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Relevance of Carbon Disclosure Project today

Relevance of Carbon Disclosure Project today

Mar 11, 2014

By Robbie Louw, Promethium Carbon ~ South African companies listed in the JSE Top100 participate in the global Carbon Disclosure Project (CDP) on an annual basis. The CDP is backed by more than half of global institutional investors and it asks major companies to disclose in what way they are exposed to climate change.

The announcement of the South African results came within a week of the conclusion of the latest Conference of Parties of the UNFCCC, also known as COP19. Comparing the results of the South African CDP with the outcome of COP19 has highlighted some interesting trends as well as points towards possible successes and failures.

The importance of the CDP results in the global climate change context cannot be underestimated as certain companies now have emissions that exceed the emissions of many countries.

In 2011, more than half of the world’s largest economies were companies operating in the private sector. South Africa’s largest greenhouse gas-emitting listed company, Sasol, emits more greenhouse gases inside South Africa than 154 individual countries. Next in line are BHP Billiton and Arcelor Mittal whose South African emissions both exceed that of more than 120 individual countries.

With the world’s attention firmly on the progress, or lack thereof, of the UNFCCC process at the annual COPs, important decisions that drive climate change are being taken in the private sector. One of the areas of disappointment of COP19 in Warsaw is the lack of greenhouse gas mitigation ambition.

Japan significantly reduced its target while most other countries are sitting on the side-line doing nothing. Australia is actively trying to dismantle its climate change legislation and Canada is driving carbon-intensive energy developments.

It is heartening to see that so much is happing in the private sector while the pace of development of a global agreement seems to be stalled. During 2013, just under 2,500 of the world’s largest listed companies participated in the CDP.

Sixty eight percent of these companies have reported that they have adopted emission reduction targets and 35% report that their emissions were reduced on an absolute level in the last year.  South African companies are performing well with an equivalent portion setting targets and 41% reporting reductions in absolute emissions.

Japan announced at COP19 that it will change its reduction target from 20% below the 1990 levels to 3% above by 2020. In this environment, Japanese companies reported that 94% have emission reduction targets but only 34% of companies actually achieved reductions in the last year. The challenges faced by the country, in the aftermath of the tsunami, are reflected in the low percentage of companies achieving absolute emission reductions.

Canadian policy also seems to impact on business with less than half of Canadian companies having targets and only 25% reporting a reduction in emissions. This seems to be out of linewith the activities of a number of Canadian provinces that have implemented carbon tax and cap-and-trade schemes.

The USA is regarded by many as being obstructive in global climate negotiations. However,the movement on ground level is good with American companies outperforming the global average.  75% of companies reported that they have emission reduction targets and more than half of the companies reported an absolute reduction in emissions.

This analysis shows that many companies are acting proactively in addressing greenhouse gas emissions. This is an interesting trend in view of the fact that it has been known for two years, since COP17 in Durban, that there will be no binding global climate change agreement before 2020.

The answer to this apparent contradiction lies in that 77% of the Global 500 companies thatreported in the CDP this year have invested in climate change-aligned projects with paybacks of more than three years. This is because it gives them a competitive advantage in the market.

The excellent performance of South African companies in the CDP this year, when compared to their global peers, is good news for local business. It means that the country is positioning itself to be competitive in the coming carbon constrained world.

The relevance of the CDP lies in that it provides an information platform from which the developments in the private sector can be judged. Not only does it give investors insight intocompanies’ responses to the changing environment, it also shows us how the world is responding in a bottom-up way as opposed to the top-down UNFCCC process.

About: Robbie Louw is a director of Promethium Carbon, a dedicated carbon and climate change advisory firm helping major international firms gain global advantage in the fast emerging low carbon economy.
www.promethium.co.za ~ +27 11 706 8185

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