A recent report on the greenhouse gas (GHG) emissions performance of the world’s largest 500 companies between 2010 and 2015 is designed to be a starting point for discussions between the business community, its customers, suppliers, employees and Governments to reduce emissions. As part of fighting climate change whilst maintaining profitability, this discussion is only going to become more important in coming years.
The ‘Global 500 Greenhouse Gases Performance 2010-2015 Report on Trends’ published by Thomson Reuters in June this year examines two aspects that will be critical considerations in an increasingly carbon constrained and competitive world. The first aspect is whether companies are reducing their GHG emissions at rates that are aligned with the United Nations United Nations Framework Convention on Climate Change (UNFCCC) goal of 2°C maximum global warming. The second aspect is the extent to which these companies are growing while reducing their GHG emissions.
According to the Thomson Reuters report, the world’s 500 largest companies from a range of sectors include utilities, energy and materials – collectively representing approximately 30% of global GDP. Between 2010 and 2015 these companies emitted 10% of global GHG emissions as a result of their operations and energy consumption. During this 5 year period, their collective emissions increased by 1%.
emissions profiles of the 500 largest global companies vary significantly
The emissions profiles of the 500 largest global companies vary significantly. 26 of these businesses decreased their emissions by more than 8% between 2010 and 2015, including BP, Vale, Exxon Mobil Corporation and Chevron Corporation. Reasons for the decrease include innovation, asset divestiture or a slowdown in business due to prevailing market conditions. 29 companies reported increased emissions between 2010 and 2015, including Air Liquide, Woodside Petroleum, GDF Suez and Holcim Ltd. According to the report, reasons for companies reporting increases include the rapid growth of a carbon intensive business and acquiring a new carbon emission based business.
In 2013 the United Nations suggested that on average a 1.4% decrease in emissions is required each year between 2010 and 2050 to maintain the 2°C maximum warming goal. The recent Thomson Reuters report shows that the world’s 500 largest companies still have a deal of work to do to align with this goal.
In addition to prompting a discussion of the performance of the world’s largest companies, the ‘Global 500 Greenhouse Gases Performance 2010-2015 Report on Trends’ included three questions that I believe are going to be asked of companies worldwide with increasing frequency in coming years by investors, regulators, consumers and stakeholders. The questions are as follows:
- Are you operating your business in a manner consistent with the UNFCCC 2° goal?
- If the answer is yes, what is the plan to keep doing so? Is it based on innovation, divestment or transforming the business model?
- If the answer is no, do you plan to reconsider given the trend towards increasing transparency regarding performance and stakeholder scrutiny?
These questions are becoming increasingly prudent based on strong signals from investors worldwide that they are looking to decarbonise their investment portfolios to reduce risk and maximise returns. The momentum of the global divestment movement is prompting growing numbers of people to review not only how they invest funds but why they invest funds in particular companies. Such decisions transcend pure economics and highlights the importance of alignment between an individual’s values and those of a company.
The ‘Global 500 Greenhouse Gases Performance 2010-2015 Report on Trends’ is an effective starting point for a discussion of emissions performance, however its findings need to be implemented and across the world if the business community, its customers, suppliers, employees and Governments are going to play their respective roles in the fight against global climate change. The business community is becoming acutely aware of the reality of a carbon constrained world and that they must operate within it to remain competitive. Customers are increasingly observing what businesses offer from more than just a price point perspective. Suppliers are implementing a number of measures such as internal carbon pricing, emissions reduction targets and investing in renewable energy in response to calls to do so from companies that procure their products. Employees are becoming cognisant that maintaining their job relies on more than the financial profitability of their employer and is increasingly linked to how their employer is seen from a corporate social responsibility perspective. Last but by no means least, Governments are being called upon to implement emissions reductions policies and enshrine legislation that not only achieves emissions reductions but is aligned with other Governments have implemented as part of the global fight against climate change. This is the minimum Governments can do to increase the competitiveness of companies within their jurisdiction and in the context of an increasingly competitive global economy.