2011 Themes and Highlights
Companies that embraced the integrated approach to climate change were also more likely to disclose both their GHG emissions and emissions reduction targets, reflecting the principle that emissions measurement can result in strategic emissions management. As indicated in Figure 4, 91% (306) of respondents have disclosed their GHG emissions and 64% (214) have disclosed absolute and/or intensity emissions reduction targets.
I. Risk management
Companies generally enter the enterprise value continuum from a risk perspective, depending on their industry and sector. The foremost risk is national and international pressure from both governmental and non-governmental organizations to meet new emission and reporting standards. This has occurred despite the lack of political and policy consensus in many countries, including the US. In addition, there are new pressures from investors, customers, banks, insurers, and global business partners to contain GHG emissions. As companies move along the continuum from risk management toward strategic advantage, the results indicate they are becoming conversant in the risks posed by regulation and the physical effects of climate change (see Figure 5). Some emerging risks are more challenging to quantify, such as those relating to reputation and consumer behavior.
Policy drivers and the internationalization of risk Multinational companies are exposed to a variety of different policies regulating GHG emissions in markets where they operate. Companies are adjusting business practices across their operations to reflect environmental regulations, cap and trade schemes and carbon taxes that occur by jurisdiction.
• Europe. The European Union (EU) has longstanding mandatory reductions in greenhouse gases. In 2007 EU leaders endorsed an integrated approach to climate and energy policy and committed to transforming Europe into a highly energy-efficient, low carbon economy. They made a unilateral commitment that Europe would cut its emissions by at least 20% of 1990 levels by 2020 through a cap and trade regime. This commitment is being implemented through a package of binding legislation. The EU has also offered to increase its emissions reduction to 30% by 2020, on condition that other major emitting countries in the developed and developing worlds commit to do their fair share under a future global climate agreement.1
To implement its climate change regulation, the EU operates the European Union Emissions Trading Scheme (EU ETS), which covers the Utilities sector and most industrial emissions in EU states. The price of carbon allowances in the EU ETS in 2011 has ranged from e11.46 to e20.80, an inherent cost of doing business in the EU to which companies operating there have had to adjust.2
• Asia-Pacific. China’s new 12th Five Year Plan aims to build sustainable development practices into Chinese industries. The new targets intend to lower energy intensity by 16% over the next five years, to cut CO2 emissions by 17%, and to increase alternative energy use from 8% to 14%.3
1.
http://ec.europa.eu/clima/policies/brief/eu/index_en.htm 2.
www.theice.com/marketdata/reports/ReportCenter. shtml?reportId=83
3.
http://deltabridges.com/news/prd-news/12th-five-year-plan- hailed-‘greenest-fyp-china’s-history’
Figure 5: Risks identified by S&P 500 respondents
250 200 150 100 50 0
211 (63%) 198 (59%) 136 (40%) 72 (21%)
Regulatory
Physical
Reputation and
Customer behavior
Other
10
Number of companies
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