Business leaders from thirteen companies including BAA, BP, HSBC, Scottish Power, Shell and Standard Chartered have offered their support to the UK government in developing new, longer-term policies for tackling climate change. In a letter to Prime Minister Tony Blair in May, the companies argued that there is a need for urgent action to avoid the worst impacts of climate change. They offered to work in partnership with the government towards strengthening domestic and international progress on reducing greenhouse gas emissions. Under the auspices of The Prince of Wales Business and the Environment Programme, the companies argued that investing in a low-carbon future should be “a strategic business objective for ‘UK plc’ as a whole”. However, the letter pointed out that at present “the private sector and governments are in a ‘Catch 22’ situation with regard to tackling climate change, in which governments feel limited in their ability to introduce new climate change policy because they fear business resistance, while companies are unable to scale up investment in low carbon solutions because of the absence of long-term policies”.
Following the initiative, 24 global companies released a statement on June 9 expressing strong support for action on climate change. The statement, issued through the G8 Climate Change Roundtable formed in Davos this year by the World Economic Forum, was presented to Blair during a meeting in London. The companies called on Blair, who is hosting the G8 summit in Gleneagles, Scotland, for a “cap and trade” system or similar market-based mechanism that would set limits on how much greenhouse gas countries and companies could emit. Contact Tim Sharp, University of Cambridge Programme for Industry 012 3342 107 ( http://www.cpi.ac.uk); ICCW 00 33 1 49 53 28 28; World Economic Forum ( http://www.wefroum.org)
MISSING IN ACTION
In the run-up to the G8 summit in Gleneagles, Scotland, it appeared increasingly likely that concerted action on climate change would evaporate when the eight nations (Britain, Canada, France, Germany, Italy, Japan, Russia and the United States) actually convene, according to news reports. A leaked copy of a document, Gleneagles Plan of Action, being drafted for the summit suggested plans had been “watered down”, Friends of the Earth said. In the communiqué, the words “our world is warming” reportedly appeared in square brackets, meaning at least one country disagrees, and all financial pledges have gone. Elsewhere, an anonymous source told news agency Reuters: “The text is getting weaker and weaker. There are no targets, no timetables, no standards – and even the money is gone. You are looking at a very, very serious problem for [UK Prime Minister Tony Blair]”.
The June 14 finals and May 3 drafts of the Climate Change, Clean Energy and Sustainable Development joint statement and action plan said: “We…commit ourselves today to a Dialogue on Climate Change, Clean Energy and Sustainable Development, and we invite the governments of other major energy-using economies to join us,” apparently calling on such major developing nations as China and India. The eight nations also considered inviting “representation from the business community and civil society” and having the International Energy Agency and the World Bank contribute to the dialogue. The statement also called for “understanding how we can mobilise public and private sector investment to promote capacity building and accelerate the development, deployment and diffusion of cleaner technologies, including through partnerships, investment frameworks and market instruments”. Contact Friends of the Earth 020 7490 1555 ( http://www.foe.co.uk)
EXXON SHAREHOLDERS PROTEST
At ExxonMobil’s annual shareholders meeting in May over one in four (28%) voted for a resolution seeking more information on the oil company’s plans to comply with the Kyoto protocol in countries where the greenhouse gas reduction treaty has been signed. But a Christian Brothers resolution asking ExxonMobil “to explain the scientific basis for its ongoing denial of the broad scientific consensus that the burning of fossil fuels contributes to global climate change” garnered only 10.3% of shareholders’ votes. Lee Raymond, chairman and chief executive of ExxonMobil, brushed aside the resolutions. “Kyoto is flawed,” he said at the annual meeting in May. “It puts the developed world, particularly the US, at a competitive disadvantage…Frankly, I think this company is a leader in climate science.” The shareholder protest came ahead of an exclusive report in The Guardian newspaper (June 8) alleging that the US administration’s decision not to sign up to Kyoto was partly as a result of pressure from ExxonMobil. The newspaper cited US State Department briefing papers obtained by Greenpeace thanking Exxon executives for the “company’s active involvement” in helping determine climate change policy. But Exxon issued a riposte, accusing Greenpeace of attempting to make news by “trumping up old allegations.”
