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

4
Executive summary
Companies today are facing calls for greater transparency
and accountability. The Leveson Inquiry into press standards
and the investigations in to LIBOR-fixing highlight the
increased scrutiny of corporate actions by regulators,
shareholders and other stakeholders. Companies are
increasingly being challenged to demonstrate how they are
responding to the financial risks posed by climate change.
In 2012, the Carbon Disclosure Project (CDP) sent its annual
request to FTSE 350 companies on behalf of 655 investors
with US$78 trillion in assets, asking them to measure and
disclose what climate change means for their business.
For more than a decade, CDP has pioneered carbon
reporting; it has established itself as the global platform
through which organisations disclose investor-relevant
climate change data. When CDP launched its first FTSE 350
report in 2006, only 49% of companies responded (83%
of FTSE 100). This year, 69% (240) of the FTSE 350 did so,
including 96% of the FTSE 100. The analysis in this report
is based on 238 responses received by 30th June 2 and
shows the quality of reporting by UK companies and their
preparedness for impending regulation.
In the summer of 2012, the UK Government announced
it would be the first in the world to require all companies
listed on the main market of the London Stock Exchange
to disclose their gross global emissions (not just those from
UK-based operations) in their annual reports. Although
the proposed legislation currently covers Scope 1 and 2
emissions only, it is likely this will expand in the future.
In the UK, reporting emissions from Scopes 1 and 2
has become standard practice – almost all (93%) CDP
respondents report Scopes 1 and 2 – however, only 64%
of respondents include this emissions data in financial
reports. CDP’s information request already goes beyond
the basic requirement of the proposed legislation to provide
information that is of real value to investors, quantifying,
for example, the extent to which a company is at risk from
factors related to climate change.
There is growing pressure for these annual reports, traditionally
built on historic financial data and focusing on short term
performance, to reflect a company’s exposure to all risks,
including those from climate change and wider environmental
issues. As a result of this, there is an increasing call for a
change in the conventional reporting model towards Integrated
Reporting. This system aims to better demonstrate the
relationship between an organisation’s strategy, governance
and financial performance and the social, environmental
and economic context within which it operates. To this end,
the Climate Disclosure Standards Board (CDSB), a special
project of CDP, has developed the Climate Change Reporting
Framework, which is designed to link financial and climate
change related reporting in annual reports (see page 46).
It is clear that the future of carbon reporting will
increasingly be driven by regulation: 84% of responding
companies believe upcoming regulations pose a risk
and 32% believe these are linked to emissions reporting
obligation. However, 74% also see regulation as an
opportunity and 20% see reporting obligations in the same
light. The most commonly reported impact from this is
an increase in demand for an existing product or service
(28% of reporting opportunities). We do however expect
leading companies to take action ahead of regulation;
indeed, already 80% of the Carbon Disclosure Leadership
Index (CDLI) include climate change information in their
annual reports (non-CDLI: 49%) (see page 23).