Investor coalition rates companies on climate change-related governance practices
A Ceres investor coalition report rating 100 multinational companies on their governance practices for handling the risks and opportunities posed by global climate change has named Alcan one of the top three companies overall and the leading company in the metals and mining industry.
"Through energy efficiency and innovative new product development, Alcan is doing a great job tackling the risks and opportunities from this issue. Company leaders and board members deserve special credit for putting well-functioning governance systems in place to meet this challenge," said Ceres president Mindy Lubber.
The Ceres report, Corporate Governance and Climate Change: Making the Connection, evaluated companies according to a Climate Change Governance Checklist, consisting of 14 governance steps that companies can take to proactively address climate change. Ceres first introduced the checklist in a 2003 report, and says the results since then are encouraging, with a growing number of leading companies having begun to confront climate change as a major business issue to be addressed.
"This report is the first comprehensive measurement of how 100 leading global companies are preparing and positioning themselves to face the challenges of climate change," Lubber observed.
Responding to the report's results, Dick Evans, recently named Alcan's new president and CEO, said, "To be recognized from across a broad scope of industry as a leading company in addressing the challenges of climate change is a testament to the hard work the Company and its employees are doing in delivering concrete, tangible reductions in greenhouse gas (GHG) emissions across Alcan's approximately 430 sites." His company, he added, "is committed to embedding sustainability into its operations as part of the Company's strategy for long term competitiveness."
In 2001, Alcan launched Target, a GHG reductions program and a key component of EHS First, its corporate framework for translating the company's commitment to environment, health and safety into measurable, recordable actions. Through Target, Alcan achieved 2.9 million tonnes of GHG reductions between 2001 and 2004, even as overall primary metal production increased by 40%.
The company is evaluating new targets for 2006 in support of the aluminum industry's goal of being carbon-neutral by 2020 on a life-cycle basis. Alcan is a participant in various voluntary programs in all regions where it has major installations, including the U.S. EPA's Climate Leaders program and the International Emissions Trading Association (IETA). It has been active in advising national governments for the U.K. and E.U. Emissions Trading Schemes and participates in the World Economic Forum's Global Greenhouse Gas Register.
The Ceres report profiles 76 U.S. and 24 non-U.S. companies in ten business sectors: oil/gas, electric power, auto, chemical, industrial equipment, mining/metals, coal, food products, forest products, and air transportation. Its Climate Change Governance Checklist uses a 100-point scoring system to rank the largest companies in terms of how they are addressing climate change in five broad areas: board oversight, management performance, public disclosure, greenhouse gas emissions accounting, and strategic planning.
In addition to Alcan, other non-U.S. companies such as BP, Toyota, Unilever and Rio Tinto had the highest scores in five of the nine sectors in which U.S. and non-U.S. firms were evaluated (only U.S. companies were assessed in the electric power sector). U.S. multinationals DuPont, General Electric, International Paper and United Parcel Service led in the other four sectors.
The results since its 2003 report are encouraging, says Ceres. The previous report, reviewing only 20 large U.S. companies, showed that few were addressing climate change. Making the Connection, by contrast, shows that leading companies in many key industries are tackling the issue at the highest levels, with management setting performance goals for reducing GHG emissions and developing new climate-friendly products.
DuPont, for example (the top scorer among the U.S. companies) has reduced its GHG emissions 72% since 1990 and has developed products such as energy-efficient building materials, components for solar, wind and fuel cell systems, and next-generation refrigerants with low global warming potential, notes the report.
Other examples include: plans by BP (the highest-scoring company of all 100 reviewed) to invest $8 billion in clean energy technologies over the next decade and its setting of long-term GHG emission reduction targets; General Electric's EcoImagination initiative; and Ford's plan to boost production of hybrid vehicles tenfold by 2010.
At the same time, however, many other companies in key climate-vulnerable sectors such as power, oil and gas, air transportation and food products are ignoring the issue, pursuing "business as usual" philosophies that are putting their businesses and their shareholders at risk, says Ceres.
The report is presented as an important tool for company executives who, it states, should benchmark their performance against their corporate peers and take steps proposed in the report to manage climate change risks and take advantage of opportunities.
These measures include: assessing the deepening financial connections between climate change and their businesses; developing action plans to manage risks and pursue opportunities; disclosing and discussing their climate change strategies with relevant stakeholders. Fourth, and most importantly, they need to move away from the customary short-term view in order to implement these strategies successfully, focusing more on long-term financial results and shareholder value.
Ceres says its report will also be useful for:
*board members, who should raise its findings with management and set guidance to improve company practices;
*investors, who should go through a benchmarking process and urge companies to raise their performance levels, especially in high-risk sectors such as electric power, oil and gas, coal and the auto industry; and
*financial analysts, who should use the report's information as a basis for rewarding companies that are responding to the climate change challenge and assigning greater risk to those that are not.
Based in Boston, Massachusetts, Ceres is a coalition of U.S. investors, environmental organizations and other public interest groups working with companies to address sustainability challenges and advance environmental stewardship. Ceres also directs the Investor Network on Climate Risk (INCR), a two-year-old alliance of 50 institutional investors in the U.S. and Europe, collectively managing approximately $3 trillion (U.S.) in assets.