“It should come as no surprise that ExxonMobil is occasionally asked by governments for our position on policy issues relating to our industry – as are other companies and other industries,” the company added. ExxonMobil said it believed actions should be taken to address the risk of climate change. “We are doing this by reducing energy use in our own operations and by investing substantial sums in seeking technological solutions to the challenge posed by the world’s growing demand for energy”. Contact ExxonMobil 00 1 972 444 1107 ( http://www.exxonmobil.com)
CAUTIONARY TALE
Increasing UK government regulation of carbon dioxide emissions presents growing risks for investors in companies with high levels of greenhouse gas emissions, a report published by Henderson Global Investors has warned. According to The Carbon 100, based on data from environmental research company Trucost, the oil and gas, electricity, mining, steel and leisure sectors generate over four fifths (85%) of direct carbon emissions, but account for less than a third (29%) of market capitalisation. Shell is responsible for almost a quarter (23%) of the greenhouse gases emitted by companies on the FTSE 100, while BP and Scottish Power account for almost a fifth (17%) of the total each. Moreover, fewer than half disclose their emissions, and among those that do so, there is a lack of comparability in reported data. ( http://www.henderson.com)
SHYING AWAY
Ethical Consumer Information System has said that 62 of the UK’s top 100 companies are unable to produce an environmental report that clearly sets out targets for improving their impact on the environment. “Corporate environmental and social reporting has long been characterised by vague promises, but companies are still shying away form making public undertakings to achieve measurable targets by a fixed time in the future,” ECIS said in a press release. Furthermore, fewer than half of those promising fixed targets offered independently verified reports. “Companies need to understand that mature environmental management needs to use quantifiable targets like any other aspect of business,” said Rob Harrison, director of special projects at ECIS. Contact Helen Middleton, ECIS 0161 227 9099( http://www.corporatecritic.org)
A BUSINESS OPPORTUNITY?
UK businesses may be faltering on reporting, but new research shows they are increasingly concerned about climate change, with sustainability and cost implications considered to be the two biggest risks, according to Paul Toyne, an environmental scientist and director of research firm Article 13. In Climate Change and Poverty: A Business Opportunity? , Article 13 researchers found 80% of the top 500 companies in the UK said they expect to consider climate change issues this year. And nearly a quarter of the companies (21%) said they are taking the issues to board level. Meanwhile, a third of companies surveyed saw new products a crucial opportunity arising form climate change. Poverty is not so high on the business agenda, they found, but the argument for a “step change” in business attitudes to poverty is strong: “Poverty brings market instability and reputational harm, which impact negatively on commercial success,” Toyne said. He emphasised the important role to be played by the G8 summit and the fact that business is now considering the issues with more seriousness. Contact Paul Toyne, Article 13 020 8731 7700 ( http://www.article13.com)
BRAND VALUE AT RISK
A new report undertaken for the Carbon Trust by Lippincott Mercer suggests that climate change is becoming an increasing risk for companies with strong brand value. The study, which assessed the brands of companies in the airline, food and beverage manufacturing, food retailing, telecommunications, oil and gas and banking industries, concluded that climate change would become a mainstream consumer issue in the next five years. Looking forward to 2010, the report identifies the potential risks for companies choosing not to tackle climate change as consumers modify their purchasing behaviour and lifestyle to reflect their concerns about how companies are addressing the issue. The airline and food and beverage manufacturing industries are identified as being particularly at risk from this phenomenon. Contact Carbon Trust 020 7544 3100 ( http://www.carbontrust.com)
GOOD EFFORT, MUST TRY HARDER
Environmental campaign group Friends of the Earth called for direct government action after the Environment Agency published a mixed report card on the state of the environment in England and Wales. The agency said on June 9 that climate change, wildlife and flood risk had the greatest ground to make up and these must be among the top priorities for future action. Air quality was rated “overall, much better” since 2000, but many towns continued to suffer from traffic pollution. Industrial emissions of nitrogen dioxide have increased by 5% since 2000 as a result of increased coal-fired electricity generation, the agency said. Consumption of resources and waste creation got a qualified “slightly better”, but for climate change and flood risk, 2005 is definitely “worse” than during 2000. The agency warned the UK would not meet its own target to reduce carbon dioxide emissions by 20% by 2010, although it is likely to meet the Kyoto target to cut CO2 by 12.5% by 2012. In the report, the agency published an eight-point action plan.
