Description
Climate change governance is an increasingly important issue as more organizations are becoming mature in their climate change strategies
November 2012 1
Report
Chase Raines, Association of Climate Change Officers
Trends in Corporate Climate Change Governance
Executive Summary
Climate change governance is an increasingly important issue as more organizations are becoming
mature in their climate change strategies. While best practices in some areas have emerged, there is
little consensus on the most effective way to govern climate change within an organization. This report
examines data publicly reported to the Carbon Disclosure Project (CDP) from the Investor CDP
Questionnaire to determine trends in climate change governance and uncover relationships between
governance and performance.
The CDP data shows that there is a relationship between industry sector and climate change
governance. Sectors exhibit differences in the amount of incentives given and the highest organizational
level that is directly responsible for climate change. Organizations that are better known or have larger
revenue also showed a relationship with climate change governance. Fortune 500 and high visibility
brand organizations had more climate change governance than other organizations. Finally, both total
revenue and disclosure scores for companies were related to their climate change governance.
Generally, more climate change governance was related both to higher revenue and a higher disclosure
score.
These results indicate a hopeful trend for the future of climate change governance. Large, established
companies which are leaders in their fields are taking climate change governance seriously and
investing. Other organizations will likely look to emulate the practices of these leaders and implement
more climate change governance. More research is needed in future years to track the progress of the
adoption of climate change governance and determine which best practices and trends emerge.
Introduction
Twenty years ago, few companies in the United States were monitoring or acting to reduce greenhouse
gas. Now, you would be hard pressed to find a major corporation that doesn’t at least mention climate
change efforts on its website or within its corporate responsibility report. With increased awareness
have come concrete actions taken by corporations such as investments in energy efficiency and
renewable energy projects and policies designed to reduce waste of all types. A recent survey by BSR
and Globescan of over 500 organizations found large percentages of respondents reporting “a great deal
of progress” in their businesses with respect to sustainability and climate change over the past 20 years.
i
i
https://www.bsr.org/reports/BSR_GlobeScan_State_of_Sustainable_Business_Survey_2012.pdf
2 November 2012
Another consequence of the larger role of climate change in business today has been the change and
growth of corporate governance related to climate change and sustainability issues.
To understand, plan for, and manage climate change issues, corporations have appointed or hired
individuals and created entities which have direct responsibility for sustainability or climate change
issues. Also, many corporations incentivize their employees to take initiative for climate change within
their own realms and integrate it into their decision making.
ii
Therefore, climate change can be
complicated to govern as it requires centralized oversight and authority but also is integrated into the
thinking and decision making of an entire organization. Because climate change is a relatively young
issue, the structure and function of governance varies greatly between organizations.
For organizations trying to emulate the actions of leaders, governance practices may be the most
instructive to study. Individual actions may be specific to organizations, which make them difficult to
imitate. Implemented climate change or sustainability projects are the symptoms of an organization’s
climate change progress, while the true cause of that progress comes from how a company made the
decision to approve and fund the project in the first place. For that reason, it is very instructive for
organizations to understand which types of climate change governance are being used by corporations
that are leaders in this arena.
Methods
The companies examined in this report were part of a data set of companies participating in the CDP in
2012. The CDP is a global non?profit organization with offices around the world, which has used market
forces to incentivize thousands of companies and cities worldwide to measure and disclose their
greenhouse gas emission and other climate change relevant information based on a standardized
system. Companies self?report their climate change information to CDP and are evaluated both on their
disclosure of information and their performance on climate change.
iii
The CDP has been successful in
gathering the largest collection globally of self reported climate change data.
The data set includes 361 corporations based in the United States. Broadly classifying the companies,
the most common sector in the data set was Information Technology, followed by Consumer
Discretionary and Financials. Of the companies, 68% are part of the Fortune 500, signifying their being
some of the highest revenue corporations in the United States. The average disclosure score for the
companies was 72 out of 100, while the most common grade received for performance was a “B.”
