NEWS
CLIMATE CHANGE
Science-based targets
ELISABETH JEFFRIES ENVIRONMENT Climate for change ELISABETH JEFFRIES
AkzoNobel, DSM and Johnson Matthey are the best performing chemical companies on climate-related metrics, according to non-profit carbon disclosure group, CDP. In a study released in October
2017, CDP analysed 22 major chemical companies in order of readiness for a low-carbon transition, stating that this requires ‘game-changing technologies in feedstock and processes’. Dow Chemical, Lyondell Basell and Formosa Plastics ranked lowest in the CDP league table.
The Catalyst for Change report says the chemicals sector is responsible for an eighth of global industrial carbon emissions. While the industry is part of the solution for climate change – with products such as electric cars profiting from the $83bn low carbon transition – nevertheless it notes that the sector is struggling to move away from highly polluting upstream processes. Upcoming regulations on emissions
trading in China – set for launch at the end of 2017 – could be disruptive for the whole sector, the report says. Chinese companies currently make up 40% of global chemical sales, but stand accused of not disclosing environmental data. It also warns of a potential ‘diesel moment’ for plastics when the consequences of the pollution impact of plastic packaging in the oceans may trigger a backlash from consumers/ regulators. The report analysed 22 of the largest
global chemical companies with a total market capitalisation of $626bn, and responsible for a quarter of all emissions of the sector at 276m t/year
of CO2 emissions. The CDP research, meanwhile,
accompanies an international initiative launched in July 2017 by the Task Force on Climate-Related Financial Disclosures (TCFD) to improve corporate transparency on climate-related risk. Among chemical companies publicly supporting the TCFD are Akzo Nobel, Dow, Solvay and Sumitomo Chemical. Previously, many companies have
responded to demands for data by displaying historic greenhouse gas emissions, usually in corporate responsibility statements. But now the TCFD recommends consistent disclosure for the first time in financial filings, as well as carbon pricing of corporate activities – one way to portray and guard against regulatory risk. According to CDP, however, just four chemicals companies currently disclose their internal carbon prices.
Classifying assets, liabilities and
acquisitions under the lens of climate- related risk would, according to the TCFD, support the more appropriate pricing of risks and allocation of capital in the context of climate change. This voluntary initiative would help speed the transition to a low-carbon economy and promote longer-term management perspectives. ‘This is not going to result in a huge
data drop by companies but rather a thoughtful narrative description from board directors. It will hopefully be used as an engagement tool as well as a divestment tool,’ explains Russell Picot, special financial advisor to the TCFD. ‘We’re not saying companies should alter their business model but that the information needs to get out there so that the market can decide.’
More than 300 companies have committed to science-based climate targets, non-profit partnership the Science-Based Targets Initiative (SBTI) announced in September 2017. Seven chemical businesses are among the signatories, including biochemicals company, Borregaard; core material producer, Diab International; and speciality chemical and coatings manufacturer, Akzo Nobel. Launched in 2015, SBTI is a
collaboration between the carbon disclosure group CDP, World Resources Institute, World Wide Fund for Nature, UN Global Compact and the We Mean Business coalition. Among its chief aims is to reform the ways in which companies manage and reduce greenhouse gas emissions (GHG). SBTI targets align business emissions with the 2016 UN Paris Agreement to limit the global temperature increase to 2°C. This may require a company to adopt a more rigorous ‘science-based’ approach to emissions reduction than previously, and to introduce or tighten a cap instead of applying ‘bottom-up’ energy efficiency reforms. The initiative differs from approaches
preceding the Paris Agreement by embracing the concept of a carbon budget. ‘The key thing is trying to define a level of carbon reduction acceptable for a company to be aligned with the 2°C target. This means creating an overall carbon budget and working out what that means for the company annually now and to 2050. It breaks down the individual company entitlement to carbon emissions,’ explains Guy Rickard, senior consultant at SBTI. Borregaard signed up to the scheme
in April 2017. It has not yet calculated a budget but intends to apply to the SBTI for target approval by the end of 2017. ‘[Our] evaluation shows it is possible to achieve a science-based target by continuing to reduce energy consumption and increase the use of renewable energy,’ says press officer, Tone Horvel Bredal. The European chemicals industry association, Cefic estimates greenhouse gas emissions from the sector have fallen by nearly 60% since 1990.
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