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September 24, 2009

CDP Issues Annual Report on Emissions Reporting by World's Largest Companies
    by Robert Kropp

The CDP's 2009 report includes responses from 82% of the 500 largest companies in the FTSE Global Equity Index Series, with significant improvements noted in responses from developing countries. -- In its 2009 issue of the annual report that it has been publishing since 2003, the Carbon Disclosure Project (CDP) reported that the response rate to its annual requests for information on greenhouse gas (GHG) emissions by corporations was the highest ever. Of the 500 largest corporations in the FTSE Global Equity Index Series, 409, or 82%, provided responses, up from 383 in 2008. As of June 2009, the market capitalization of the FTSE Global 500 was $15.5 trillion.

The report, entitled Carbon Disclosure Project 2009: Global 500 Report, also found that the level of disclosure of Scope 1 and/or 2 GHG emissions increased from 72% of respondents in 2008 to 83%. Scope 1 GHG emissions refer to those generated through the direct burning of fossil fuels, and Scope 2 emissions are those generated from purchased electricity. According to the CDP, the Global 500 accounts for 11.5% of Scope 1 GHG emissions worldwide.

While reporting on Scope 3 emissions, which measure emissions from such indirect sources as supply chains and corporate air travel, remains comparatively low, it did increase by 37% compared to 2008.

Considering that the debate over the role of developing countries in GHG emissions reduction is expected to be especially contentious at the UN Climate Change Conference (COP-15), to be held in Copenhagen in December, the response rate from corporations in developing countries was encouraging, the CDP found. The response from corporations headquartered in the BRIC countries (Brazil, Russia, India, and China) doubled since 2008 to 44%, including a 100% response rate from Brazil, and responses from Asian corporations increased by 39%, from 51 to 71.

According to the report, "Responses reveal that a global agreement in Copenhagen would provide increased certainty for the Global 500 looking to set medium and long term emissions reduction targets." While 51% of the Global 500 companies reported emission reduction targets, up from 41% in 2008, only 36% of the reported targets extend beyond 2012.

In support of its conclusion that corporations are looking for increased certainty through an effective agreement in Copenhagen, the report noted that companies covered by the EU Emissions Trading Scheme (EU ETS) achieved higher scores in both disclosure and performance. The EU ETS established targets of a 20% reduction in GHG emissions, and a 20% share of renewable energy in total energy consumption, for EU member countries by 2020.

The 2009 report marks the first time that the CDP has incorporated performance assessments into its scoring methodology. According to the report, "Performance scores assess actions taken by companies to manage their response to, and reduce their contribution to, climate change." The inclusion of performance scores "Reflects the desire of investors to move to a system that gives greater weight to performance," the CDP stated.

The report found that the standard of disclosure was highest in the carbon-intensive utilities sector, followed by health care and materials. Utilities and energy companies scored highest in identifying the risks and opportunities of climate change, an area in which companies in the financials sector scored well also. The report suggested that "the indirect exposure of the Financials sector to climate change through trading, investment and lending operations is significant." Of the 50 companies included in the CDP's Carbon Disclosure Leadership Index (CDLI), eleven are from the financials sector.

The report also found that respondents from the consumer staples, industrials, and information technology sectors anticipated more opportunities than risks from climate change, perhaps reflecting prospects for new products and services.

The companies that scored highest in the CDP 2009 report were Bayer, BASF, HSBC Holdings, Wal-Mart, and Chevron. PG&E scored highest in the utilities sector, Spectra Energy in the energy sector, Boeing in industrials, and Samsung Electronics in information technology.

Among the largest non-responders by industry sector to the CDP's request for reporting on emissions reduction are four companies from China: PetroChina and China Petroleum and Chemical in the energy sector, China Mobile in the telecommunications sector, and Bank of China in the financials sector. Also among the largest non-responders in the financials sector was the US-based Berkshire Hathaway.

At a forum of businesses and investors convened during Climate Week NYC, James Cameron, Chairman of the CDP, said, "We understand that there is a considerable gap between our knowledge and understanding of the problem, and our capacity to react intelligently to the problem." Referring to a recent CDP report entitled The Carbon Chasm, Cameron continued, "We found that we are roughly 39 years too late to achieve our 2050 targets. And time matters."

"We know that if we act now, the costs are manageable over time," Cameron said. "We know there are significant economic benefits to early action as well."

Reporting to the forum on the CDP 2009 report, Paul Dickinson, CEO of the CDP, said, "The objective of society is to promote economic growth, but to decouple it from a carbon economy. In many ways, the corporation is the most important institution of the 21st century. In their responses to the CDP, giant corporations have declared their commitment to reducing climate change. This level of engagement of business with climate change shows that business can be part of the solution."

"Here in the States, it may well be that the Waxman-Markey bill will struggle to get through by the end of the year," Cameron said. "If the US creates a legal regime to reduce emissions by the end of the year, that will make an agreement much easier in Copenhagen."

"But even if that doesn't happen, we need to maintain momentum."

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