In some instances in this report, the revenue of corporations is examined. The revenue figures come
from Item 6 of the 10?K filing submitted to the U.S. Securities and Exchange Commission (SEC), which is
available publicly online. There were some corporations for which revenue could not be found, and
these were not included in the revenue analysis. For information on what companies are regarded as
top brands, this report utilizes the Brand Finance Global 500 list, an international ranking of companies
based on their transparent valuation of their brand and intangible assets.
ii
https://www.cdproject.net/CDPResults/CDP?Global?500?Climate?Change?Report?2012.pdf
iii
https://www.cdproject.net/en?US/Pages/guidance.aspx#methodology
November 2012 3
In many instances in this report, companies are rated on a Climate Change Governance Index. This index
quantifies how an organization replied to CDP governance questions. In this report, the index is used to
approximate “how much” or “the amount of” climate change governance an organization has. The
highest an organization can score on the index is six, while the lowest is zero. The average index score in
this analysis was 3.69. In analyses where the index is compared to the total disclosure score, there is a
small amount of inherent correlation between the two metrics because the disclosure score and the
index both add a point for answering one of the questions. Although this might make it seem like an
analysis of these two variables is flawed, the connection could only amount to less than one half of one
percent of the total disclosure score, any correlation we see between the two variables are over 99.5%
related to other factors.
Table 1: Explanation of how Climate Change Governance Index is determined from CDP responses. Each
response to the governance questions receives the number of points indicated in the rightmost column, and
those are summed to get the final index score.
CDP Question Response Index Points
Individual/Sub?set of the Board or other
committee appointed by the Board
2
Senior Manager/Officer 2
Other Manager/Officer 1
No individual or committee with overall
responsibility for climate change
0
Where is the highest level of direct
responsibility for climate change within
your company? (must choose single
response)
No Response 0
Yes 1 Do you provide incentives for the
management of climate change issues,
including the attainment of targets?
No 0
Monetary Reward 1
Recognition (non?monetary) 1
Type of Incentive (can select multiple)
Other non?monetary award 1
Climate Change Governance Trends
Industry Type and Climate Change Governance
One of the things the CDP data allows us to investigate is whether industries are managing climate
change differently. We analyzed climate change governance across the broadest sector classifications,
and the distribution of companies in those sectors is detailed. The most common sectors listed were
Information Technology (17%) and Consumer Discretionary (15%), while the least common were
Telecommunication Services (
Climate change governance is an increasingly important issue as more organizations are becoming mature in their climate change strategies
November 2012 1
Report
Chase Raines, Association of Climate Change Officers
Trends in Corporate Climate Change Governance
Executive Summary
Climate change governance is an increasingly important issue as more organizations are becoming
mature in their climate change strategies. While best practices in some areas have emerged, there is
little consensus on the most effective way to govern climate change within an organization. This report
examines data publicly reported to the Carbon Disclosure Project (CDP) from the Investor CDP
Questionnaire to determine trends in climate change governance and uncover relationships between
governance and performance.
The CDP data shows that there is a relationship between industry sector and climate change
governance. Sectors exhibit differences in the amount of incentives given and the highest organizational
level that is directly responsible for climate change. Organizations that are better known or have larger
revenue also showed a relationship with climate change governance. Fortune 500 and high visibility
brand organizations had more climate change governance than other organizations. Finally, both total
revenue and disclosure scores for companies were related to their climate change governance.
Generally, more climate change governance was related both to higher revenue and a higher disclosure
score.
These results indicate a hopeful trend for the future of climate change governance. Large, established
companies which are leaders in their fields are taking climate change governance seriously and
investing. Other organizations will likely look to emulate the practices of these leaders and implement
more climate change governance. More research is needed in future years to track the progress of the
adoption of climate change governance and determine which best practices and trends emerge.
Introduction
Twenty years ago, few companies in the United States were monitoring or acting to reduce greenhouse
gas. Now, you would be hard pressed to find a major corporation that doesn’t at least mention climate
change efforts on its website or within its corporate responsibility report. With increased awareness
have come concrete actions taken by corporations such as investments in energy efficiency and
renewable energy projects and policies designed to reduce waste of all types. A recent survey by BSR
and Globescan of over 500 organizations found large percentages of respondents reporting “a great deal
of progress” in their businesses with respect to sustainability and climate change over the past 20 years.
i
i
https://www.bsr.org/reports/BSR_GlobeScan_State_of_Sustainable_Business_Survey_2012.pdf
2 November 2012
Another consequence of the larger role of climate change in business today has been the change and
growth of corporate governance related to climate change and sustainability issues.
