S., the London-based non-profit said today in a report. That’s up from 30 percent last year and 10 percent in 2010.
“There’s an attention to extreme weather events which are in many cases disrupting businesses’ operations and supply chains,” Carbon Disclosure Project Executive Chairman Paul Dickinson said yesterday in a phone interview. “Legislative action and extreme weather events are coming together to provide a tipping point for companies to pay attention to emissions.”
The number of companies incorporating climate change into business plans rose 10 percentage points this year, and those that monitor their emissions have proved a better investment than those that don’t, according to the report. Even so, the pace of emissions cuts is nowhere near what’s needed, said co-author PwC.
German drugmaker Bayer and Swiss foodmaker Nestle topped the CDP’s list of companies disclosing and cutting carbon, followed by Spanish utility Gas Natural SDG SA (GAS), German automaker Bayerische Motoren Werke AG (BMW) and chemical company BASF SE (BAS), also from Germany.
Emissions targets show companies plan to trim CO2 by 1 percent a year, a quarter of the rate that global consultant PwC says is needed to meet the United Nations goal of constraining global warming since the 18th century to 2 degrees Celsius (3.6 degrees Fahrenheit).
“What’s needed is government action -- taxation and regulation of greenhouse gases,” said Dickinson. “CO2 is a valueless pollutant, so it’s not really possible to address without government action.”
Greenhouse pollutants are already traded in the European Union, where corporate emissions are capped, with systems in operation or being set up in countries and regions including Australia, New Zealand, South Korea, China, California and nine states in the northeast U.S.
“It is vital that we internalize the costs of future environmental damage into today’s decisions by putting an effective price on carbon,” Carbon Disclosure Project Chief Executive Officer Paul Simpson said in the report’s forward.
The CDP requested data from the so-called Global 500 companies, the biggest by market capitalization in the FTSE Global Equity Index Series. A total of 405 businesses supplied the information, though today’s report is based only on the 379 that replied by July 31.
The 379 respondents reported emissions totaling 3.6 billion metric tons. That’s a decline of more than half a billion metric tons, equivalent to pollution from 138 million cars, from 2009, when 409 replies were processed.
About 82 percent of companies said they have set themselves emissions targets, though only 20 percent had goals to 2020 and beyond. Seventy-eight percent said they integrate climate change into their strategy, and 96 percent said they have a board member or senior executive with oversight of climate change.
Apple Inc. (AAPL), Berkshire Hathaway Inc. (BRK/A), Royal Bank of Canada (RY), Caterpillar Inc., Amazon.com Inc. (AMZN), Comcast Corp. (CMCSA), America Movil SAB, Lukoil OAO (LKOH), Bank of China Ltd. (3988) and National Oilwell Varco Inc. (NOV) were the biggest companies not to reply, the CDP said.
The top 10 was rounded out by U.K. drinks-maker Diageo Plc (DGE), Finnish mobile phone maker Nokia Oyj (NOK1V), German insurer Allianz SE (ALV), Swiss bank UBS AG (UBSN) and Japanese electronics maker Panasonic Corp. (6752)
A total of 51 of the companies surveyed were included in the project’s Carbon Disclosure Leadership Index for 2012 after meeting requirements for transparency of emissions reporting and performance in reducing greenhouse gases over the past year. Nineteen are American, seven are German and four are Swiss.
A separate report on the members of the S&P 500 Index (SPX) of U.S. stocks showed that 52 percent said they were attempting to cut their emissions, up from 35 percent last year. The proportion of companies seeking outside verification of their emissions data almost doubled to 42 percent.
The reports were carried out by CDP on behalf of 655 institutional investors with $78 trillion in assets.
An investment in a basket of stocks based on the Global 500 disclosure leadership index, and rebalanced each year to reflect the new index members would have generated total returns of 67 percent, compared with the 31 percent return from an investment in all the Global 500 members, according to the study.
“Companies that work to decouple greenhouse gas emissions from financial returns have the potential for both short and long-term cost savings, sustainable revenue generation and a more resilient future,” Simpson said.
More than four-fifths of companies said climate change posed an immediate or future physical risk to their operations, up from 71 percent last year.
“Recent extreme weather and natural events have tested companies’ business resilience and increased their level of understanding of the timeframes of the physical risks they associate with climate change,” the study said. “Physical risks are viewed as tangible and present, impacting companies’ operations, supply chains and business planning.”
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