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December 27, 2013

Using Science to Set Emissions Targets
    by Robert Kropp

Climate Counts and the Center for Sustainable Organizations rank 100 companies within the context of climate science and find that nearly half are rated as sustainable.

SocialFunds.com -- In October, the US Energy Information Administration (EIA) reported that energy consumption in the US decreased by 2.4% in 2012 and that greenhouse gas (GHG) emissions are 12% less than they were in the pre-financial crisis year 2007. Also in 2012, EIA found, the Gross Domestic Product for the US increased by 2.8%.

According to a new report< /a> from Climate Counts and the Center for Sustainable Organizations (CSO), EIA's statistics indicate that “the US economy decoupled economic growth from carbon emissions, a necessary dynamic if we are to achieve the elusive goal of truly sustainable development.”

The report, entitled Assessing Corporate Emissions Performance through the Lens of Climate Science, is noteworthy in that it employs a context-based analysis developed in 2006 by CSO. The report determines the corporate environmental performance of 100 companies against the science-based goal of limiting atmospheric concentrations of CO2 to no more than 350 parts per million (ppm). In May of this year, the National Oceanic and Atmospheric Administration (NOAA) reported that for the first time, the daily mean concentration of carbon dioxide in the atmosphere surpassed 400 ppm at its measurement station in Mauna Loa, Hawaii.

The levels of CO2 measured at Mauna Loa have not been experienced on Earth in at least three million years.

The report from Carbon Counts and CSO relays some good news, as it found that “49 of 100 companies studied are on track to reduce carbon emissions in line with scientific targets to avert dangerous climate change.” Furthermore, 25 of those 49 companies “exhibited revenue growth even as their emissions declined, proving that decoupling of growth and emissions is possible.” Autodesk and Unilever, the top two companies in the ranking, both have been using forms of context-based carbon metrics for several years.

Of course, that leaves 51 of the 100 companies with unsustainable emissions levels. Not surprisingly, the oil & gas and utilities sectors scored poorly, although the sample of companies was small.

Perhaps less intuitive was the finding that of the seven financial firms included in the study, six are emitting unsustainable levels of emissions, despite the fact that the study did not include Scope 3 emissions arising from such sources as companies in the lending and investment portfolios of banks. During the period of time covered in the report—from 2005 through 2012—the financial industry “experienced the 'worst of both worlds' -- weakening financial performance and growing carbon footprint -- resulting in a reverse version of 'decoupling' as compared to the desirable dynamic of economic growth linked to carbon contraction.”

“The findings herein are meant to represent the start of a journey, not the end,” the report states. The number of companies eligible for analysis was small; “there is a limited universe of companies that have been disclosing their emissions publicly back to 2005, the baseline year of our study,” the report states. And linking emissions to “to an organization’s individual and proportionate contributions to GDP” seems like a necessary evil in a global economy that persists in regarding economic growth as a positive concept. “We are very much aware of the shortcomings of GDP in this regard and are taking steps to replace it with an arguably better mechanism or proxy of some kind as soon as a viable substitute becomes available,” the report states.

Finally, as noted earlier, the report does not take into account indirect emissions from such sources as supply chains and product use, which in many industries account for the vast majority of emissions.

Yet, it is undeniable that grounding corporate emissions reporting in a context based on climate science is an important development. “Most of what passes for best practice in sustainability measurement and reporting today falls short of the mark, precisely because it fails to take real social and environmental thresholds into account,” said Mark McElroy, Founder and Executive Director of CSO. “What businesses need, instead, are science- and context-based tools that bring meaning to measurement. The context-based carbon metric used in this study can help show the way.”

What does such a development mean for sustainable investors? “"To my knowledge, there aren't any sustainable investment organizations that are using context-based metrics at all,” McElroy told SocialFunds.com in 2012. “The opportunity for that in the capital markets is enormous. I'd like to see the sustainable investment world become more involved in cutting-edge thinking on this topic.”

McElroy serves as an expert adviser to the Global Initiative for Sustainability Ratings (GISR), an initiative launched in 2011 by Ceres and the Tellus Institute. The goal of the initiative is to create a single standard for rating the sustainability performance of companies.

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