Carbon Clear's Third Annual FTSE 100 Carbon Performance Report

It's that time of year.  The results have been announced. The press releases, released.  The winners are crowing and the also-rans licking their wounds.

Each year, Carbon Clear's publication, "Carbon Reporting Performance of the FTSE 100" attracts more attention from the press and from leading corporations.  In a short span of time, this report has become a trusted tool for understanding which companies are taking seriously their response to climate change. The need for such a tool is as important as ever. As I pointed out last year:

"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."

Our research separates the stars from the wannabes.

A few trends leap out from this year's research results:

• Integrated reporting is becoming mainstream, with just over half of companies mentioning their carbon footprint in their annual report;
• 56 of the FTSE 100 are reporting at least part of their Scope 3 GHG footprint;
• 29% of companies have set carbon targets that go beyond 2020;
• The number of companies that claim to be carbon neutral has increased by 46% since last year.

There are a host of other interesting findings, but for these and the list of top-performing companies, you'll have to read the report.

It's important to point out that this is not a "name and shame" exercise.  Carbon Clear's research provides a useful diagnostic that can help companies benchmark their performance against their peers, address weaknesses, and increase their ambition.

If you're in the FTSE 100 (or even if you're not), we can provide a customised overview that explores your company's performance and helps you plan your next steps.  Please contact the team at Carbon Clear for more information.

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Can everyone really be "above average" when it comes to Carbon Management?

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.

Carbon Clear's Autumn Breakfast Briefings: Telling the Story

There are only two days to go before the launch of Carbon Clear's autumn Breakfast Briefing series. A good deal of thought went into these sessions, and I like to think they come together to tell a compelling story.  Here's how they fit together.

The first session, on 20 September, will cover the UK Government's new Mandatory Carbon Reporting legislation, which I blogged about a few weeks ago.  I'll be joined at that session by my colleague Vincent Reulet and by Mardi McBrien, MD of the Carbon Disclosure Standards Board.

We'll be talking about why the Government is pushing for mandatory carbon reporting, how this new requirement fits in with other carbon reporting efforts like the EU ETS, the Carbon Disclosure Project and the Carbon Reduction Commitment Energy Efficiency Scheme (CRC), and how companies can both comply with this legislation and use it to gain competitive advantage.  Should be an informative and dynamic event.

A few weeks later, on 2 October, we will be talking about what I sometimes refer to as Carbon Offsetting 2.0.  After the first wave of carbon offsetting in the mid- to late-2000s, there was a lull.  Now, a new crop of companies, from Microsoft to Marks & Spencer, are announcing carbon neutrality programmes.  We'll be discussing how this new round of carbon offsetting differs from the first, and how other companies can benefit.

Then, on 17 October we will be unveiling our Carbon Maturity whitepaper.  Our crack team of consultants has pooled decades of accumulated experience working with over a hundred companies to develop a model of corporate carbon maturity.  We've found that companies at each stage of the maturity curve share certain characteristics and encounter similar obstacles before moving on to the next level.  This applies to both their internal carbon management activities and their carbon offsetting initiatives.  Delegates at this briefing will learn how the carbon maturity model works, and how to benchmark their companies' performance against other businesses.

The breakfast briefing series, then, tells a story.  We start with carbon footprinting and show how it can go from being a burden to a source of competitive advantage.  We then move on to carbon offsetting and show how it has evolved to become a source of real business value for the largest companies.  And then we describe how companies around the world are developing increasingly sophisticated carbon management programmes that deliver benefits for management, employees, investors and the wider community.

I think that's a story that every company should hear. Join us, and help tell the story.

Carbon Capture and Storage: What's the Big Deal?

The U.S. Department of Energy has released the North American Carbon Storage Atlas (NACAS).  The atlas is a compendium of geologic sites across Canada, the United States and Mexico where it is theoretically possible to store CO2 produced from stationary sources like power plants, cement factories and the like.

