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August 15, 2006
Benchmarking Corporate Climate Change Mitigation to Scientific Targets
by Bill Baue
The Center for Sustainable Innovation launches a new tool for measuring corporate sustainability
using emissions reductions goals set by science, not business or politics.
SocialFunds.com --
There has been a profusion of diverse corporate social and environmental performance quantification
tools spawned over the last half-year. For example, the sdEffect translates corporate social and environmental
performance into financial valuations for benchmarking companies to each other in terms the
business community understands. ADVANCE similarly expresses sustainability performance
in monetary terms, and then it benchmarks against political policy targets. And Trucost's Carbon Footprint benchmarks corporate greenhouse gas
(GHG) emissions against their revenue.
 With its new Global Warming
Footprint, the Center for Sustainable Innovation (CSI) similarly measures GHG emissions, but it
takes a next step in benchmarking against targets emanating not from the business or
political realms, but rather from the scientific community. While business and political leaders
weigh a variety of factors (such as profitability, popularity, and expedience) in formulating
responses to climate change, scientists focus on empirical evidence. When it comes to climate
change, profits and politics for scientists may melt in significance compared to cold, hard facts.
Tom
Wigley at the National Center for Atmospheric Research in Boulder, one of the most highly cited
scientists in climatology, has developed the so-called WRE350 scenario for mitigating climate
change that the Global Warming Footprint uses as its benchmark. WRE350 is a scientific model that
forecasts carbon emission reductions necessary to reverse carbon dioxide build-ups in the earth's
atmosphere (currently at about 385 parts per million, or ppm), and stabilize them at a
non-threatening level of 350 ppm by 2150.
"Benchmarking company behavior to scientific
community targets such as WRE350 would seem to be an ideal approach, whereby the goal is reducing
carbon and other emissions to target levels that would minimize climate change potential," says
Cary Krosinsky, a member of the Expert Group for the Principles for Responsible Investment (PRI) of the United Nations Environment Programme
Finance Initiative (UNEP FI) who has analyzed
CSI's Social Footprint as well as Trucost's Carbon Footprint. "The Global Warming Footprint
proposed by CSI creates a seemingly unique vehicle for companies and their investors to measure
where they have to be from an environmental performance standpoint in order for overall emissions
to get to a level that avoids potential catastrophic levels of climate change."
"Other
measures, scores and ratings tend to be relative and measure sustainability performance without
attempting to judge whether a company is acting in a truly sustainable manner over the long term,"
Mr. Krosinsky told SocialFunds.com.
CSI tweaks its Social Footprint methodology to the
case of global warming by comparing corporate GHG emissions to WRE350 targets then divides by the
number of employees ("people feet") to arrive at a measure of environmental impact in human terms
("societal quotient.") A quotient of less than 1 is not sustainable, while a quotient of more than
1 is sustainable. CSI applies this methodology for the years 2001 through 2005 to five
companies--BT (ticker: BT.L), BP (BP), Shell (RD), Johnson & Johnson (JNJ), United
Technologies Corporation (UTX)--as well as a university that
participated on condition of its anonymity.
"Three of the six organizations shown were
sustainable all five years, with two of the three (BT and UTC) improving in their performance over
the date range, and the other (BP) declining," states Mark McElroy, executive director of CSI, in
the report on the Global Warming Footprint. "Shell has declined in performance over the five-year
period [and] J&J has improved (and is nearing sustainability.)"
Interestingly, the
university performed worst of all, suggesting that business pressures can drive strong
sustainability performance. However, systemic pressures on businesses may also create obstacles to
improving environmental performance.
"The problem, as it stands today, is that
short-termism, in combination with a lack of adequate legislation, acts as a barrier to companies
improving their environmental performance," explained Mr. Krosinsky, whose primary position is
director of ownership data at CapitalBridge. "In fact, hedge funds demanding economic
performance could well be the biggest obstacle of all, were they to demand profit performance at
the expense of further emissions efficiencies."
Ironically, while some pension funds such
as the California Public Employees Retirement System (CalPERS) are taking a leadership role in confronting
corporate contributions to climate change, pension funds as a whole are increasingly moving toward
hedge fund investments.
"Will pension funds continue to seek short-term gain at long-term
expense via hedge fund investments in this regard?" Mr. Krosinsky asks. "As it stands, the current
equity market mechanisms potentially encourage companies to not be sustainable--unless, of
course, it is profitable for them to do so."
CSI is not without its critics. Mallen
Baker, a prominent corporate social responsibility (CSR) expert who works with Business in the
Community (BITC), lambasted the Social Footprint in
the April 9, 2006 edition of his Business Respect email newsletter.
"The idea that
any organization is responsible on a per capita basis relating to its workforce is simply
nonsensical," wrote Mr. Baker, among many other points of criticism.
Mr. McElroy wrote a
list of problems with the critique, which Mr. Baker posted on his website.
"But
having reviewed all of these, and trying to disentangle the argument of ideas from the namecalling,
I stand by the original review," stated Mr. Baker in the next edition of Business
Respect. "But the proof will be in the action."
"Ultimately, if the Social Footprint
proves to be an effective tool for businesses to use, it will be used and I will have to eat my
words," he continued. "A good method can survive bad criticism."
©
SRI World Group, Inc. All Rights Reserved.
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