Carbon Disclosure:
Global Trends and Best Practice
Bryan Hartlin, Senior Consultant, ERM
March 2011
Delivering sustainable solutions in a more competitive world
Sustainability leaders
ERM is one of the leading
sustainability consultants
worldwide, providing
environmental, health and
safety, risk and social
consulting services in
influential assignments. We
have extensive experience in
carbon footprinting, life cycle
assessment and assisting
companies respond to CDP.
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•
3600 professional staff
•
130 offices in 40 countries
•
Projects in 170 countries
•
Over the past five years we
have worked for around 60%
of the Global Fortune 500
•
Annual gross revenues of
US$600m
•
39 year history
About GTE
• Supports the delivery of low
carbon projects through carbon
financing and footprinting
services
• Established in 2008
• Leading project developer and
consultancy firm in the field of
renewable energy and energy
efficiency in Turkey
• 1200MW of total capacity
• First Turkish company to get
trained and registered to the
‘UK Carbon Trust’s Footprint
Expert’
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• Over 60 emission reduction
projects
• 7.8% of total installed
capacity
• 3 million emission
reductions/year
• 1.1% of emissions in
2008
Our presence in Turkey
• ERM has over 20 years experience of working in Turkey.
• Working with GTE on product and corporate footprinting
projects and assisting companies respond to CDP and other
sustainability reporting.
• Working with ELC to provide support site selection,
screening, impact assessment, national permitting processes
and international financing under IFC and Equator Principles
requirements.
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Climate change in Turkey
Emissions have doubled since 1990
Increased in all
sectors accept
agriculture
Source: EEA
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Driven by economic
and demographic
development
High annual population growth
compared to European countries
but the lowest per capita GHG
emissions
Where are the emissions from?
Waste
9%
Agriculture
7%
Energy supply
30%
Industrial
processes
8%
Transport
13%
Energy use
33%
Source: EEA
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Emissions are growing
Source: IEA
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Country comparison
Source: IEA
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Building the business case
• A company’s current and potential success is not
simply judged in terms of financial growth.
• Carbon disclosure is part of a wider trend toward
including more non-financial information into
business reporting.
• Investors, consumers and suppliers are becoming
more sensitive to climate change, which can impact
sales and market share.
• Large enterprises are putting pressure on their
suppliers to fill out the CDP questionnaire.
• Opportunity to enhance brand and be seen as ‘carbon
leader’.
• Competitive advantage over those who don’t
disclose.
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How did the ISE-50 response compare?
Turkey
20%
First year
Russia
8%
Second year
Brazil
72%
Sixth year
Global 500
82%
Eighth year
Source: CDP
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China
11%
Third year
India
21%
Fourth year
Benefits of disclosure
• Climate change presents strategic risks and opportunities to most
companies.
• Going through the process of answering the CDP questionnaire enables
companies to begin the process of measuring their carbon emissions:
this is the first step towards being able to then manage these emissions.
• Answering CDP provides a high level of visibility and accountability to all
stakeholders including institutional investors and participation in:
• Voluntary GHG programs
• Mandatory reporting programs
• GHG markets
• The questionnaire contains quantitative as well as qualitative information
and thus it enables companies to take a holistic look at climate related
risks, opportunities and management strategies.
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Looking beyond CDP: Global initiatives
• Tracks financial performance of the leading
sustainability-driven companies worldwide
• Measures the performance of companies that
meet globally recognised CR standards and
facilitates investment
• Integrating sustainability into capital markets
for the health of the planet and its people
• Carbon Efficient Index addresses the
investment community’s increasing concern
with environmental issues
• Identifies the best managed companies that
will succeed on a sustainable basis
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Looking beyond CDP: Global initiatives
• Non-profit organization rating corporations
on their efforts towards mitigating climate
change
• Provided 100,000 global suppliers with a
survey to evaluate their own companies’
sustainability to be used in data base and tool
• ESG data on 3080 companies in 43 countries
in the hands of investors
• Provides objective, relevant and systematic
ESG information based on 250+ KPIs
• Ratings for popular food, personal care
products, household chemicals and toys
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Best practice: Understanding the terminology
• A carbon footprint is the total emissions of carbon dioxide equivalents
from whichever source is being measured (individual, organisation,
product etc)
• A number of terms are widely used
• Carbon (C) or carbon dioxide (CO2)
• Greenhouse gas (GHG) inventory
• Carbon footprint
• Life cycle carbon footprint / ’embedded’ carbon
• Carbon neutral (activity, product, event)
• All involve quantification of GHG emissions for a defined system
• The purpose should guide the method you use, the amount of data
collection required and the cost.
