It will probably come as a surprise that BT is responsible for 0.7% of the UK’s entire electricity consumption. But it may come as an even greater surprise that 99% of its demand is sourced from renewable and combined heat and power sources (a very efficient form of energy).

But these are just two of the nuggets of information revealed in the company’s response to an international investor-driven corporate communication campaign, now in its fifth year, called the Carbon Disclosure Project.

Headquartered in London, the CDP sent out a questionnaire to 2,400 of the world’s largest quoted companies in 2007 and asked them about risks and opportunities related to climate change, emissions and past and current actions to reduce them.
It is full of tiny and gigantic statistics, as well as unexpected holes, concerning the corporate response to climate change and institutional investor support. In 2007, investors that are signatories to the project (and thus officially demanding the information) represented more than $41 trillion of assets under management.

Food for thought

Some of the revelations from the research include the extraordinary statistic that the carbon footprint of a packet of Walkers cheese and onion crisps amounts to 75g; the heating energy saved by insulating an isolated building is equivalent to a thousand times the energy that went into manufacturing the materials and that outdoor advertising company, JCDecaux, swapped 1,600 billboards for 20,000 free bicycles in Paris.

Given its five-year existence, trends are now becoming visible. In the UK, 77% of FTSE-500 companies replied to the questions, compared to 45% in 2002. BT, J Sainsbury, Cadbury Schweppes and Shell are among the British companies that have participated and allowed their responses to be published since the beginning, while WH Smith, Debenhams and John Wood Group are among those that have not replied.

The CDP revives the long-standing question concerning the benefit of voluntary corporate initiatives. While some of the companies may, in any case, be publishing emissions information in their corporate social responsibility reports, it puts them on the spot by asking them specific, consistent questions. Non-responses, claims its chief executive Paul Dickinson, are a sign of skeletons in the cupboard. “I find it incomprehensible that a company doesn’t respond. What’s going on in there?” he asks.

It is a line familiar to corporate governance theorists and public relations gurus: transparency breeds accountability and familiarity breeds favourability. In effect, one of the aims of the CDP is to create a naming and shaming list, point out the leaders and laggards for each sector, and drum up collective support to act on greenhouse gas emissions.

But there is no reason why a company should be penalised for not replying. In most parts of the world, there is no requirement to report on emissions or produce environmental reviews. In the UK, only an amendment to the Companies Act 2006 that came through in October requires companies to do anything close to reporting on emissions. But its terms are very general. Companies are now legally obliged to report information about environmental matters in the business review section of the annual report and accounts, or explain why they don’t feel environmental issues are relevant to their business.

Many of those who do reply are partly motivated by a requirement to provide data to governmental authorities anyway because they are participants in the Emissions Trading Scheme (ETS). Companies in the Scheme are not obliged to quantify its financial impacts separately in their accounts, but do quantify physical emissions. Some go over and above their disclosure requirements and have reported on these issues in their annual statements for years before the ETS began. “Why wouldn’t we publish this? We feel we’re a fairly transparent company and that it’s the right thing to do,” says Roddy Kennedy, BP’s chief spokesman.

First movers

Others do not create heavy enough emissions at their facilities to be included in the ETS, but are still engaged in energy efficiency innovations and want to report on them. This is because of solid views concerning first mover advantage. “If you wait for irrefutable evidence [of climate change] in 10 to 20 years’ time you’ll be second in terms of getting the best and most cost-effective solutions through,” argues Mike Barry, Marks and Spencer’s CSR director.

The first mover advantage is an important consideration. There are also market advantages to developing environmental leadership. In addition, corporate planners would be foolish to ignore the possibility that new legislation might be round the corner, or the impact of the climate change bill. A cross-party political consensus in the UK has emerged in this area. The possibility of including service sectors in the ETS has been discussed, while activist companies like Trucost, the organisation which carried out much of the number crunching work for the CDP, are already calling for mandatory emissions reporting using consistent international standards not unlike IFRS.

Reputational risk

The question of whether to act is also driven by a decision on how far climate change, now accepted as a reality by most scientists, has an impact on corporate risk, and that will depend on the industry and on a company’s views on reputational risk. The fact that numerous investors are clamouring for information suggests that they think climate change will affect risk.

Nevertheless, there are some fairly obvious contradictions evident among the data. If so many powerful shareholders want companies to clean up, it is not easy to explain the slow European progress on emissions targets.

The answer to this lies in the fact that some environmental communication is still used defensively to protect a company’s image, while emissions reporting is not always externally verified. Yet the CDP is taken seriously and is backed by luminaries such as corporate governance expert Derek Higgs and German Chancellor Angela Merkel. That is because carbon dioxide is gradually being accepted as a new type of commodity.