Friends of the Earth slammed the government for not making progress on climate change. “The government must take urgent action to ensure we reduce our carbon dioxide emissions from all sectors, and it should do this by committing to a 3% cut in emissions year-on-year,” said Tony Juniper, executive director. Contact Environment Agency 08708 506 506 ( http://www.environment-agency.gov.uk; Friends of the Earth switchboard 020 7490 1555 ( http://www.foe.org.uk)
June’s European Summit was dominated by referendums on constitutions and rows about financing. Little noticed in the rumpus was agreement about official EU support for turning the United Nations Environment Programme into a specialist international agency like the World Health Organization and the World Trade Organization. Although likely to get bogged down in wider discussions about UN reform, the proposal is significant as it highlights the growing recognition that big environmental issues like climate change can’t be tackled by voluntary initiatives or at national level alone.
When the WHO was set up in the late 1940s, countries recognised that some health threats cross borders (think SARS and Asian Bird Flu in our own times). They gave it powers under Article 21 in effect to make and enforce international law – subject of course to an annual assembly, two-thirds voting and so forth. The WTO’s powers to regulate world trade are more controversial with NGOs, though the wisest among them are calling for a better system of international law-making on trade (i.e. more but fairer globalisation) – and plenty of government’s don’t like the WTO’s powers either.
Indeed John Elkington makes this point in his guest editorial: scaling up our response to climate change has profound and uncomfortable implications for governments and NGOs as much as for companies – in fact perhaps more so, as companies are used to responding quickly to market signals. And as we report above, the market is sending increasingly strong signals: through investors (ExxonMobil’s own and institutions like Henderson), brand values (Lippincott Mercer) and potential products (Article 13). In our next section, we analyse how companies through their products and services are responding. Here, our closing thought is that corporate lobbying of governments should extend beyond protecting narrow interests. Lobbying for a World Environment Organisation is a proper part of corporate responsibility.
Another day, another business initiative on the environment. Is it all bluff, or do these programmes actually have value?
GE’S GREEN WAY
General Electric announced in May a new push towards a more environmentally friendly business. Dubbed Ecomagination, the initiative addressed the need for cleaner, more efficient sources of energy, reduced emissions and abundant sources of clean water. And according to GE’s chairman and chief executive Jeff Immelt, GE plans “to make money doing it. Increasingly for business ‘green’ is green,” he said, referring to the green dollar bill, or ‘greenback’.
Under Ecomagination, GE will:
– double investment in R&D for green products;.
– double revenues from products and services that provide significant and measurable environmental performance advantages to customers;
– reduce greenhouse gas emissions and improve energy efficiency;
– publicly report progress in meeting these goals.
CEO Immelt announced the programme at a series of high-profile events in Washington DC. Joining Immelt was Jonathan Lash, president of the Washington-based World Resources Institute. “This is a hugely important step by one of the world’s most important companies,” Lash said.