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Standards and methods
• ISO 14040/44 life cycle assessment
Existing
• WRI/WBCSD GHG accounting protocol
• Environmental Product Declaration Schemes
New
• British Standards Institute (BSI) publicly available
specification (PAS) 2050
• Carbon Trust – Carbon Reduction Label
• New WRI/WBCSD product carbon accounting and
Scope 3 guidelines
Emerging
• Proposed ISO 14067 standard for carbon footprinting
• Various international initiatives
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International standards
• France - Le Grenelle Environnement: BP X30-323
• Germany - Extension of Blue Angel label; PCF pilot
• Switzerland - Migros labelling scheme
• Sweden - Criteria based labelling scheme, joint initiative
• EU-wide - ILCD, ELCD
• US - Carbon Trust pilots; Wal-Mart use of CDP
• China - Carbon Trust pilots
• Japan - Carbon label programme, national guidelines
• Korea - Carbon label programme launched
• New Zealand - Sector-based GHG footprinting strategy
• Global – WBCSD/WRI, ISO
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Where to start? The carbon management cycle
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Planning: Identify business goals
Managing GHG risks and
identifying reduction opportunities
Public reporting and
participation in voluntary GHG
programs
Participating in mandatory
reporting programs
Participating in GHG markets
Recognition for early voluntary
action
Source: GHG Protocol
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• GHG constraints in the future
• Cost effective reduction opportunities
• Setting targets, measuring and reporting
• Voluntary stakeholder reporting
• Reporting to government/NGO GHG registries
• Eco-labelling and GHG certification
• Participating in government reporting
programs: national, regional or local
• Supporting internal GHG trading programs
• External cap and trade allowance trading programs
• Calculating carbon/GHG taxes
• Providing information to support “baseline
protection” and/or credit for early action
Planning: Set boundaries
•
Set organisational
boundaries: equity share vs
control approach
•
Set operational boundaries
Source: GHG Protocol
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Measuring
• Understand your business and
operational boundaries
• Have the right people involved
to answer questions and
collect data
• How to collect data: measure,
calculate, estimate, assume
• Tools: cross sector vs sectoral
Source: GHG Protocol
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Managing and informing
• Efficiently manage reduction
and mitigation plans
• Set baseline data and plan for
future updates
• Third party credibility
• Inform stakeholders
• Communicate to the public
• Detail required depends on
your communication plan and
audience
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Completing your first CDP response
• Ideally, companies beginning CDP participation should complete
a GHG emissions inventory in the first year and expect to improve
it over time.
• Some companies treat the first year as a scoping and planning
exercise with more concrete data in following years.
• Incomplete or imprecise responses do not look good.
• Joining CDP creates expectations that participants will ultimately
analyse their climate change risks and opportunities, manage and
communicate them.
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CDP response tips
• Integrate climate change into business
strategy
• Explain: strategy, governance, risks and
opportunities, accounting and
communication
Strategy
Disclosure
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Investment
• Capital should be marked for tackling
climate risk on a long-term timescale
and not have to compete for budget with
short term projects
• Past and current GHG emissions should
be reported for each financial year
• Explain the reliability of the data and
including whether the information is
verified by a qualified third party
• Stakeholder engagement/external
communication
CDP response tips
Physical Risk Disclosure
• Report how anticipated sea-level rises, changes to
weather patterns, water availability, frequency of
flooding or forest fires and employee health will
not only impact their own business operations,
but those of supply chain and customers.
Regulatory Disclosure
• The nature and significance of GHG regulations in
each country the company operates should be
described and included in the company’s regional
and global performance reporting.
Investor Activism
Not if, but when?
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• Investors have a vital role to play in tackling
global warming.
• Climate change is debated for 2020, 2050, or even
2100, but adaptation starts now.
• For companies not making the effort to close the
‘disclosure deficit’, it is not a question of if, but
when.
Things to remember
• Credibility of CDP participation tied to seriousness of response
submitted and demonstration of improvement in responding over
time.
• After a couple of years, pressure likely to increase to achieve best
practice reporting and transparency.
• Supply chain becoming more important.
• Ultimately, organisations are expected to demonstrate that they
have systematically assessed their climate change risks and
opportunities and have meaningful plans in place and part of core
business to deal with them.
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Reporting trends
• Supplier evaluations more
common
• Scope 3 standards are now drafted
• More ratings and indices with their
own requirements
• Life cycle thinking emerging
• Entire supply chain
• Additional impacts beyond
carbon
• Verification and auditing
• Labelling for suppliers and public
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Reporting challenges
• Regulatory uncertainty
• Emerging accounting methods
• Global and regional differences
• Understanding your processes
and boundaries is not always
easy
• Data collection and availability
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What’s next for CDP
• Working on methods to improve quality and
comparability of data
• Launching a Reporter Service, exclusively for
responding companies, to help them develop their
carbon management strategies through increased data
quality, deeper analysis and the sharing of best
practice.
• Expanding initiatives include: CDP water, supply
chain, public procurement and cities programmes
• Focus on mitigation and emissions reduction strategy
Source: CDP
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Case study: Ambuja Cements (India)
Business growth presents climate
related risks and opportunities
• Challenge: Business operations
expanding
• Solution: Increased efforts towards
energy conservation, waste heat
recovery, use of renewable energy,
efficient lightning systems and
technology like video conferencing
to reduce travel
• Benefit: Recognition as one of the
best-performing companies in the
CDP 2009
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“CDP has played important role in
recognition of risks and
opportunities related to climate
change, associated with operations”
Case study: Avaya Communications (Global)
Operational changes result in
energy efficiency and guide product
development
• Challenge: Cutting carbon
footprint through operational
changes
• Solution: Public disclosure – an
annual marker to aid strategy
• Benefit: Energy efficiency brings
cost savings and business
opportunities
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“The CDP questionnaire… has
helped to consolidate management
of climate change across the
organisation.”
Case study: PepsiCo (Global)
Looking beyond direct operations to
realise the scale of your carbon
footprint
• Challenge: Building greater
understanding of complex
operations and supply chain
• Solution: A collaborative
approach with their supply chain
• Benefit: Sharing best practice and
growing awareness
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“Involvement with the CDP Supply
Chain Program means we are able
to build a better understanding of
our corporate carbon footprint and
the level of climate change risk
within our supply chain.”
Final thoughts
Carbon Management
Realise financial
savings
Showcase innovative
sustainable management
Brand
enhancement
CDP Response
Ability to report to
other global
initiatives and
indices
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3000 organizations in 60 countries
respond to CDP
Fundamental knowledge learning