CDP-FTSE-350-Climate-Change-Report-2012

Climate change reporting: drivers and content
Companies are increasingly aware that they need to tell
a comprehensive story to all stakeholders and report on
all elements which could affect their business continuity.
Good reporting can demonstrate preparedness for
regulations and motivate companies to critically evaluate
their internal processes. Shareholders and customers
are making choices based on both economic and
environmental issues and transparent reporting can help
companies to increase market share. Most significantly,
some companies have stated that the process of reporting
on climate issues has brought about strategic change.
To provide material, shareholder relevant, information
to financial markets, companies need to report on the
risks, opportunities and strategies associated with
climate change across a company’s entire operation.
This would include their suppliers, customers and other
critical elements beyond the legal entity itself. CDP has
been asking FTSE companies to disclose this information
voluntarily, through its global reporting platform, since
2006, promoting an overall increase in awareness of the
business-critical issues (see Figures 2 and 3).
Regulation
The introduction of new climate change regulations will
motivate companies to report on the impact of those
regulations. The future of carbon reporting will increasingly
be driven by the introduction of new climate change
regulation. Currently, regulatory risks and opportunities
are the most reported type of risks and opportunities, with
risks far outweighing opportunities (see Figure 4). 84%
believe upcoming regulations pose a risk (2011: 77%)
and 32% believe these are linked to emissions reporting
obligations (2011: 33%). For example, Morrison notes
how reporting could be detrimental to its business if the
regulation does not conform to the current voluntary
method it uses: it could increase administrative costs
or highlight relatively poor performance with respect to
Morrison’s peers.
Tate & Lyle notes the absence of a binding international
agreement to tackle climate change means levels of
ambition, regulation and costs are developing differently
around the world. Royal Dutch Shell believes that a real
carbon price in the global energy system will be the most
effective approach to managing greenhouse gas emissions
internationally. It does not believe voluntary industry
GHG targets will significantly help progress regulatory
discussions across the globe.
Other UK regulations are also seen as risks. For instance,
41% of responding companies state that they see the
CRC Energy Efficiency Scheme as a risk, in large part
because of the uncertainties surrounding it. HSBC
notes that the CRC Energy Efficiency Scheme put it
at a disadvantage by not taking account of its carbon
neutrality. Shanks and Derwent London are amongst those
companies who report that administrative costs linked to
the CRC Energy Efficiency Scheme will place a significant
burden on their operations (Shanks: £205,000, Derwent
London: £319,000). The Confederation of British Industry
supports mandatory carbon reporting as an important way
to help businesses save money and emissions, provided it
is done in a sensible way.
F4 REGULATORY RISKS AND OPPORTUNITIES IDENTIFIED BY RESPONDING COMPANIES
• Risks
• Opportunities
60%
50%
40%
30%
20%
10%
0%
7%
14%
Air pollution
limits
33%
18%
Cap and
trade
schemes
52%
Carbon taxes
22%
32%
19%
Emission
reporting
obligations
43%
26%
Fuel/energy
taxes and
regulation
31%
21%
General
environmental
regulations
including planning
19%
17%
International
agreements
4%
Lack of
regulation
12%
18%
Other
regulatory
drivers
19%
19%
Product efficiency
regulations and
standards
13%
9%
Product labeling
regulations and
standards
32%
Uncertainty
surrounding new
regulation
6%
7%
Voluntary
agreements
13