When I lived in the States I was
a fan of Garrison Keillor’s News from Lake Wobegon. As part of
his weekly radio show, Keillor told homespun stories from a small town where “all
the women are strong, all the men are good looking, and all the children are
above average.”
One of the charms of the show was
Keillor’s knack for saying things that sounded reasonable but upon closer
inspection were shown to be ridiculous or impossible. In particular, in order
for one person to be above average, someone
has to be below average! But few people would volunteer for that role.
The “Lake Wobegon effect”, a
propensity to overestimate one’s capabilities, manifests itself in many walks
of life – intelligence, driving, choosing the fastest lane on the freeway – even
carbon management. When we talk with
large companies, the vast majority speak proudly of their climate change
initiatives. In reality, there is a significant spread in the depth and breadth
of carbon management programmes in the corporate world.
Some companies, mostly consumer
facing retailers, are trail blazing when it comes to measuring and reporting
their greenhouse gas emissions. These firms have a variety of projects,
strategies and engagement programmes underway and they are setting the bar for
being above average fairly high. As a Walmart executive commented recently to
Fast Company, “This isn’t a project, it’s the company.”
But there are many other
businesses that are only taking the first tentative steps in managing their climate
change impact, and a handful are doing nothing at all. Clearly, then, not
everyone is above average when it comes to carbon management.
Carbon Clear recently analysed
the progress that member companies in the FTSE 100 have made measuring,
reporting and managing their carbon emissions. This research, which has gained
wide press
coverage, builds on similar work we carried out last year. This year, however, we have taken a more nuanced
view to better evaluate the maturity
of companies’ carbon reporting. As a result, we have gone beyond asking whether
or not a company reports its carbon footprint to explore how thoroughly it
reports and whether it has obtained independent assurance for its claims.
These tougher evaluation criteria
allow us to highlight clearer differences in companies’ carbon management
strategies. They reflect the fact that
carbon management and sustainability are processes, not end goals, and the
definition of “good enough” will continue to evolve.
Our analysis found that the
majority of companies that performed well in last year’s rankings continued to
perform well in 2012. One reason for this consistent performance may be because
leading companies have put in place systems that help embed carbon management
within their operations. Having overcome the initial learning curve, they find
it easier to continue and advance their programmes.
Another reason is that leading companies
are beginning to recognise the business benefits of carbon management. This
should not be a surprise. At Carbon Clear,
we have found repeatedly that companies that measure their carbon emissions
begin to look at their operations in a different way, identifying efficiency
and cost saving measures that strengthen their bottom line.
However, even amongst the biggest
publicly listed companies in the UK, only a minority have successfully integrated
carbon management into their businesses. In fact, the average overall
performance score from our analysis is 47%. A start, to be sure, but not good
enough given the benefits that come from an integrated carbon management programme.
More specifically, companies tended
to score quite well in the measurement,
reporting and verification competency area, with an average score of 58%. High
scores in this domain may be due in part to the fact that the scoring criteria
encompass those areas of carbon management that a company should logically
address first.
Companies scored less well in the
strategy competency area and in the carbon reduction competency area, with average
scores of 42% and 30% respectively.
The strategy competency area
focusses on whether companies have evaluated the risks and opportunities that
arise from climate change, whether they have an overarching plan to reduce
their emissions, and whether there is a senior leader in the company who takes
responsibility for driving the strategy forward along a defined timeframe.
Establishing a carbon
management strategy requires a fairly sophisticated level of engagement by
senior management, so it is not overly surprising that the average score in
this area is relatively low.
What is more worrying is that companies
are not scoring very well in the carbon reduction
competency area. This is a concern as carbon reduction is a central feature
of an effective carbon management strategy, helping drive cost savings and
lower greenhouse gas emissions. Companies that are not driving ambitious
reductions through their operations and supply chain are in many instances
leaving money on the table. Even fewer
are offsetting their footprint, choosing for now to release greenhouse gases
unabated into the atmosphere without any efforts at compensation. Given the
urgent need for business leadership on climate change, we need more action in
this area.
Engagement activities
are one of the main and most visible benefits of comprehensive carbon reporting,
so it’s not surprising that companies score quite well in this competency area,
with an average score of 52%. Over half of the FTSE 100 demonstrates a
commitment to building a platform with which to communicate their activities
and establish a dialogue with their stakeholders around climate change and
carbon management.
Our in-depth analysis has found
that the FTSE 100 is making useful progress on the carbon management journey. All of the companies we researched are taking
some steps to measure and sometimes manage their carbon impact. And there are
many more that have progressed further along the carbon maturity curve and achieved
higher scores. What is evident from the analysis is that those companies
demonstrating true carbon management leadership remain few and far between: there
are many companies performing at the average level and not very many that live
in Lake Wobegon.