In an op-ed in The Washington Post (May 21), Immelt and Lash said the US government should have the courage to lead the debate on climate change. “We believe that government can restore its leadership position by moving beyond the gridlock on energy and environmental policy. We need a policy that commits to market-based approaches that can drive environmental improvement. One that thinks outside the barrel — and promotes diverse energy sources that can help break the shackles of oil dependence.” Contact Gary Sheffer, GE 00 1 203 373 3476 ( http://www.ge.com); World Resources Institute 00 1 202 729 7600 ( http://www.wri.org)
GREEN SKIES ON THE RADAR
UK aircraft manufacturers, airport operators and airlines in June committed to reduce the amount of carbon dioxide produced by new aircraft over the next 15 years by half. The plan, announced by industry associations whose membership includes BAA, British Airways, easyJet, Flybe, Virgin Atlantic Airways, DHL, BAE Systems and Rolls-Royce, also includes targets for nitrogen dioxide and noise pollution. The Sustainable Aviation Strategy sets up mechanisms for monitoring and regular reporting of progress toward a range of specific objectives, including limiting climate change impact by improving fuel efficiency and carbon dioxide emissions of new aircraft by 50% per seat kilometre by 2020 compared with 2000 levels; improving air quality by reducing nitrogen oxide emissions by 80 pct over the same period; and lowering the perceived external noise of new aircraft by 50%. The companies also want to establish a common system for the reporting of total CO2 emissions and fleet fuel efficiency by the end of 2005 and press for aviation’s inclusion in the EU emissions trading scheme at the earliest possible date.
Europe’s largest low-cost carrier Ryanair dismissed its environmentally conscious rivals as “lemmings shuffling towards a cliff edge”. Asked by The Guardian what he would say to travellers worried about the environment, CEO Michael O’Leary replied: “I’d say, sell your car and walk. A lot of members of the sustainable aviation group won’t be around in 10 years’ time – that’ll be their main contribution to sustainable aviation”.
Meanwhile environmental campaigners attacked the initiative for not doing enough to tackle the predicted massive increase in flights. “Today’s commitments are welcome, but technological improvements will be overwhelmed by an increase in flights unless the government ends the £9bn tax subsidy that fuels this growth,” said Friends of the Earth’s aviation campaigner Richard Dyer.
The aviation industry’s announcement came as former Treasury adviser Brendon Sewill said the government’s current policy for dealing with aviation emissions would not solve the problem of pollution. In Fly now, grieve later, a study published by the Aviation Environment Federation (AEF), Sewill said the UK was the world’s worst climate change culprit after the US as far as aviation is concerned. Sewill suggested a number of ways to improve this, including increasing air passenger duty, imposing VAT on air tickets, abolishing duty free sales and ending the planning system that encourages airport expansion. Contact Roger Wiltshire, Sustainable Aviation Steering Group 020 7222 9494 ( http://www.sustainableaviation.co.uk); Friends of the Earth 020 7490 1555 ( http://www.foe.co.uk); AEF 020 7248 2223
WIND POWER
Anglo-Danish company Core, the UK renewable energy unit of Germany’s E.ON – the owner of Powergen – and Shell subsidiary Shell WindEnergy announced in early June that their consortium, London Array, has submitted planning applications for the London Array offshore wind farm project. If built, the wind farm could generate up to 1,000 megawatts of renewable electricity, enough for more than 750,000 homes – equivalent to the household demand of the county of Kent and East Sussex combined, or a quarter of greater London homes. The wind farm will also avoid emissions of up to 1.9m tonnes of carbon dioxide every year and could make up to 10% of the UK government’s 2010 renewable energy targets. The £1.5bn project would involve the construction of hundreds of turbines 12 miles off the Kent coast, making it the world’s largest wind farm. Environmentalists have raised concerns over the impact on wildlife, but both Friends of the Earth and Greenpeace backed the project. Contact Shell WindEnergy 00 1 31 70 377 2900 ( http://www.shell.com/wind)
NOT SO SURE
Despite the fanfare surrounding Shell’s involvement in London Array, Shell raised doubts about the prospects of profiting from renewable energy. Speaking on June 22, ahead of the historic shareholder vote on unification of the UK and Dutch arms of the company, chief executive Jeroen Van de Veer ruled out a big increase in Shell’s renewable activities between now and 2015, saying wind power was only profitable because of generous government subsidies. The CEO also announced plans to appoint a “Mr or Mrs CO2” to report to the board on Shell’s plans for dealing with carbon dioxide emissions. The news came as Shell announced on June 22 plans to exploit the new era of high oil prices by raising output by more than 40% over the next 10 years to about 5m barrels of oil a day, a move that went some way to appeasing shareholders in the wake of the oil company’s reserves fiasco. Contact Shell WindEnergy 00 31 70 377 2900 ( http://www.shell.com/wind)
