From Apple to Walmart, Successful Companies Are Addressing Climate Change

Managers manage. They are assertive rather than passive. They have little time for histrionics or ideology because impatient shareholders are far less forgiving than even the most fervent ideologue. And it is investors who pay the bills.

So while there is considerable pressure to deny the existence of climate change, belittle the science behind it and fight against regulatory or governmental programs aimed at addressing it, many, if not most, corporations, even those located in the most conservative regions, are quietly but firmly and comprehensively preparing for it.

The reality is that the science, while it does not always absolutely prove the case, has raised enough concerns that any prudent enterprise with a half-way competent risk management program has to assess the possibilities. And, as the following article explains, what they have learned is of sufficient moment that many have begun taking steps to begin protecting their assets, channels, supply chains and people.

The experiences in Japan and Thailand over the past few years were a clarion call which served to remind managers that much of their success was dependent on ruthlessly efficient systems and commercial webs which presume effective operation. It is becoming apparent that disruption, while a popular intellectual meme, is a monumentally counterproductive influence, especially for those whose compensation is dependent on the reduction of economic friction.

It is unlikely that many businesses will take the lead in advocating for policies to mitigate climate change's effects, but necessity may dictate that their actions belie their public posture. JL

Eric Roston reports in Bloomberg:

The results are a case of already-successful companies taking on climate change, not climate change activities per se categorically pushing stocks higher somehow.
If acting on climate change hurts the economy, as the American Coal Council's talking points suggest, it’s a lesson lost on some of the world’s most successful companies.
Stocks of companies that take climate change seriously beat the wider market by almost 10 percent over the last five years, according to a report released this week by a U.K. nonprofit. The group, CDP, encourages companies to disclose their climate change work publicly, on behalf of hundreds of institutional investors.
CDP's Carbon Performance Leadership Index (CPLI) is composed of companies that lead their peers in managing and reporting the carbon pollution from their own operations and supply chains. That’s not necessarily the same as the least-polluting companies; it’s the companies most aggressively wrangling carbon. In the five years since the CPLI first launched, the index beat both the Bloomberg World Index, which tracks the largest companies across sectors by market value, and the Dow Jones Sustainability World Index (DJSWI):

Source: CDP.net; data in US$ from 1/10/2010 to 22/9/2014, source ECPI based on data by Thomson Reuters Datastream and Bloomberg.

CDP grades companies based on how aggressively they are setting and meeting carbon goals, and on how forthcoming they are about this work. CDP started with a pool of about 2,000 companies that shared information about their climate-related work earlier this year. The 187 companies that received an "A" from group this year made the index. They include some of the world’s leading brands — Apple, Bank of America Merrill Lynch, BMW, CVS Health, Google, Northrop Grumman, Samsung, Unilever.
At least part of the strong performance of the CDP carbon index can be attributed to its heavy concentration of tech and financial stocks, sectors that grew faster than average in the last five years. Businesses in those industries have embraced pollution cuts much faster than their counterparts in industries where burning fossil fuels is more central to the core business. The energy sector, for example, "has very few companies" -- five -- "that are able to meet the leadership criteria" laid out by CDP this year, according to the report.
"Energy companies struggle to really put themselves on a path of a low-carbon transition," says Paul Simpson, CDP's chief executive. "Their core business is very carbon-intensive."
The results challenge the still-pervasive assumption that climate-friendly business is automatically bad business. "The A List" study complements a library of research into the benefits to businesses and investors of considering environmental and other sustainability criteria when setting strategy. There's some evidence of a “halo effect” associated with do-gooder companies on low-carbon diets. More likely, the CDP results are a case of already-successful companies taking on climate change, not climate change activities per se categorically pushing stocks higher somehow.
If nothing else, CDP’s new report is a reminder that rational executives atop leading companies are embracing the changes that are already underway in consumer sentiment, regulation and the climate itself.