“Huge variations in performance” in levels of carbon efficiency among the world’s 2,000 largest listed firms

Luke Nicholls and Alex Baldwin provide an important article on the edie.net website about the large gap between the worst and best-performing businesses on energy efficiency. This was a global study.

 

Energy efficiency: ‘Champions and dunces’ exist in every industry

The world’s largest listed companies could save 1.4 billion tonnes of CO2 – the equivalent of Japan’s annual carbon emissions – by closing the gap between the worst and best-performing businesses on energy efficiency, a major new report has revealed.

The new study released today (5 December) by investor tracking group ET Index Research reveals “huge variations in performance” when it comes to levels of carbon efficiency among the world’s 2,000 largest listed firms.

If the ‘dirtiest’ 50% of carbon disclosers achieved just mid-range carbon intensity for their sector, they could save 1.4 billion tonnes of CO2, the ET Global Carbon Rankings report reveals.

The UK’s former Energy Secretary and co-chair of ET Index Research Chris Huhne said: “Sector by sector, there are champions and dunces. Some companies can be over 100 times less carbon intensive than others in the very same industry. Backing the champions makes sense because carbon-efficient companies have outperformed the market average over the last five years.”

Nearly half of the world’s 800 largest listed companies have disclosed their emissions, and have improved their carbon efficiency by 15% in the last year, the report reveals. Just 363 of those have fully disclosed their direct emissions from their operations and the electricity they use (Scope 1 and 2). These disclosers have increased their carbon efficiency by an average of 15% from 2015 to 2016, saving 360 million tonnes of CO2 – equivalent to the annual emissions of Turkey.

Performance gap

Unsurprisingly, the renewable resources and alternative energy sectors lead the pack when it comes to levels of disclosure of Scope 1 and 2 emissions, with 67% of companies in these sectors reporting complete datasets. Conversely, the health care and financial sectors have the lowest levels of disclosure with 32% and 34% of businesses disclosing complete datasets respectively.

The research goes on to reveal a huge range of carbon efficiency performance even within particular sectors. In the chemicals industry, for example, Malaysia’s Petronas Chemicals Group emits 13,961 tonnes of carbon (tCO2) for every million dollars of revenue, making the firm 51 times less carbon-efficient than the industry average, and 481 times less than the industry leader – the UK’s Johnson Matthey.

And in the electric utilities sector, Electric Power Development of Japan emits 8,127tCO2 per million dollars of revenue, making it 16 times less carbon-efficient than the industry average and 133 times less than the best performer – Italy’s Terna Rete Eletrrica Nazionale.

Computer software company Oracle is the world’s most carbon-efficient company, according to the research, as it produces just 34tCO2 across Scopes 1, 2 and 3 for every million dollars of revenue. It is followed by two more US companies, biotech firm Biogen at 40tCO2, and software company Adobe Systems at 41tCO2.

Indirect impacts

The research also finds there is a significant leap in emissions for businesses in some sectors when Scope 3 emissions – all indirect emissions related to the activities of an organisation – are taken into account. Reporting of Scope 3 emissions doubled from 1% to 2% between 2015 and 2016, indicating an increase in disclosure efforts among big corporates.

Co-founder and chief executive of ET Index Research Sam Gill said: “Scope 3 emissions are vital in understanding the full extent of a company’s exposure to carbon risk because they usually account for by far the largest part of its carbon footprint.

“For example, Honda’s carbon intensity is 43 times higher when you consider consumer use of its vehicles and other Scope 3 emissions. It is virtually impossible to imagine a scenario in which carbon-intensive companies, across the entire value chain, are not penalised after the Paris Agreement.”

Carbon risk has become more of a mainstream investor concern ni recent times, driven in part by the recent enforcement of the Paris Agreement, which commits countries to keeping global temperature rises “well below 2C”. A task force set up by the international Financial Stability Board is due to make recommendations later this month on how companies should report on the potential impact of climate change on their bottom line.

A separate report produced by carbon management supporter Carbon Clear ranked the FTSE100 on carbon measurement and reporting drew similar results to those of ET Index Research, concluding that there are “game-changers” in some industries, but that “much more needs to be done” by others.

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