Financial incentives for employees, particularly at board level, are powerful drivers of corporate action on climate change, according to a major new survey.
"Companies with monetary rewards are more likely to achieve absolute emission reductions," says the CDP, formerly the Carbon Disclosure Project, in its CDP Global 500 Climate Change Report 2013.
Some 85% of companies that offered monetary incentives related to energy consumption and carbon emissions reported lower emissions last year, the report notes, compared with 67% of companies that did not.
Other major findings from the report are that:
- emissions from the 50 largest emitters have increased by 1.65% since 2009, despite lower emissions for the FTSE Global Equity 500; and
- current reporting of indirect emissions does not reveal the full impact of companies' supply chains.
"It is imperative that big emitters improve their performance … and governments provide more incentives to make this happen," says Paul Simpson, chief executive of the CDP. The 50 biggest emitters are currently responsible for 73% of total emissions, the organisation notes.
Furthermore, "the economic case for action is strengthening," Simpson says in a foreword to the report. CDP analysis suggests companies that are leaders in climate action have superior stock market performance and 79% of US companies reported higher returns from emission reduction investments than from the average business investment, he adds.
When considering supply chain emissions, many companies focus too much on relatively insignificant opportunities for carbon reductions, the CDP says. For example, while "use of sold products" accounts for 76% of supply chain emissions, it is reported by only 25% of companies. On the other hand, 72% of companies report emissions arising from business travel, though it represents only 0.2% of total supply chain emissions.
The report also identifies the best companies in terms of emission reductions and reporting and compiles two indexes: the Climate Performance Leadership Index and the Climate Disclosure Leadership Index.
The top companies, according to both indexes, were: car makers BMW, Daimler, Honda, Nissan and Volkswagen, food group Nestle, IT companies Hewlett-Packard and Cisco, financial services firm BNY Mellon, electronics group Philips and the Spanish utility Gas Natural SDG.
The report is based on data from 389 companies in the FTSE Global Equity 500 Index, collected by the CDP on behalf of 722 institutional investors representing $87 trillion in invested capital.
Graham Cooper