Climate Change & Business: The Carbon Disclosure Project
“greenwash” – painting an organization “green” through advertising, promotional and marketing campaigns – has risen along with the public, government, investor and media attention focused on climate change. That makes developing the means to monitor and assess corporate social and environmental responsibility an even greater necessity if investors, the public, national governments and international bodies are to make responsible and well-informed investment and capital allocation decisions.
Building a comprehensive, accurate and timely international system of reporting capable of monitoring and assessing private sector emissions reduction and climate change mitigation efforts requires each participating country to put in place a system to gather and analyze data and information based on generally accepted best measures and practices. That’s a tall order in and of itself.
Launched in the UK in 2000 by a group of institutional investors with some US$ 41 trillion under management, the Carbon Disclosure Project is helping to do just that. Following the release of the first CDP survey on disclosure issues and corporate awareness covering FT 500 companies in 2003, the CDP 5 report canvassed more than 2600 companies internationally. South Africa this year joined Brazil and India as one of only three developing countries contributing to the 2007 CDP report.
The CDP & South Africa
The CDP has a twofold aim: to provide investors with reliable information on the business risks and opportunities presented by climate change; and to raise awareness within business of these risks and opportunities, and of the concerns of their shareholders regarding the impacts of climate change on company value, according to the project’s stewards. Half of the world’s largest fund managers, more than 40 Asian, Canadian and Australian institutions, 15 Brazilian and five South African institutions have come on board as signatories to the CDP.
South Africa’s Minister of Environmental Affairs and Tourism Marthinus van Schalkwyk on November 22 submitted its report for the global 2007 CDP. The survey was conducted and the report prepared by Genesis Analytics. The project itself was coordinated by South Africa’s and Incite Sustainability and sponsored by ABN AMRO, Fraters Asset Management and Macquarie First South.
With survey responses from 74% of the Johannesburg Stock Exchange’s Top 40 listed companies, the report puts the actual and potential impacts of climate change in South Africa into business and economic context by providing an analysis of the awareness of and actions being taken to mitigate climate change on the part of the country’s largest companies.
South Africa’s first CDP report focuses on five primary areas: climate change risks; opportunities and strategy; greenhouse gas emissions accounting; greenhouse gas emissions management and climate change governance.
“The introduction of the CDP in South Africa could not have come at a better time to shape our consciousness in dealing with our energy security challenges and the attendant resource constraints,” Fourie.Hegrowth, the National Business Initiative’s CEO stated in a media release.
Jonathon Hanks, managing partner of Incite Sustainability added, “South African investors and policy makers need access to reliable information on the potential business implications of climate change - and on the extent of individual company exposure. This CDP report will go a long way towards meeting this need, and to stimulating a more informed discussion on climate change within the South African financial and business community and within the media.”
A Long Road Ahead
While responses from South Africa’s leading companies indicate a reasonably high level of awareness of the potential impacts of climate change, they show that the business has a long way to go, and quickly, if the South African economy is going to be ready and able to adapt and change along with a changing climate.
“While most of the company disclosures show a good level of understanding and awareness on climate change impacts, this is rarely translated into action. Although 61% of the FTSE/JSE Top 40 responding companies have allocated board level or upper-management responsibility for climate change related issues, only seven companies have disclosed clear, company-wide emissions management targets,” according to the CDP press release (LINK).
Moreover, only 25% of responses from the JSE Top 40 reported any awareness about the likelihood of South Africa taking on future climate change caps and there is little in the way of business collaboration around climate change issues.
“No interaction with government on this issue was reported by any of the companies. Very few companies referred to specifically South African economic, political or physical characteristics as resulting in commercial risks or opportunities. This suggests that the country’s private sector is still a long way from identifying and lobbying government for support for the creation of strategic competitive advantage in a carbon constrained economy,” according to the CDP analysis.The problem and challenge of addressing carbon emissions reduction in South Africa appears more straightforward than in other countries, however. Three companies – BHP Billiton, Eskom (the national electricity utility) and Sasol produce 83% of the country’s disclosed emissions.