The Corporate World Is Increasingly Seeing Climate Change As Key Issue

World leaders began meeting on November 30 to hammer out a successor to the Kyoto Protocol. They have until December 11 to agree on a climate agreement good enough to keep temperature rise to two degrees. That’s the threshold scientists say we don’t want to cross in order to avoid the worst climate change impacts. 

While countries must play a key role in mitigating climate change, the business world also is an important player. And many corporations are focusing on climate change. Over the the last five years, the corporate world has come a long way in reducing carbon footprints and supporting a low carbon economy, as CDP recent report shows. The report, titled CDP Global Climate Change Report 2015, focuses on responses from 1,997 companies from 51 countries representing 55 percent of the market capitalization of listed companies globally. 

One of the key drivers for companies addressing climate change is the urging of institutional investors. Institutional investors, representing $95 trillion in assets, requested data from companies to compile the CDP report. Since 2010, there has been a 54 percent increase, from 534 to 822, of institutional investors requesting companies disclose information on climate change, energy and greenhouse gas (GHG) emissions data to CDP. As the report states, “Those investors who understand the need to decarbonize the global economy are watching particularly closely for evidence that the companies in which they invest are positioned to transition away from fossil fuel dependency.”

There is much good news and some bad news, the report finds. While there has been much progress in the corporate world, more still needs to be done to avoid the worst impacts of climate change. There are “significant” improvements in the corporate management of climate change, or in the words of the report, “what was leading behavior in 2010 is now standard practice.” In 2010, for example, 80 percent of companies allocated responsibility for climate issues to the board or to senior management, but now that has increased to 94 percent. The amount of companies incentivizing employees through financial and non-financial means to manage climate change increased from 47 percent to 75 percent. 

Setting a GHG reduction target is key for addressing climate change. More companies are setting targets. In 2010, only 27 percent set targets, but that has increased to 44 percent. And 50 percent have goals to reduce emissions per unit of output, up from only 20 percent in 2010. The Spanish energy company, Iberdrola is one company cited in the report for establishing a long-term ambitious emissions target. Listed as one of the A List companies by CDP, Iberdrola is committed to reducing the intensity of its GHG emissions by 50 percent by 2030 and to be carbon neutral by 2050. The company’s emissions are already 30 percent less than the average for the European electricity sector. 

When asked if their board of directors would support a global climate change agreement to limit warming to the two degrees threshold, 805 said yes, while only 111 said no. The bad news is that 1,075 said they have no opinion and 331 didn’t even answer the question. Clearly, more work needs to be done to stress the importance of climate change among boards of directors. 

Time will tell how much more the corporate world will improve. Hopefully, corporations will set an example for countries and pave the way for the world to stick to the two degrees threshold. 

Photo: Flickr/Floods On The Levels