Majority of Top Businesses Now Set Emissions Targets, But Still Seek Global Policy Direction

For the first time, more than half of the world’s largest companies have set greenhouse gas reduction targets, and most are strategically identifying risks and opportunities related to climate change, the Carbon Disclosure Project reports today in its 2009 Global 500 Report.

There’s a catch to the progress, though. Only 36% of those carbon reduction targets extend beyond 2012.

Corporate leaders tell the CDP that they are holding off setting medium and long-term targets until the international community gets its act together at Copenhagen — they need a price signal and a secure understanding of the future rules of the game.

It’s a message that the CDP, investors and business leaders have been stressing as international leaders prepare for this week’s UN climate summit in New York and then the G20 meeting in Pittsburgh.

“Given the multinational nature of many companies, the evolution of these policies is likely to have significant implications on strategic direction and operations, and many of the world’s largest companies want to seize early mover advantage,” the CDP writes.

The Carbon Disclosure Project 2009 Global 500 survey queried the 500 largest corporations in the FTSE Global Equity Index Series, a group worth $15.5 trillion.

Their responses revealed that many of the world’s top corporations are already being affected by climate change. Flooding, water shortages, the spread of disease and changing weather patterns all affect businesses, their supply chains, and their employees.

The key to minimizing the impact is preparation with comprehensive risk assessments and contingency plans, the CDP writes. It found utilities and energy companies leading the way on that front.

In general, companies in the energy, health care and utility industries responded that they saw more risk from climate change — including regulatory risk — than opportunity, while on the flip side, information technology, industry and consumer projects saw more opportunity in responding to climate change than they saw risk.

For all of them, the speed and severity of the financial crisis brought the need for risk planning in all areas of their businesses into sharp relief, says Alan McGill, a partner with PricewaterhouseCoopers.

“Without question, a major contributory factor to the rapid escalation of the [financial] crisis was an underestimation of risks and their systemic impact. Put bluntly, when they needed it most, management teams in many organizations — not least banks — lacked vital, connected insight into their businesses," McGill said.

"As a result, CEOs, non-executive directors, investors and regulators worldwide have now become skeptical about the quality of information they receive — and the value that this information actually delivers. Is it possible that they are missing some critical insight? And if they are, how much damage could result?”

Paul Dickinson, CEO of the Carbon Disclosure Project, put it this way:

“Corporate carbon reduction targets are now a 'need-to-do' not a 'nice to have'.”

The report found that among the Global 500, 68% now disclose greenhouse gas emissions, up from 55% percent last year; 51% disclose emissions reduction targets, up from 41% last year; and 49% verify their emissions, up from 43% last year.