LENDING, THE GREEN WAY
JPMorgan Chase in April became the third big bank to adopt new lending and underwriting policies designed to protect the environment. Not only did the bank adopt the Equator Principles (guidelines that promote environmental and social responsibility in project financing), it promised to apply the principles to projects that are $10m or above in environmentally sensitive industries, below the threshold of $50m set by the Principles. The new policy also addresses issues including climate change, sustainable forestry, the protection of critical natural habitats, illegal logging, and the needs and concerns of indigenous peoples. “A policy of this magnitude illustrates our commitment to preserve and protect the world around us,” said Amy Davidsen, director of environmental affairs. Contact Amy Davidsen 00 1 212 270 6000 ( http://www.jpmorganchase.com)
GREEN LEAGUE
Business in the Community in April released the results of its tenth annual Environment Index. Pilot tested in 1995 and publicly launched in 1996, the index is a voluntary exercise that benchmarks businesses against their peers and whole sectors against each other, on the basis of their environmental management and performance in key impact areas. Having begun the process in early September 2004, 178 companies participated in this year’s Environment Index. This year, 20 companies made it to the ‘premier league’ (the group of companies scoring above 95%), compared with 28 in the prior year. Contact Jim Haywood, BITC 020 7566 8703 ( http://www.bitc.org.uk)
ENVIRONMENTAL KPIS
The Department of the Environment, Food and Rural Affairs published for consultation indicators that will help businesses to manage and report their impacts on the environment. Environmental KPI’s – Reporting Guidelines for UK Business, released on June 27, covers areas such as greenhouse gas emissions, waste, and water abstraction. In many cases, the KPIs make use of standard business data that may already be collected, Defra said. The recent growth in environmental reporting has led to a number of different approaches and inconsistent reporting. The new guidelines will set a standard to give businesses assurance they have reported environmental performance to a minimum level of accuracy and detail. Environmental research company Trucost helped Defra produce the guidelines. CEO Simon Thomas said the KPIs would make it easier for businesses to report on significant environmental issues when preparing the Operating and Financial Review.
KPIs have been mapped out for over 50 business sectors, identifying the most significant direct and indirect environmental impacts of specific sector activity and industrial processes. The consultation will end on September 19. Contact Defra 08459 335 577 ( http://www.defra.gov.uk)
Business in the Environment’s tenth birthday is an anniversary worth noting, if only as an opportunity to look back and see how ‘the environment’ has changed as a business issue. Originally the Index focused on operational management (policies and processes) and only gradually added performance measures. The focus broadened too, from core operations to include backward and forward linkages such as suppliers and transportation. This year’s overall scores reflect the ‘maturity’ of development in companies, with management scoring highest at 84%, next performance at 74% and supply chain bringing up the rear at 64%.
Today it’s fair to say many companies have achieved significant improvements in their internal ‘eco-efficiency’, not least because the most obviously sensible measures have quite reasonable financial payback times. Safe to say in the next ten years operating efficiency won’t be as easy to find. But the big issue is that as consumption and thus output has increased, so companies’ impacts have grown in absolute terms. That’s why the focus in indexes like BiE must now be on the full life cycle of products and services (direct and indirect impact) and on achieving overall volume reductions.
And that’s why the developments we report above are so interesting, whether GE researching new products or HSBC and JP Morgan Chase influencing how borrowers use their money.
The note of caution is that no one company can buck the market: as Shell highlights, high oil prices make renewables more attractive, but they also make exploitation of high carbon impact oil sands more viable too. Back to our previous theme about the need for governments to set the ground rules within which individual companies can make operational decisions.
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