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Corporate disclosure of climate risk
Editor’s note: we’re attending the Ceres conference on sustainable governance and blogging some tidbits from this gathering of leaders in sustainability.
One of the first principles of business is that you can’t manage what you don’t measure. Thus, we were pretty excited to catch up with the state of the art in carbon measurement and disclosure in the investment community at Ceres.
We’re fans of the biggest effort, the international carbon disclosure project. Now in its fourth year, the CDP sends a simple questionnaire to 1,900 of the largest companies in the world asking them about risks from climate change and quantification of their emissions.
This is obviously valuable for investors thinking about exposure to financial risk in a carbon constrained world, but how do the companies themselves feel about disclosure?
Neil Golightly from the Ford Motor Company talked about some of the positives from Ford’s perspective of disclosing carbon emissions and producing the first climate change report in the auto industry.
One result at Ford was that producing these reports and measuring the emissions tended to crystallize internal thinking about climate change and bring a new “framework for decisions” to the table.
This framework is a positive change from the old decision-making process, which relied more on internal champions to push an environmental agenda forward. For example, according to Golightly, the push for hybrids at Ford would never have happened without personal intervention from Bill Ford. Today, Golightly thinks that with a framework in place for thinking about environmental impact, the organization itself would have come up with the right “intelligent business decision.”
Maybe we’re too nerdy [Ed. note — who are you kidding? Of course you’re too nerdy], but we find this an intriguing point about how change propagates in large companies, and how creating and tracking different metrics can lead to change.
In one close parallel, we hear from many Chicago Climate Exchange members that simply going through the membership process starts them down the path of measuring carbon, finding ways to reduce it, and thinking about how to profit from sustainability. When sustainability is good for business, there’s much greater hope for traction on the climate change problem.