Sunday, November 2, 2008

Climate change & sustainability reporting
In increasing numbers, companies are incorporating sustainability and environmental considerations into their business strategies and processes. Many now issue formal sustainability reports.

Food, drink and consumer goods companies are looking at sustainability in the context of their entire value chain. Common focus points include packaging, waste and recycling, transport, component safety and carbon management.

Issues associated with global climate change are becoming part of these sustainability reports

A new study, Reporting the Business Implications of Climate Change in Sustainability Reports, examines how companies are reporting on climate change to their stakeholders. The study summarizes the results of a survey conducted by the Global Reporting Initiative™ (GRI) and KPMG’s Global Sustainability Services™. The survey analyzed 50 sustainability reports from major companies around the world.The survey’s main finding is that, in reporting on climate change, many companies emphasize potential opportunities arising from climate change rather than the financial risks and other liabilities it could give rise to.This approach ignores new evidence that climate change presents a serious global economic threat. Thus the Stern Report on the Economics of Climate Change predicts that the costs of extreme weather events alone could reach a half to one percent of world GDP by mid-century. Stern warns that the scale of economic disruption from climate change could equal that associated with the great wars and the economic depression of the first half of the 20th century.

Opportunities identified

The GRI/KPMG study suggests many companies view climate change not only as a threat but also as an opportunity for new products, services and trading.Two-thirds of the surveyed companies report new business opportunities arising from climate change. Nearly half say they are involved in emissions trading.Some companies set up carbon funds or engage in emissions brokering. A quarter of the respondent companies report on taking advantage of opportunities arising from the Clean Development Mechanism of the Kyoto Protocol.

Energy efficient consumer products are seen as a business opportunity

Many companies in the survey give targets for reducing greenhouse emissions and/or energy use. Where companies report the financial implications of these reductions, many believe they will make savings or generate positive returns on investment.

Risks ignored

Companies are reporting little on the business risks of climate change.Just one-fifth disclose a threat of increases in energy prices resulting from climate change abatement activities.Few companies mention the risks of legal action related to climate change such as class action law suits. Hardly anyone reports on potential disruptions caused by extreme weather events or long term physical changes such as reduced water availability.Some of the most anticipated future regulation or legislation related to climate change is emissions trading, which many companies see as a business opportunity rather than a threat.In general, the survey found that companies are not reporting on the financial implications of the risks and opportunities associated with climate change.The demand for effective reporting on the business implications of climate change continues to increase. As public awareness of climate change intensifies, company responses to the problem have become a significant reputational and strategic issue.


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