What colour is the U.S dollar bill? (27-Sep-07)
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Alongside the recent UN climate conference in New York, researchers at the Carbon Disclosure Project reported its latest results. The basic idea of the scheme is if investors can be encouraged to ask companies for information about their carbon footprints, it would be a powerful incentive for corporations to reduce pollution and their contribution to global warming.
But disclosure is a means, not an end. The goal is to change their polluting behaviour. Although the project is gaining momentum, it is recognised that there is still a long way to go.
Of the 500 largest listed companies, 77% answered the questionnaire, although key firms in Russia and China, such as Gazprom and China Petroleum, failed to reply. Of those who replied, there was an increase in the percentage of companies who are implementing greenhouse gas reduction plans — from 46% last year to 76% this year.
Also noteworthy was that a mere 9% of U.S companies stated that they took into account the cost of carbon when making business decisions. A possible explanation for this is that, unlike European companies, American businesses do not have to track their emissions to comply with local regulations.
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NEW YORK: On the sidelines of the UN climate conference in New York this week, hundreds of corporate investors and executives gathered to hear researchers pitch the Carbon Disclosure Project and to report its new results. The project is a brilliant plan to prod large companies to cut emissions, but it may take more than a good sell to get businesses to seriously buy in.
The mood at the event, held at Merrill Lynch headquarters was upbeat, inspiring, luxurious even, with fresh croissants and comfy sofas. Former President Bill Clinton was the keynote speaker, exhorting the corporate audience to see the profit potential in going green.
"I think this will be an economic boom," he said. "I hope I've persuaded you that it's good economics as well as good for the future of our children." Sustainability, Clinton said, could be "economic salvation."
From an environmental perspective, Clinton's inspirational speaking was needed, since the results of the latest Carbon Disclosure Project were, in fact, exceedingly mixed.
But first, a quick introduction to this clever five-year-old project: Each year a group of environmentally minded institutional investors has sent a voluntary "Carbon Disclosure" survey to hundreds of the world's largest companies, asking for information about how much CO2 they put into the atmosphere, and if they have a plan to reduce it.
The group has grown dramatically since its inception in 2002, so that now it is harder to ignore. This year, the query was sponsored by 315 financial corporations that manage $41 billion, including heavyweights like Merrill Lynch, Goldman Sachs and American International Group.
The idea is that if investors ask for information about companies' carbon footprints, it would be a powerful incentive for corporations to reduce pollution and their contributions to global warming.
For starters, companies would have to calculate their CO2 emissions, a number they might prefer to ignore. Investors would be better able to select green investments, and consumers would be better able to identify brands from companies trying to clean up their acts.
As even its organizers readily admit, the Carbon Disclosure Project is gaining momentum in collecting information about corporate actions, but it has a long way to go in prompting any reduction of greenhouse gas emissions.
"Remember that disclosure is a means, not an end. The goal is to change behavior," said Matthew Kiernan, the chief executive of Innovest, a global consulting firm and one of the founders of the project.
So, first the good news from this year's result: 77 percent of the 500 largest listed companies globally answered the questionnaire, and 76 percent of those companies reported implementing a greenhouse gas reduction plan, compared to only 46 percent of those answering last year.
Notably, though, only 56 percent of leading U.S. companies answered, and only 29 percent of those that responded had greenhouse gas reduction programs with specific deadlines and targets. Worse still, only 9 percent said they took into account the cost of carbon when making business decisions.
Partly explaining the gap is that many companies in Europe now have to keep track of their emission to comply with EU rules; American companies do not.
According to the results released this week, a number of big companies have begun to think about climate change, including DuPont, Hewlett-Packard, Sun Microsystems and Wal-Mart.
But 1,100 of the 2,400 companies contacted did not even respond. "They seem to feel so relaxed about this that they don't answer questions from 315 major shareholders," said Paul Dickinson, the coordinator of the Carbon Disclosure Project. "We have a long way to go with exiting activities."
Now for the list of shame. Some of the companies that declined to respond were Harley-Davidson, Sears and Western Union.
Then there were the companies that didn't respond at all, many in Russia and China, like Gazprom and China Petroleum.
And so, the impressive presentation at Merrill Lynch was a performance to convince them.
The emphasis was on the benefits of thinking early about climate change, avoiding risks, and how going green can provide money and jobs. ("Green is green, as in dollars," one of the organizers said.)
Clinton, a master of persuasion, said, "There has to be a good new source of jobs every five to eight years to avoid a stagnant economy, and climate change is it."
He added that, with a bit of investment, climate change was a "phenomenal opportunity to develop poor countries." Ethiopia was considering investing in growing cane for biofuels, he noted, a path that has already brought great profits to Brazil.
John Fleming, sustainability director for Wal-Mart, talked about that company's host of admirable green initiatives. It is now urging its tens of thousands of suppliers to calculate emissions and report to the carbon disclosure project, as well as to reduce packaging. The changes, he said, could be "environmentally friendly while growing our business" and saving $3.4 billion in the coming decades.
In some cases, good will, profits and environmental changes may converge. But exhortations don't make profits come true. Indeed, on the day of the conference Wal-Mart's stock dropped. The reason cited by analysts: the announcement of the company's collaboration with the Climate Disclosure Project.
And many researchers reiterate that reducing carbon emissions will undoubtedly involve sacrifice as well.
The most common gripe I heard at the event from the crowd of corporate greenies was that it took more than an hour to drive downtown with the traffic caused by the UN climate meeting. I took the subway and walked the five blocks to the conference. It took 20 minutes from way uptown, and the carbon footprint was nearly zero.
- Source: Herald Tribune
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