The idea is that this atlas would be used to find and evaluate carbon storage sites close to big greenhouse gas emitters across the continent.  This, in turn, would help to improve the economics of carbon capture and storage (CCS) by reducing the logistics costs associated with transporting millions or billions of tonnes of liquified CO2 long distances.

Carbon capture and storage is one of a number of potential tools we can wield in the fight against climate change.  The technology has many variants, but the basic approach is to use chemical or mechanical systems to capture CO2 from exhaust gase. Another approach is to chemically remove and capture the CO2 from the fuel before it is burned. In either case, the CO2 is then liquified under pressure, transported to a geologic storage site, and injected into underground basins, where it intended to remain for hundreds of years.  After all, CO2 from burning fossil fuels only contributes to global warming if the gas is released to the atmosphere.

NACAS researchers estimate a potential storage capacity of 136 billion tonnes of CO2 in oil and gas fields (where CO2 injection can also release the last remaining oil, which ironically will release more CO2 when burned); 65 billion tonnes in coal fields; and 1.7trillion tonnes in saline reservoirs.

How does that compare to current emissions?  In 2010 U.S. greenhouse gas emissions were approximately 6 billion tonnes CO2 equivalent, with 2.25 billion tonnes from electric power plants. So there is enough potential storage in oil, gas and coal fields to storage 88 years of CO2 from power plants, at today's rates of emissions.  If coal consumption increased as a result of population growth, economic activity or the lack of viable alternatives, this storage potential would not go as far.  And while saline reservoirs have the potential to hold several centuries' worth of CO2, appreciable injection rates can only be achieved at present with hydraulic fracturing (or "fracking"), a process that has caused tremendous concern when used to extract shale gas.

The North American Carbon Storage Atlas therefore serves a useful role in highlighting the theoretical potential of CCS in the fight against climate change.  However, it is still not clear whether CCS can play a practical role.  One rule of thumb is that commercial-scale CCS would consume approximately 20% of a power plant's output, which means that each unit of electricity sold to end users would be that much more expensive.  That figure does not include the cost to transport the liquid CO2 to the injection site and pump it into a storage reservoir 3 kilometers deep.  These cost considerations raise doubts about the potential of CCS at a time when wind and other clean energy technologies are falling rapidly in cost, and with governments unable or unwilling to invest billions in pilot schemes to perfect the technology.

The debate over CCS has now shifted to the U.N. Clean Development Mechanism, where proponents are exploring the use of carbon credits sales to help overcome the financial and technical barriers to implementation. Work continues on this front, with the CDM in its CMP 7 report in Durban agreeing to explore ways to develop acceptable rules governing long-term liability, site safety, permanence of the emission reductions, and a host of other issues.

I generally advocate a team approach to carbon reduction, where we pursue multiple emission reduction measures at the same time.  However, CCS is potentially so big that, despite its challenges it bears watching closely.  Stay tuned.

Welcome to the Reality-Based Majority

Reuters (and several other news outlets) reported late last week that 75% of Americans support EPA moves to regulate carbon dioxide as a pollutant, and that 61% would vote for a Presidential candidate who advocated revenue-neutral carbon taxes to reduce greenhouse gas emissions. [Update: the original Yale-George Mason survey report can be found here.]

Interestingly, this support crossed party lines.  84% of Democrats, 77% of independents, and a whopping 67% of Republicans would support efforts to regulate greenhouse gas emissions.

That's pretty amazing.

Before this survey, one might have concluded that most Americans were opposed to climate change regulation, or were at best confused about the issue. After all, President Obama was unable to pass climate change legislation during his first two years in office. However, one would be wrong.  People only have to look out their windows to see that the types of weather events predicted by climate researchers are coming to pass.  Whatever confusion voters might have experienced is giving way to certainty.

