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Corporate Climate Response
London, UK May 22nd-23rd 2006
Report By Adrienne Baker, The Cross Border Group
Climate change's schism
Despite efforts to address the dangers of climate change, most UK companies aren't giving out useful information on how it impacts their business. 'Many companies spend a lot of time and effort reporting on the problem but it is not very useful,' said Dr. Rory Sullivan, director of investor responsibility at Insight Investment.
What investors want to know is whether climate change affects a company's strategy. But most companies report on environmental initiatives in separate social responsibility reports which make it impossible to connect these efforts to business performance. Sullivan, for one, would like to see climate change information in annual reports and company accounts.
A lack of guidelines on how to report on climate change is rendering much of the data on the topic useless. 'The unreliability and inconsistencies in reporting data (on climate change) make it unusable in a direct way,' said Goldman Sachs analyst Marc Fox. Goldman Sachs is one of the first major investment banks to include environmental, social and governance criteria in its analysis of companies.
Both Sullivan and Fox spoke at a GreenPower Conferences event in London on May 22 that looked at how companies should present this data. A number of FTSE 100 companies including HSBC, Barclays, BSkyB, BT, BP, Marks & Spencer, and BAA presented their takes on climate change reporting.
For big brand name consumer companies, the drive to talk up climate change comes from customers not shareholders. Forty-six percent of M&S' customers think that climate change is an issue the retailer needs to address. So while the company's carbon footprint is relatively small compared to other sectors like oil and gas, its reputation is tied to its stance on climate change. 'This is inevitably a brand management issue,' said Mike Barry, head of corporate social responsibility at M&S.
BSkyB just became the first carbon neutral media company after recognizing customer concern over global warming. 'Our sense is that climate change will become a mainstream consumer issue,' said the head of BSkyB's corporate responsibility, Ben Stimson. The company is offsetting its CO2 emissions and decreasing its energy use when possible. It's also planning a campaign to encourage customers to decrease their energy use.
The move to carbon neutrality might pay off for the broadcaster since the first taxi company to offset its emissions saw a big boost to business. After spending £100K to become carbon neutral, Radio Taxis saw £1.5 million in new business, according to its managing director Andrew Hebert. 'We see this as a business opportunity not a defense [strategy],' said Hebert.
Climate change is not yet a consumer issue for big UK retail banks, however. Andrew Flett of Barclays says there is a general slumber in terms of consumer awareness around climate change and retail banking. The drive for Barclays and HSBC to curb their emissions and reduce energy consumption comes straight from the top with the banks' CEOs and boards recognizing that global warming could impact future profits. 'Climate change is the elephant of the boardroom table,' said Flett.
Some investors recognize this and want better data on the long-term impact of climate change from companies. Current information like carbon emissions is generally retrospective. 'Companies are very good at talking about the past and we are actually interested in what is affecting your company going forward,' said Sullivan.
Carbon emissions are also rarely broken down by country, making it impossible for shareholders to gauge the impact of climate change on various business segments. The solution to climate change's reporting chaos is a universal consensus, according to Goldman's Fox. 'Best in class companies will set the standard for how environmental reporting will work,' he predicted.
ENDs
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