February 05, 2009
Report on Climate Risks Targets Largest Consumer and Technology Companies
by Robert Kropp
Fourth report from Ceres and RiskMetrics finds some progress in addressing the business challenges
of climate change, but too many companies still ignoring the issue.
The first comprehensive analysis of efforts by 63 of the world's largest consumer and information
technology companies to mitigate the effects of climate change has been commissioned by Ceres, a national network of investors,
environmental organizations and other public interest groups, and written by RiskMetrics Group, a leader in risk management, corporate
governance and financial research and analysis.
Leading institutional investors associated
with the Investor Network on Climate Risk (INCR)
requested the report in order to determine which consumer and technology companies have the best
management systems in place to address climate risks before they become liabilities.
report, entitled Corporate
Governance and Climate Change: Consumer and Technology Companies, is the fourth in a series
dating back to 2003 that addresses the issue in various business sectors. Previous reports have
analyzed the strategic approaches of emissions-intensive sectors and 40 of the world's largest
banks to the challenges and opportunities posed by climate change.
On February 4, a
webcast highlighting the major points of the report featured Doug Cogan, Director of Climate Change
Research for RiskMetrics, and Anne Kelly, Director of Corporate Governance Programs for Ceres. The
webcast is scheduled to be posted on RiskMetric's website on February 5.
"The survey is
meant to cover the largest publicly-traded companies in eleven industry sectors," said Cogan of
RiskMetrics. "From beverages to big-box retailers, and from computer makers to real estate
developers, these sectors are huge consumers of energy and water, which makes them vulnerable to
regulations that add carbon to the price of energy."
The diverse group of industries
represented in the report share important characteristics. As the report points out, "With
manufacturing sites and vast real estate portfolios around the world, these companies are major
energy consumers." The companies in all the sectors analyzed in the report are compelled to address
the carbon footprint located in their supply chains. Furthermore, "Emerging demand for product
alternatives is transforming the marketplace and enhancing the role of companies with compelling
"For example," said Cogan, "A company the size of Wal-mart is so
large that its operations emit the same amount of greenhouse gases as a power company serving an
entire state or one of our metropolitan areas."
Of the eleven industry sectors analyzed in
the report, the technology, pharmaceutical and semiconductor sectors had the best average climate
governance scores. The beverages and personal & household goods sectors were relatively strong
performers as well. The apparel sector, grocery & drug retailers and big box retailers had lower
average scores, despite opportunities to maximize energy efficiency, market climate-friendly
products and engage suppliers on climate change standards. The travel & leisure, real estate and
restaurant sectors had the lowest average scores.
"Climate change is a threshold matter
in terms of governance framework," said Kelly of Ceres. "Unfortunately, only eight of the 63
companies have board-level oversight of climate change. And we have yet to see a company that has
linked executive compensation to climate change performance. Companies with leadership from the top
down are doing well in terms of climate governance, and financially as well."
In 2007, the
INCR petitioned the US Securities and Exchange Commission to require publicly held companies to
assess and fully disclose material financial risks and opportunities from climate change.
"We need more robust disclosure across the board," said Kelly. Only 16 of the companies
surveyed in the report mentioned climate change in recent annual securities filings.
Emission reduction targets are a key factor in the activity of corporations in support of
climate change. The report found that half the companies surveyed had established such targets, and
one-third had set absolute emissions targets as opposed to targets that utilized relative data
based on metrics such as number of employees or market capitalization.
is becoming the low-hanging fruit of the climate change agenda," said Kelly. By employing an
aggressive energy efficiency strategy, IBM was able to save $19.3 million in 2007 alone, saving
77,000 metric tons of CO2 and conserving 3.8% of total energy consumption.
into which companies have extended climate mitigation efforts has been product design and
promotion. The report found that 30% of the companies reviewed, including at least one company in
every sector, have identified climate change-related commercial opportunities for their products or
A critically important area addressed in the report is the carbon footprints in
corporate supply chains, where for many large companies the largest percentage of their greenhouse
gas emissions is found. While only three companies included in the report measure supply chain
emissions as part of their emissions inventories, ten others are beginning to do so and many more
are taking some action to minimize their supply chain emissions.
Kelly ended her webcast
presentation by saying, "Many sources have said that water will be the first major climate crisis."
The report references a 2007 finding by the Pacific Institute, which points out that with few exceptions,
even beverage companies, where water risk is clearly a material factor, have limited disclosure on
water. The Ceres report mentions Molson, Coca-Cola and Anheuser Busch as beverage companies with
well-defined plans for water usage.
While the report did find that several companies do
have water conservation programs, few have set reduction targets for water consumption or
Among the recommendations included in the report are elevation of
climate-change to a board-level governance issue, linkage of executive compensation to the
establishment of emissions reduction and other climate mitigation measures, and increased attention
to supply chain management of greenhouse gas emissions.
Using a 100-point scale, the three
highest scoring companies were IBM, with 79 points; Tesco, a UK-based grocery retailer, with 78
points; and Dell, with 77 points. More than half of the 63 companies scored under 50 points, with a
median score of 38 points.
The lowest scoring companies were Burger King, with 6 points;
Tim Horton, a donut maker, with 4 points; and Abercrombie & Fitch, the apparel company, which
scored a zero.
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