Event Snapshot: Carbon Disclosure Project’s Canada 200 Report Launch

The Carbon Disclosure Project (CDP) is a UK-based “independent not-for-profit organization working to drive greenhouse gas emissions reduction and sustainable water use by businesses and cities”.  On October 16^th, 2012, a group of handpicked individuals will join top Canadian business executives for the launch of CDP’s Canada 200 Report, which was compiled by the Canadian management consulting agency Accenture. Included in the report will be reports measuring carbon disclosure and carbon performance indices, figures which will showcase the companies that are “leading the way” in “addressing climate change and realizing opportunities that contribute to increased company valuation.”

“Climate change” says the CDP’s website “is a global problem and risk to business operations.” It is for this reason that the CDP was established, with a presence in “most of the world’s major economies” that allows it to collect and analyze extensive data reflecting the status of carbon emissions from which environmental initiatives and policies can be crafted in order to counter-act negative trends. Drawing its information primarily from publications tracking “the largest companies as measured by capitalization” as well as “suppliers of major purchasing organizations”, the CDP now claims to measure the data gathered from over 8,000 corporations worldwide, working out of offices in London, New York, Berlin, Brussels, Sydney, Stockholm, Milan, Sao Paolo, New Dehli, Beijing, and Tokyo.

Understanding the methodology used by the Carbon Disclose Project in its 2012 reporting is vital to investors and companies intending to pursue environmentally-friendly policies and wanting to adopt green carbon emissions standards as set forth by Kyoto, Copenhagen, and other international summits on this subject. The analytics of each country’s carbon emissions regime are broken into various segments through which performance indices are measured:

• Management (governance, strategy, targets and initiatives, communications)
• Risks and opportunities (climate change risks and opportunities, both physical and regulatory)
• Emissions (including methodology, data, energy, performance, and trading)

Questions found on the carbon disclosure surveys provided to corporate executives include inquiries that test group and individual responsibility, individual performance, risk management approach, engagement with policy-makers, and other factors that have the potential to reflect good or bad corporate governance on the part of executives and senior management. I’ve provided some samples of the questions on CDP’s survey which companies are required to fill in as part of the reporting regime:

• Where is the highest level of direct responsibility for climate change within your company? What are the names of the individuals or committees holding this responsibility?
• Is climate change integrated into your business strategy?
• Do you provide incentives for the management of climate change issues, including the attainment of targets?

In 2012, the CDP is “requesting climate change information from the 200 largest Canadian companies by market capitalization, as listed on the Toronto Stock Exchange.” The previous year, CDP’s analysts had gathered and compiled a report covering 551 investors worldwide with assets of US$71 trillion, in a brief entitled Realizing Opportunities from Effective Corporate Management of Climate Change. Out of the 551 investors examined, the report drew on the responses submitted by representatives of 108 Canadian companies, representing a 54% success rate for CDP on encouraging Canadian firms to report and disclose their figures.

Three key incentives which should nudge even more corporate executives into accepting the benefits of disclosing carbon emissions figures are that reporting provides an opportunity to boost your business efficiency, it decreases the risks of a company finding itself in non-compliance with regulations, and it allows executives to craft business strategies which are in line with the new mode of thinking in corporate, which sees the reduction of carbon emissions as a crucial catalyst for environmental protection and preservation. The Canadian Business Journal reported on these three incentivizing factors for companies wishing to join the growing list of CDP’s signatories, noting that “companies were taking a strategic approach to climate change and were taking action to seize commercial value from its effects.”

In the 2011 CDP report on Canada’s progress in the area of carbon disclosure, analysts noted the changing atmosphere which has led to mandatory and voluntary climate change disclosures including these novel developments:

• Securities regulators understand that climate change is an important business and financial issue
• Materiality is a key disclosure consideration
• Effective governance of climate change issues is important to institutional investors
• Management and external stakeholders need reliable, timely information for effective decision-making
• Companies are taking action to satisfy stakeholder interests

It will be interesting to see how the 2012 CDP Canada 200 Report measures up against the facts and figures presented last year, especially concerning new initiatives to tackle climate change, sustainable water usage, and to check the environmental risks posed by supply chains. A year in the world of business is a long time, and with new regulations, standards, and government legislation in place dealing with environmental, social, and corporate governance issues across the board, the 2012 compilation promises to be a document worth waiting for.