New Carbon Disclosure Project (CDP) analysis shows that S&P 500 companies are making significant strides in both transparency and progress towards carbon goals when compared to the Global 500. The results highlight a tipping point in the actions being taken in American C-suites and boardrooms to integrate a sustainability agenda into overall business strategy despite a lack of comprehensive regulatory requirements in the U.S.
The CDP S&P 500 Climate Change Report, co-written by CDP and professional services firm PwC on behalf of 655 institutional investors representing $78 trillion in assets, provides an annual update on greenhouse gas emissions data and climate change strategies at America’s largest public corporations. It reveals that the average disclosure score, calculated by CDP to reflect each company’s transparency on climate change, has increased by 13% and the average disclosure score required by companies to achieve a position in the Carbon Disclosure Leadership Index (CDLI) has increased by 11% to 92. This is now on par with the minimum score of 94 required for a position on the Global 5001 CDLI and shows that the quality of reporting in the U.S. continues to improve.
Further, the average S&P 500 performance score, which ranks companies according to the scale and quality of their emissions reductions and strategies, increased 44%, with the addition of 24 companies eligible to receive performance scores.
These findings, based on 3382 company responses to the investor request for information, provide evidence that more S&P 500 companies are taking actions to mitigate their impact on climate change, in spite of the vacuum created by regulatory and legislative inaction. Among the S&P 500 92% of the survey respondents reported board or executive-level oversight compared to 86% in 2011 and 25% of respondents disclosed greenhouse gas information in their Annual Reports, up from 18% in 2011.
Globally, according to the CDP Global 500 Climate Change Report, this year has seen a 10% increase year-on-year in companies integrating climate change into their business strategies (2012: 78%, 2011: 68%), contributing to a 13.8% reduction in reported corporate greenhouse gas emissions from 3.6 billion metric tons in 2009 to 3.1 billion metric tons in 2012. The fall is equivalent to closing 227 gas-fired power stations or taking 138 million cars off the road. A third of companies (31%) however reported no emissions reductions.
CDP’s executive chairman Paul Dickinson says, ”The best interests of investors are catalyzing U.S. companies to improve the management of environmental risk, which is vital if we are to forge a more sustainable economy. This report shows us that the powerful American corporation is responding to a growing market demand and increasingly understands that transparency and action on climate change is a business imperative. Failure to act could result in a competitive disadvantage.”
Doug Kangos, partner for Sustainable Business Solutions at PwC says, ”The takeaway from this year’s report is clear: more S&P 500 companies have begun to view climate change as critical to their long-term resilience. As a result, they are embedding the physical risks of climate change into their business continuity plans, making headway in reducing GHG emissions, preparing for potential GHG oversight, and improving GHG disclosure. Leadership on the path forward to operating in a lower-carbon economy is coming from their own ranks, not from the public sector.”
“The progress revealed in this year’s CDP numbers shows that, against a backdrop of government inaction, corporations are stepping into the leadership vacuum, fostering a new era in which sustainability and growth are not at odds, but rather, very much in sync,” says Kim Slicklein, president of OgilvyEarth Worldwide, the communications partner for CDP in the U.S. “The companies that have adopted and integrated sustainability into their business proposition are sure to reap the rewards during the short and long term; indeed, many of them already have. It is our belief that these organizations will be the business leaders of the future.”
The CDP disclosure and performance indices are used by investors to assess corporate preparedness for national or international emissions regulation and to guide investment decisions. CDP’s performance leaders report having lower energy costs, increased productivity, and obtaining the proprietary knowledge needed for development of current and future low-carbon, energy efficient products and services.
S&P 500 Carbon Disclosure Leaders
Companies on the S&P 500 CDLI have the highest carbon disclosure scores and provide perspective on the range and quality of responses to the CDP questionnaire. This year’s CDLI includes the top-scoring 10% of responding S&P 500 companies, 53 in total. Key statistics to note:
- 6 companies improved disclosure scores by at least 20 points.
- 25 companies improved disclosure scores by at least 10 points.
- 22 companies have scored 95 or greater in 2012, compared to 8 companies in 2011.
- On average, leaders have improved their score by 9 points, a 10% increase from 2011.
- The CDLI index minimum score has increased to 92 in 2012 from 83 in 2011.
S&P 500 Carbon Performance Leaders
The average performance score for CPLI companies was 91 compared to 79 in 2011 and 85 in 2010. The average performance score for the S&P 500 companies that qualified to receive a performance score was 54, up from 39 in 2011 and 47 in 2010. Key statistics to note:
- 15 companies achieved band A in 2012, up from 11 companies in 2011.
- 5 companies improved their band from C to A.
- 1 company has stayed in the CPLI for 3 consecutive years (Bank of America).
- CPLI average performance score increased by 15%.
- 7 S&P 500 CPLI companies are included in the Global 500 CPLI, up from 6 in 2011.
1The Global 500 are the largest companies by market capitalization included in the FTSE Global Equity Index Series.
2343 companies had responded by the time of printing of the report.