Carbon disclosure gaining importance amongst businesses

At a recent event, senior officials noted that the low carbon future is the only future, and businesses that adopt low-carbon strategies in their operations will stay ahead of the game.

Singapore’s senior parliamentary secretary of the Ministry of the Environment and Water Resources Amy Khor had noted that increasingly, governments and investors alike are requiring companies to disclose their carbon footprint. “Those that put carbon management systems in place now… will raise their competitiveness and help lower greenhouse gas emissions,” she said.

For firms new to the concept of carbon management, that is what organisations such as the Carbon Disclosure Project (CDP) are for.

It aims to enable businesses, big or small, to report their carbon emissions and put in place strategies to tackle climate change.

Carbon disclosure was the subject of a recent forum in March jointly organised by the Singapore Business Federation, Singapore Compact, City Developments and Association of Sustainable and Responsible Investment in Asia or ASrIA.

British High Commissioner Paul Madden of the British High Commission, which was one of the support partners of the seminar, highlighted that it was a matter of time before companies have to comply with such reporting.

In Singapore, for example, the Energy Conservation Act will take effect in 2013. Its objective is to bring Singapore’s 2005 energy usage levels down by 35 per cent by 2030. It will require companies that use more than 15 gigawatt-hours of energy per year, to appoint a trained energy manager to monitor and report energy use to the National Environment Agency (NEA) and submit improvement plans to improve energy efficiency.

Ms. Friedricke Jebens, Partnership Manager for the CDP, explained that CDP was set up in 2000 and requests information on behalf of 475 institutional investors who recognize the challenges of climate change and the value of such reporting. These investors have funds totaling US$55 trillion.

The non-profit organization holds the largest database of corporate climate change and energy use data information in the world, with full access for signatories and retail investors.

The information requested by CDP goes out on Feb 1 every year to companies who register on the database. They are then given four months to submit their responses. After 31st May, CDP analyzes the responses and reports on the results of the analysis.

The questions cover Governance, Risks & Opportunities, Strategy, Emissions Measuring & Accounting and Communication. New questions this year will enable more clarity in the risk identification process and in making the link between climate change and strategy, said Ms Jebens.

This year, CDP sent out its eighth annual global request to 4,500 companies for climate change information. In 2009 about 2,500 companies all over the world measured and disclosed green house gas emissions and climate change strategies

ASrIA is one organisation who has championed CDP in Asia and has enabled submissions from Singapore, Taiwan, Thailand, Indonesia, India, Malaysia, China and Philippines.

David St. Maur Sheil, Director of ASrIA and lead author of the Carbon Disclosure Project 2009 Asia ex-Japan Report said that Socially Responsible Investment or SRI Funds in Asia have surged from 158 to 203.

There are 19 SRI funds in Singapore. Globally US $7 trillion of funds take into account environmental, social and governance issues, out of which Asia accounts for US$66 billion.

According to the above report, the number of reporting companies has more than doubled to a total of 127 in 2009, up from 61 in 2008. This has been based on a significantly enlarged sample, up from 220 to 500 companies in 2009.There was a remarkably consistent response rate of around 20 per cent from each sector; and the information technology (IT) sector stood out with more than 70 per cent response level.

The leading response rates country wise are from Korea, Taiwan and Hong Kong. India is emerging as a strong reporter. Singapore had 6 respondents as compared to 26 from Korea. Clearly, more companies in Asia need to do more to report on climate change.

Mr. Sheil also pointed out some benefits for firms who commit to reporting:

  • In business, what gets measured gets managed. The CDP has played an important role in encouraging companies to take the first steps in that measurement and management path towards carbon emissions reduction
  • Companies can think about climate change risks and opportunities in a structured way e.g., the UK company Logica saved 10 million pounds through responding to the CDP form, as it led them to improve their operations
  • Companies are better prepared for legislation when it arrives
  • It enables effective communication with investors who are looking for clear reporting on climate change
  • It helps companies to conform to an international standard for carbon reporting and develop strategies for climate change

Companies usually approach these disclosure requirements in a defensive mode, responding to pressures from customers, investors and global regulators in a knee-jerk fashion. If taken pro-actively, then these requirements can be turned into an opportunity for companies to streamline operations, reduce costs and be well prepared for a low carbon future.

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