Getting Emissions on the Books: Project Promotes Carbon Accounting By Biggest Companies
The Wall Street Journal, 11/6/07
By: Mike Foster
Paul Dickinson, chief executive of the London-based Carbon Disclosure Project, has spent seven years persuading institutional investors to back his efforts to convince companies to disclose carbon-emission levels. Today, institutions managing assets valued at a total $41 trillion are backing the project.
The not-for-profit initiative has been financed by family endowments, led by Rockefeller Philanthropy Advisors, and won the support of former U.S. President Bill Clinton, who said at its September conference that you can never get a handle on the way companies cut emissions without measuring what they produce at the outset.
The Carbon Disclosure Project is an independent lobbying organization that works with 315 institutional investors and 2,400 of the world’s largest companies to focus on reducing carbon emissions and energy consumption.
It surveys participating corporations about emissions accounting and management, regulation and changes in technology. It also keeps a database on corporate greenhouse-gas emissions. In its most recent survey, for instance, the initiative found that total greenhouse-gas emissions reached nearly seven billion tons of carbon dioxide, more than 50% of which is accounted for by FTSE 500 publicly traded companies.
Mr. Dickinson says he is encouraged by the European Union’s decision to put tough second-round emissions standards in place after being too generous with permits in the past.
As carbon taxes and regulation are introduced, accounting bodies will start to audit corporate emissions, and Mr. Dickinson is preparing for the change. “The authorities, including the U.S. Environmental Protection Agency, have started to pick up on our work,” he says. “It will only be a matter of time before accounting bodies realize we are measuring issues that will affect future profitability.”
Accounting scrutiny for carbon emissions is likely to mimic recent events in the pensions sector. When schemes were relatively small and liabilities stretched into the future, accountants could overlook their economic impact.
When liabilities started maturing, making a material impact on near-term profits, accounting standards boards started telling companies to report on their funding positions in a disciplined fashion.
When the initiative started in 2000, Mr. Dickinson had strong support from Chairman Tessa Tennant, who started Jupiter Asset Management’s socially responsible investment initiative. Ms. Tennant is now chair of the ICE Organization, which aims to encourage individuals to grasp the importance of limiting emissions.
Kicking off with Legal & General Group PLC, Mr. Dickinson and Ms. Tennant persuaded a growing number of institutions to back emissions disclosure. Companies were asked how many tons of carbon dioxide they either produced or bought through energy purchase. They were also asked to calculate the amount produced by other activities, such as business travel.
At first, Mr. Dickinson was infuriated by the lack of response, but as concern about climate change grew, more companies started filling in its surveys, vetted by third-party environmental groups.
By 2003, Ms. Tennant said, more companies started to respond. “There’s nothing like peer-group pressure. For companies to see what their competitors are doing is a great spur to action,” she said.
The latest Carbon Disclosure Report issued in September on the world’s 500 largest publicly traded companies revealed that 77% of them had answered the questionnaire, up from 72% last year. Of these, 76% had initiated an emissions-reduction program, up from 48% in 2006.
Mr. Dickinson believes corporate initiatives will multiply following the decision of some of the world’s largest retailers and manufacturers to ask their suppliers to provide data for the Carbon Disclosure Project. “We have just signed Wal-Mart, and it has agreed to write to 68,000 suppliers,” he said.