On September 20, the opening day of Climate Week NY°C, the Carbon Disclosure Project (CDP) released the Global 500 and S&P 500 reports for 2010. These reports, summaries and analyses of the responses of some of the world’s largest companies, demonstrate that an unprecedented number of companies are measuring and disclosing information related to climate change, despite economic and legislative uncertainty.

The Carbon Disclosure Project

This year marks the 10th anniversary of the Carbon Disclosure Project (CDP), an independent non-profit organization launched in 2000 that aims to “accelerate solutions to climate change by putting relevant information at the heart of business, policy and investment decisions”[1]. The CDP, currently the only global climate change reporting system in the world, boasts the largest database of primary corporate climate change data.

Each year, the CDP sends out questionnaires to thousands of companies worldwide. Reporting to the CDP is voluntary, and the questions are focused on the measurement of greenhouse gas emissions, setting of emissions targets, and development of reduction measures, as well as broader questions concerned with the integration of climate change initiatives and forecasting into internal processes, stakeholder communication, and overall business strategy. The gathered responses are made available to a large audience, including governments, corporations, policymakers, and the public.

Since its inception, the CDP has achieved terrific growth in the response rate of contacted companies, and approximately 2,500 organizations in almost 60 countries now use the CDP to measure and disclose their GHG emission and climate change strategies. The figure below illustrates the tenfold increase in the number of companies responding to the CDP since the first questionnaires sent out in 2003[2].

According to Paul Dickinson, the Chief Executive of the CDP, the organization “has seen a quite unprecedented coming together of investors, of responding corporations, and partnership with government, and the sheer scale of that collaboration is…the great achievement of the Carbon Disclosure Project”[3]. I firmly believe that the CDP has played a key role in exposing corporations around the world to the field of carbon accounting, and engaging them in the processes of climate change and emission reduction strategizing, by providing a centralized and standardized method of reporting relevant information.

Reporting on Reporting: CDP Reports

The 2010 CDP S&P 500 Report

Two reports were released by the CDP early last week. The first, entitled Carbon Disclosure Project 2010 S&P 500 Report, details the responses from the companies in Standard & Poor’s (S&P) 500 Index – companies “considered to be representative of the U.S. large-cap equities market”[4]. Basically, the S&P 500 Report provides a snapshot of the current attitudes of American corporations towards GHG reporting and climate change in a business context.

Quick Stats

The CDP questionnaire was distributed to 500 companies based in the United States. Of these companies, 350 (70%) responded, an increase of 4% from the 2009 response rate. It is worth mentioning that thirty-two companies – almost 10% of responding companies – responded to the CDP for the first time in 2010. Of course, some of these companies wouldn’t have had the chance to respond to the S&P survey in previous years, if they are new to the S&P Index. This was the case for six responding companies, which leaves twenty-six companies that were chose to begin responding this year. The below figure depicts this increase in response rate, as well as the changes in various other CDP categories, between 2009 and 2010[5].

From the above figure, we can also see that every other category excepting one increased between 2009 and 2010, including noticeable increases in the number of S&P companies disclosing GHG emissions to the CDP, and in those companies making their information publicly available. One trend that worries me is that the number of companies having their emissions verified by an external, third-party organization decreased fairly substantially. While verification is not always necessary, it is an effective way of assuring stakeholders, clients, and the public of the accuracy, transparency, and completeness of results. This is a statistic I plan on following closely in future reports…

Risks and Opportunities

Verification rate notwithstanding, the results of the survey are extremely positive, indicating that U.S. companies are continuing to recognize the business value presented by climate change challenges. In fact, of the S&P 500 respondents (350 companies), 70% – or 245 companies – identified significant opportunities associated with climate change in their CDP responses. Opportunities took the form of potential products and services to help companies measure and manage greenhouse gas emissions and other climate change metrics, the development of energy efficient products, investment into clean technologies, the chance to streamline supply chains and processes (and reap the economical benefits!), and opportunities associated with enhanced reputation and competitive advantage.