To understand, plan for, and manage climate change issues, corporations have appointed or hired
individuals and created entities which have direct responsibility for sustainability or climate change
issues. Also, many corporations incentivize their employees to take initiative for climate change within
their own realms and integrate it into their decision making.
ii
Therefore, climate change can be
complicated to govern as it requires centralized oversight and authority but also is integrated into the
thinking and decision making of an entire organization. Because climate change is a relatively young
issue, the structure and function of governance varies greatly between organizations.
For organizations trying to emulate the actions of leaders, governance practices may be the most
instructive to study. Individual actions may be specific to organizations, which make them difficult to
imitate. Implemented climate change or sustainability projects are the symptoms of an organization’s
climate change progress, while the true cause of that progress comes from how a company made the
decision to approve and fund the project in the first place. For that reason, it is very instructive for
organizations to understand which types of climate change governance are being used by corporations
that are leaders in this arena.
Methods
The companies examined in this report were part of a data set of companies participating in the CDP in
2012. The CDP is a global non?profit organization with offices around the world, which has used market
forces to incentivize thousands of companies and cities worldwide to measure and disclose their
greenhouse gas emission and other climate change relevant information based on a standardized
system. Companies self?report their climate change information to CDP and are evaluated both on their
disclosure of information and their performance on climate change.
iii
The CDP has been successful in
gathering the largest collection globally of self reported climate change data.
The data set includes 361 corporations based in the United States. Broadly classifying the companies,
the most common sector in the data set was Information Technology, followed by Consumer
Discretionary and Financials. Of the companies, 68% are part of the Fortune 500, signifying their being
some of the highest revenue corporations in the United States. The average disclosure score for the
companies was 72 out of 100, while the most common grade received for performance was a “B.”
In some instances in this report, the revenue of corporations is examined. The revenue figures come
from Item 6 of the 10?K filing submitted to the U.S. Securities and Exchange Commission (SEC), which is
available publicly online. There were some corporations for which revenue could not be found, and
these were not included in the revenue analysis. For information on what companies are regarded as
top brands, this report utilizes the Brand Finance Global 500 list, an international ranking of companies
based on their transparent valuation of their brand and intangible assets.
ii
https://www.cdproject.net/CDPResults/CDP?Global?500?Climate?Change?Report?2012.pdf
iii
https://www.cdproject.net/en?US/Pages/guidance.aspx#methodology
November 2012 3
In many instances in this report, companies are rated on a Climate Change Governance Index. This index
quantifies how an organization replied to CDP governance questions. In this report, the index is used to
approximate “how much” or “the amount of” climate change governance an organization has. The
highest an organization can score on the index is six, while the lowest is zero. The average index score in
this analysis was 3.69. In analyses where the index is compared to the total disclosure score, there is a
small amount of inherent correlation between the two metrics because the disclosure score and the
index both add a point for answering one of the questions. Although this might make it seem like an
analysis of these two variables is flawed, the connection could only amount to less than one half of one
percent of the total disclosure score, any correlation we see between the two variables are over 99.5%
related to other factors.
Table 1: Explanation of how Climate Change Governance Index is determined from CDP responses. Each
response to the governance questions receives the number of points indicated in the rightmost column, and
those are summed to get the final index score.
CDP Question Response Index Points
Individual/Sub?set of the Board or other
committee appointed by the Board
2
Senior Manager/Officer 2
Other Manager/Officer 1
No individual or committee with overall
responsibility for climate change
0
Where is the highest level of direct
responsibility for climate change within
your company? (must choose single
response)
No Response 0
Yes 1 Do you provide incentives for the
management of climate change issues,
including the attainment of targets?
No 0
Monetary Reward 1
Recognition (non?monetary) 1
Type of Incentive (can select multiple)
Other non?monetary award 1
Climate Change Governance Trends
Industry Type and Climate Change Governance
One of the things the CDP data allows us to investigate is whether industries are managing climate
change differently. We analyzed climate change governance across the broadest sector classifications,
and the distribution of companies in those sectors is detailed. The most common sectors listed were
Information Technology (17%) and Consumer Discretionary (15%), while the least common were
Telecommunication Services (