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Executive Perspectives

EXECUTIVE PERSPECTIVE: What makes an environmental leader in today’s world?

Dexter Galvin

21 Jan 2019

“We’ve been tracking and scoring the progress of more than 6,800 companies at CDP and more than 140 of them have made it onto our A List for their pioneering environmental action.”

In this piece from CDP, we are reminded of the increasingly diverse examples of business models gaining competitive advantage through sustainability.  Tim Nixon, Managing Editor, Thomson Reuters Sustainability.

Global climate emissions are showing no signs of peaking, something that is necessary for us to avoid dangerous levels of global warming of more than 1.5C.

This has created an emissions gap – the difference between where we need global emissions to be to avoid temperature rises of more than 1.5C and where they actually are – that UN climate negotiations between national governments are continually trying to find a way to close.

Yet out of the media limelight, climate change has risen up the corporate agenda with a huge amount of progress on commitments to reducing emissions. Climate change dominated the list of biggest worries expressed by business leaders ahead of the annual World Economic Forum meeting in Davos, Switzerland.

We’ve been tracking and scoring the progress of more than 6,800 companies at CDP and more than 140 of them have made it onto our A List for their pioneering environmental action. Companies’ scores are based on a diverse range of metrics including their transparency, awareness of environmental risks and leadership in setting ambitious and meaningful targets.

Swiss company Firmenich takes a top spot

Top of the list is the Swiss fragrance and flavour business Firmenich, one of only two companies (along with L’Oreal) to get A’s across the board for its actions to tackle climate change, deforestation and water security. Earlier this month, it committed to using 100% renewable electricity for its operations by 2020. Progress on water efficiency and a new wastewater treatment plant has helped it almost double its manufacturing capacity, cut costs in China by 10% and reduce unit costs by a forecast of more than 10%.

The A List now provides a growing list of corporate case studies showing that taking action on environmental issues can go hand in hand with being a profitable and successful business. For example, triple A Lister L’Oreal reduced the CO2 emissions of its operations by 73%, in absolute terms, from 2005 to 2017, during which time its share price roughly trebled.

An analysis by STOXX found that companies on CDP’s Climate A List outperformed the market by 5% from December 2011 to July 2018.

The US administration may have withdrawn from the Paris climate agreement, but thirty US-based companies have made the A List. One of those, Apple, issued US$1 billion in green bonds to fund environmentally focused initiatives, in response to the US withdrawal. This was Apple’s second green bond, having issued a US$1.5 billion green bond in February 2016, to demonstrate the importance of businesses taking leadership in reducing global emissions.

Action on climate change, deforestation and water

It is not all about climate action though. Action on deforestation, for example, is intimately connected to climate change, with 15% of all greenhouse gas emissions directly caused by deforestation and up to 33% of climate mitigation efforts dependent on preserving forests. Water security too, is entwined with the climate challenge. The world faces a 40% shortfall in available global water supply by 2030, according to UN research.

Swedish packaging business Tetra Pak – which scored an A for its actions tackling deforestation – only accepts paperboard that is certified by the Forest Stewardship Council as well managed or controlled wood sources. LEGO is already meeting its climate emissions targets through its use of renewable energy, and has now launched its first LEGO bricks made from plant-based plastic sourced from sugar cane, with a commitment to making all LEGO products from sustainable materials by 2030.

Away from the consumer goods category, Brazilian petrochemicals company Braskem has developed ‘Green PE’, a polyethylene produced from sugarcane ethanol (a renewable feedstock) which captures and fixes carbon dioxide from the atmosphere during its production, helping to reduce greenhouse gas emissions. And the energy and service station provider Galp Energia recycled and reused around 14% of its total water consumption.

The climate newcomers

The success of environmental pioneers on our list is creating a domino effect of corporate engagement, with a 55% jump in companies reporting to CDP since 2013. While not yet A Listers, there are a number of examples of companies at an earlier stage of improving their environmental performance. For example, Dutch sustainable energy and innovation company Eneco Group has committed to reducing GHG emissions per GWh from electricity consumed by its customers 25% by 2020, and to reducing GHG emissions per GWh of electricity used for employee operations 50% by 2020, both from a 2012 base year. 

It is this rising tide of corporate progress that provides genuine evidence to back up the UN’s recognition that businesses could help in not just closing that emissions gap, but in tackling a range of environmental challenges including deforestation and water security. 


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