Of course, climate change also poses numerous risks, and 66% of respondents disclosed significant climate change risks in their CDP responses. An extremely common – and potentially quite costly – risk for carbon intensive industries, such as the utilities and energy sectors, was regulatory risk, in the form of government legislation. Regulatory developments, such as the EPA mandatory reporting rule for large emitters, are already driving the observed increase in GHG emissions reporting from 52% in 2009 to 59% in 2010. In particular, regulatory uncertainty composes the largest part of the risk for many energy companies – they’re not sure if, or when, they will be regulated, which would impact spending on capital goods and infrastructure. For other companies, such as those with globally distributed supply chains or a dependence on natural resources and agriculture, changing weather patterns were indicated as a large risk. The below figure, taken from the CDP S&P 2010 Report, gives a good visual of the industry sectors in which risks and opportunities were most clearly outlined.

Chapter 4 of the S&P 500 report, “Industry Perspectives: Sector Snapshots”, provides a great overview of the total reported emissions, identified opportunities and risks, and general stats about each industry sector. It’s a very good resource for analyzing individual industry trends in reporting.

The 2010 CDP Global 500 Report

The Carbon Disclosure Project 2010 Global 500 Report, also released by the CDP early last week, is a summary of the responses of the world’s 500 largest public companies according to the FTSE Global Equity Index series. In the wake of disappointments at Copenhagen late last year, and given the current global economic climate, it was realistic to fear that corporate carbon reporting commitments might take the back-burner compared to more mainstream business concerns. I’m pleased to report that the findings of this latest Global 500 survey indicate otherwise; despite a somewhat shaky start to 2010, companies worldwide are still engaged in climate change strategies and initiatives.

Quick Stats

Of the 500 companies contacted for this survey, 410 companies (82%) responded. This shows a significant level of participation at the global level, especially when compared to the 2003 – the first year the surveys were sent out – response rate of less than 50% of Global 500 companies. The figure below, depicting the same categories as presented for the S&P 500, gives a glimpse into actual CDP response rates.

In comparing the above stats rates for the S&P 500 and the Global 500, we can immediately see that the Global 500 survey had better overall rates in every category. Most notably, Global 500 companies had a 12% higher overall response rate, 14% higher rate of emissions disclosure, a 21% higher rate when it comes to board or executive body oversight, and a 23% higher rate of emissions verification. What this shows is that, not surprisingly, non-North American companies are still ahead of U.S. companies when it comes to climate change disclosure. This observation is further supported by the fact that three times as many Global 500 companies as compared to S&P 500 (U.S.-based) companies made it onto the CDP’s Carbon Performance Leadership Index (see section below) in 2010.

Geographically speaking, some countries are still lagging when it comes to CDP reporting, and a disproportionate number of non-respondents were from China (8 out of 10 companies didn’t respond), Hong Kong (12 out of 16), Mexico (3 out of 4), Poland (3 out of 3), Russia (8 out of 10) and Singapore (4 out of 5). Clearly, there is fairly extreme variance in the business value placed on climate change in different countries. The good news is that companies from 16 countries reported to the CDP this year, compared with respondents from only 8 countries last year. All ten industry categories of the survey were well represented, with a switch from the Financial sector to the Materials and Consumer Staples sectors in terms of the largest representation in the Carbon Disclosure Leadership Index (CDLI).

CDP Scoring Indices: The CDLI and the CPLI

The CDP, in order to facilitate comparisons between companies and between years, has introduced two complementary scoring indices. The Carbon Disclosure Leadership Index, which has been around since the inception of the CDP, “assesses the quality and completeness of companies’ reporting and carbon management”[6]. Essentially, a company’s CDLI score indicates how thorough and detailed the data and responses submitted to the CDP are. It is extremely important to distinguish at this time between the CDLI, which scores companies only on the quality of data disclosed, and the Carbon Performance Leadership Index (CPLI), which scores a company’s actual climate change management and mitigation activities. The Global 500 report found that companies with higher CDLI scores also tend to have higher CPLI scores, since better data quality and data management facilitate related actions and initiatives. A score of above 70 on a 100-point scale is a high CDLI score, and indicates that the company has a strong understanding of climate related risks and opportunities, a commitment to internalizing the business issues related to climate change, a well measured and managed carbon footprint, and excellent communications with stakeholders. The CPLI, on the other hand, takes into account four areas when assessing climate change performance, which are summarized in the figure below[7].

