Major Corporations Quietly Reducing Emissions—and Saving Money

A federal carbon cap-and-trade program is dead for the foreseeable future. So is a once promising national clean energy standard.

With climate policy paralyzed in Washington, a number of leading U.S. corporations are going it alone, squeezing big reductions of climate-changing emissions from their operations and supply chains. With stakeholder criticism and other pressures building, more and more are also releasing rigorous climate data in their financial reports and enlisting third-party firms to make sure it is accurate.

“We do it because it makes good business sense—whether it’s top of the fold [politically] or not,” said Wayne Balta, vice president of corporate environmental affairs and product safety at IBM.

The world’s biggest computer services provider is on track to slash its electricity use by 20 percent by the end of this year from 2008 levels. It will also cut its energy-related greenhouse gas emissions by 16 percent from 2005 levels—four percent above its original goal. Earlier this year, the firm won one of the U.S. Environmental Protection Agency’s first-ever Climate Leadership Awards.

Balta said that key to those reductions were efficiency upgrades in more than 360 buildings and data centers, which were achieved with the help of 40 full-time energy management professionals. He would not say how much the climate initiatives cost.

Balta emphasized that while IBM’s climate efforts have increased, putting efficiency measures into action is nothing new. Between 1990 and 2010, IBM avoided enough electricity to power 520,000 homes for a year; cut its energy bills by nearly half a billion dollars; and as a result prevented the release of 3.8 million tons of carbon dioxide, equivalent to the annual emissions of Cambodia.

FedEx, the world’s largest overnight delivery company, is on a similar path. This month, it announced tougher emissions reduction targets for its fleet of nearly 700 aircraft. The firm is now targeting a 30 percent cut in aircraft emissions by 2020 from 2005 levels, up from its previous goal of 20 percent.

89% More Taking Action—but Why?

IBM and FedEx are hardly alone in recognizing the business potential of climate action—even as efforts in Congress stall.

Of the major U.S. corporations surveyed in 2011 by the Carbon Disclosure Project (CDP), a London-based nonprofit, 89 percent more were taking action on climate change than in 2010.

Last year, 214 of the biggest public firms in the United States told the CDP they had set emissions targets, a nearly 30 percent rise from the previous year. Zoe Tcholak-Antitch, director of CDP’s North America office, said that’s a significant jump considering the number hasn’t really changed in the past few years.

“That’s a very positive indicator … that the U.S. corporate community is taking emissions reductions seriously,” she said.  

David Rosenheim, executive director of the Climate Registry, the nation’s largest carbon reporting entity, said he sees the same increasing interest. Since 2007, its membership has grown from 243 founding members that work with the registry to report and reduce their emissions to about 400 today.

There are three main reasons why firms are voluntarily stepping up climate efforts, company representatives and advocates told InsideClimate News. The first is the tough economy, which has prompted businesses to rigorously track spending on fuel and electricity use—and to dramatically reduce it.

Shipping giant UPS, for instance, which has an annual vehicle fuel budget of over $1 billion, has made trimming its jet fuel footprint a key priority. “We look at fuel conservation programs as part of our economic picture,” said spokesperson Lynnette McIntire in an interview. Last year it avoided 8.4 million gallons of gasoline, enough to fill up the tanks in nearly a quarter million SUVs.

The second reason is worries about the rise in extreme weather and other climate impacts to their operations and assets. “In the past, there was a level of skepticism around the existence of climate change,” said Doug Kangos, a partner at PricewaterhouseCoopers, a global services firm that partners with the CDP on its annual U.S. report. “Now more companies are acknowledging its impact on their business.”

Kangos pointed as proof to this year’s record-breaking heat and drought—both linked to global warming by scientists. The extreme weather has made it tougher for cargo to travel by river, stalled construction of bridges and roads and crippled power and water supplies for manufacturers, affecting many companies’ bottom lines.

A third concern is pressure from the investment community to set greenhouse gas reduction goals. A growing number of climate resolutions are showing up on annual shareholder ballots. In 2012, nearly half of all resolutions concerned environmental and social sustainability initiatives, up from about a third in 2011, according to an analysis by Ernst & Young.