These lopsided poll results came through in the face of the vociferous anti-environmental positions taken by many politicians, an organised disinformation campaign conducted by deep-pocketed lobbyists, and less-than-stellar media coverage.  They show that the vast majority of people are able to see through to the real issues.  The Reality-Based Majority knows that:

1. Climate change is real and human activity is the leading cause;
2. It is in our power to reduce greenhouse gas emissions and mitigate climate change impacts;
3. The benefits of taking action vastly outweigh the costs.

As I noted five years ago on this blog, climate change deniers and proponents of doing nothing are in the minority.

So what does all of this bode for companies?

The message is clear: pay attention to the survey results.  True, the survey respondents are voters, and were asked about political issues.  However, these same people are also customers, shareholders, and employees.  In addition, many of them may be activists and protesters.

Customers expect the companies from which they buy to uphold high social and environmental standards.  Shareholders want to know that the companies in which they invest are prepared for the future, and working to avoid reputational and financial risk.  Employees want to feel pride in the companies for which they work, and to feel they are helping to make a difference.  And activists want to know that companies are interested in anticipating their concerns for environmental protection rather than waiting to become a protest target.  If I were in charge of a major (or minor) company, I'd get started sooner rather than later.

At Carbon Clear, we have long encouraged companies to face the climate change challenge head-on and embrace the opportunities that come along with complete carbon management.  The survey results from the U.S. show that, when it comes to climate change, the time is right for more businesses to join the Reality-Based Majority.

Carbon Clear at the Africa Carbon Forum

This week we're at the Africa Carbon Forum in Addis Ababa, Ethiopia, where I'll be speaking at a training session on Programmes of Activities.  And catching up with old friends and associates.

The Africa Carbon Forum, or ACF, brings together government representatives, private investors and carbon project developers, consultants, academics and NGOs.  The goals: share information, identify carbon project opportunities and figure out how to make the carbon markets work for Africa.

Until recently, it could be argued that the carbon markets were not working for Africa.  According to the UN Environment Program, fewer than 3% of all Clean Development Mechanism carbon credit projects were in Africa, and 4% of all carbon credits.  For a region with 14% of the world's population and a disproportionate exposure to climate change impacts, Africa has clearly been under-represented.

Much of the conversation at the last few ACF meetings has been about how Programmes of Activities, or PoAs, can help change this situation.  PoAs allow you to register carbon credit projects that are made up of a number of decentralised activities that can be rolled out over a period of years.  The traditional project approach was suited only for relatively large, standalone activities, like hydroelectric power stations and landfill gas capture schemes.  Those traditional approaches are challenging for projects that provide benefits to poor, widely dispersed rural communities. PoAs are distributing improved cook stoves, water purification systems, or solar-powered lanterns across an entire country.

Since the adoption of Programmes of Activities, the number of new carbon credit projects in Africa has skyrocketed.  That's good news for people across the continent who lack ready access to clean energy services.

But, like traditional projects, these initiatives must be well-managed and rigorously monitored to generate carbon credits with robust environmental integrity.  Thus my session tomorrow morning.  I'll be participating in a training for organisations that want to manage these far-flung PoAs, helping to ensure that they understand the rules laid out by the Clean Development Mechanism.

I'll say more in subsequent posts about the conversations and presentations at this week's conference.

Happy Birthday, Carbon Clear!

 
Six years ago today, Carbon Clear was incorporated in the UK.  Back in 2005, the global carbon market was a very different place:

• The Kyoto Protocol had just entered into force
• The EU-ETS had just started operation
• Al Gore’s “An InconvenientTruth” had not yet been released
• ISO 14064-1 had not been released
• The Gold Standard did not exist
• The Voluntary (now Verified) Carbon Standard had not been released
• The UK Dept for Energy andClimate Change did not exist
•  The International Carbon Reduction and Offset Alliance (ICROA) did not exist

A lot has changed since 2005.  We've been priviliged to witness - and contribute to - the growth and evolution of a thriving ecosystem of companies, institutions and individuals committed to the transition to a low-carbon future.

It's been a successful and busy six years at Carbon Clear, but there is still much more to do.  We look forward to helping our customers and partners transform their relationship with carbon.


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