I was pleased to read that a larger emphasis was placed on verification in this year’s CDLI scoring. Perhaps this modification will help to reverse the trend in decreased companies seeking third party verification for GHG assessments between 2009 and 2010.

Risks and Opportunities

Overall, responses from the 2010 survey suggest that companies are shifting their view on climate change from one of risk to one of opportunity. Almost 9 out of 10 Global 500 companies (86%) identified significant business and sector specific opportunities presented by climate change. Conversely, only 78% of responding companies identified significant risks. Included in the opportunities outlined were the chance to modify supply chains to be ‘climate resilient’ as well as the new and growing niche market for environmentally friendly and sustainable products and services. As CDP CEO Paul Dickinson put it, “Fuelled by opportunities to reduce energy costs, secure energy supply, protect the business from climate change risk and reputational damage, generate revenue and remain competitive, carbon management continues to rise as a strategic priority for many businesses”[8].

Given the pretty stagnant state of international climate policy right now, the impressive numbers in regards to Global 500 response rates also indicate something else: that companies worldwide are acting ahead of policy requirements. Perhaps we’re seeing a shift in the context of climate change legislation from policy driving businesses, to businesses encouraging policy. I think it can be fairly stated that a lot of companies have recognized that waiting for international agreements and legally binding targets may mean missing the boat on issues of sustainability and corporate leadership. Indeed, the uncertainty surrounding climate change policy is a number one risk for a lot of Global 500 respondents, just as was the case for the S&P 500 survey. Policy uncertainty affects the overall prioritization of sustainability and climate change mitigation for some companies, as well as the setting of medium and long term reduction goals. The main areas of action identified by the Global 500 respondents were increasing the energy efficiency of operations (no doubt a priority because of the related potential for cost savings), R&D into low carbon technologies and services, and measurement and reduction of Scope 3 emissions.

Moving Forwards

The introduction of the new Carbon Performance Leadership Index will hopefully jumpstart some previously slow-moving companies into improving not only the quality of their climate change disclosure, but the scope and quality of their climate change actions as well. While Global 500 companies are well underway in this regard, further action in North America by American, Canadian, and Mexican companies needs to be undertaken. The below table outlines the difference between Global 500, Global 500 CPLI, S&P 500, and S&P 500 CPLI respondents in terms of actions taken related to climate change management[9].

As you can see, S&P 500 CPLI companies actually outscore their Global 500 counterparts in a number of areas, specifically strategy and achievements. The only problem is that CPLI S&P 500 companies represent a very small subset of responding companies that were measured by the CPLI – 14 out of 334 (~4%). In contrast, 48 of 386 (~12%) of eligible Global 500 respondents scored high enough to be CDP performance leaders. We have the foundations for corporate climate leadership established with North America, but we need to keep working together with leading organizations and policymakers – at home and internationally – to promote the concept within our businesses.


[1] https://www.cdproject.net/en-US/WhatWeDo/Pages/overview.aspx

[2] https://www.cdproject.net/en-US/WhatWeDo/Pages/overview.aspx

[3] http://player.vimeo.com/video/15049317

[4] https://www.cdproject.net/CDPResults/CDP-2010-SP500.pdf

[5] https://www.cdproject.net/CDPResults/CDP-2010-SP500.pdf

[6] https://www.cdproject.net/CDPResults/CDP-2010-G500.pdf

[7] https://www.cdproject.net/CDPResults/CDP-2010-G500.pdf

[8] http://www.greenbiz.com/news/2010/09/19/latest-cdp-reports-show-increasing-carbon-disclosure-despite-uncertainties?utm_source=Vertical+Newletters&utm_campaign=11b5718ff4-CBiz-NL-2010-9-23&utm_medium=email

[9] https://www.cdproject.net/CDPResults/2010-G500-SP500-report-highlights.pdf

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