Ceres, a coalition of investors with $10 trillion in assets, tracked nearly 110 sustainability resolutions that were submitted to U.S. companies in 2012. Forty percent resulted in firms committing to address climate and other environmental risks, it said.

Rob Berridge, senior manager of investor programs at Ceres, said the resolutions largely targeted oil and gas companies and electric utilities. Investors are “trying to create change across the economy to get everything aligned with a low-carbon future, because that will help protect the economy in the long run,” he said.

SEC Climate Guidance: Has It Worked?

Beyond the shareholder resolutions, companies are also feeling compelled to document and disclose the risks that global warming might pose to their businesses.

Driving that pressure is two-year-old guidance by the U.S. Securities and Exchange Commission (SEC) requiring companies to consider climate risks on their annual 10-K financial forms.

Jackie Cook, the founder of Fund Votes, an independent project that tracks public disclosure data, said that in 2009, one year before the SEC ruling, 32 percent of the 543 public companies that filed 10-K reports that year mentioned climate change. That number rose to 49 percent in 2010, or 264 companies out of 533, likely because of the SEC guidance, she said.

Since 2010, though, the number of firms disclosing climate data on their 10-K forms has stayed flat. As of June 2012 only 53 percent of companies have done so, according to a computer tool developed by Cook that scours 10-K filings for climate data. The bulk of those companies are in the oil and gas, coal mining and utility sectors.

Cook said there is a silver lining, however. The depth of companies’ climate disclosures has grown since 2009, with a 20 percent increase in the amount and quality of 10-K content devoted to climate-related risks.

Climate Data Moves Out of Corporate Sustainability

Along with the 10-K filings, companies are providing more robust climate data in their annual reports to shareholders, said Kangos of PwC. Roughly a quarter of the country’s top public companies are now reporting emissions data and global warming risks as part of their overall financials, instead of in separate corporate sustainability reports, he said.

“That’s fairly dramatic. Five or six years ago, it was probably none of them. Now it’s some of them. That’s a trend we see continuing.”

Companies are hiring third-party consultants to audit their greenhouse gas emissions and verify the findings—just as they would with their financials. UPS, for instance, enlists firms such as Deloitte & Touche, Swiss-based SGS and The CarbonNeutral Company, a British firm that develops corporate strategies to reduce carbon emissions.

“It’s equivalent to having their financial data audited by an accounting firm, so that investors can trust it,” said Rosenheim of The Climate Registry. “It’s that same level of assurance.”

Businesses are also starting to apply the same level of scrutiny to their supply chains that they apply to their own operations, to both cut costs and to deepen corporation-wide emissions. Suppliers’ greenhouse emissions can account for as much as 86 percent of a company’s overall emissions, according to a study by Carnegie Mellon University researchers.

At IBM, for instance, first-tier suppliers that directly provide products and services to the firm are now required to set and publicize goals on emissions reductions, energy conservation and waste management, and to measure their results regularly. Those companies must then require the same goals of their own suppliers that do work tied to IBM.

The Carbon Disclosure Project works with 50 global corporations—including IBM, Coca-Cola, Unilever and Nestle—to collect climate data on suppliers as part of its Supply Chain Program. In February, the CDP reported that 45 of those firms now have a system in place to evaluate risks that climate change pose to their suppliers’ operations. About 25 of those say they already require, or soon will require, their suppliers to sign contracts pledging emissions reductions.

That trend means business for companies like Climate Earth, a Berkeley, Calif.-based startup that tracks and analyzes emissions across companies’ global supply chains. President and CEO Chris Erickson told InsideClimate News that the four-year-old firm has doubled its sales every year and is bringing on board bigger corporate customers, like industrial conglomerate 3M and Merck & Co., one of the world’s largest pharmaceutical companies.

Still, many of those interviewed for this story said U.S. firms reporting and reducing greenhouse gas emissions remain the exception in the business community. “There’s not enough action happening,” said Berridge of Ceres.

Nothing would help more to encourage climate action than federal carbon regulations, Kangos of PwC said.

“In the absence of policies, companies are left to fend for themselves,” he said. “The business community’s attitude has been [to] set the [climate] regulation so we know what the ground rules are. And we’ll deal with those ground rules.”