NSF Cites Corporate Challenges to Report, Manage Carbon Emissions
August 28, 2009 // Published as a news service by IHS
NSF International and Trucost Plc released Carbon Emissions - Measuring the Risks, a report highlighting the importance of measuring and managing emissions to prepare for future carbon emissions trading.
U.S. companies may soon have to pay for greenhouse gas (GHG) emissions under the proposed cap-and-trade program where economic incentives are offered to companies which reduce pollutant emissions and adopt energy-efficient business practices.
This NSF report examines the GHG emissions and carbon footprints of S&P 500 companies in several sectors, including chemicals, food and beverage, health care, industrial goods and services, personal and household goods, automobiles and parts and retail.
The report also highlights other environmental challenges facing these industries by addressing the following:
- Are companies measuring and reporting GHG emissions?
- Which sectors emit the most direct operational GHGs?
- Which sectors are most exposed to carbon costs under regulations to control GHG emissions?
- Beyond carbon, what are the other significant environmental impacts of each sector?
"Climate change represents serious challenges to the environment, as well as risks and opportunities to U.S. corporations," said Malcolm Fox, Trucost's vice president of corporate services. "The first step in mitigating those risks is to calculate carbon emissions and their potential costs from direct operations and supply chains.
"Industry by industry, this report presents those impacts and identifies critical strategies to prepare for upcoming legislation and turn risks into competitive advantages," he said.
"Carbon-intensive companies will be most exposed to carbon costs under the cap-and-trade program to be introduced in 2012 under the draft American Clean Energy and Security Act of 2009 (Waxman-Markey Bill)," said Koen Bontinck, vice president of NSF Sustainability Services.
"The goal of this report is to not only provide companies with an affordable analysis of their current operations and exposure to carbon costs, but also to help them implement sustainable business practices and verify their GHG emissions data in preparation for the new regulations," Bontinck said.
The report is based on findings from Trucost's study, Carbon Risks and Opportunities in the S&P 500, which assessed GHG emissions, carbon intensity and exposure to carbon costs of S&P companies internationally using publicly disclosed information.
Using Trucost's methodology to provide an overview of each industry's impact on the environment, the key components of the emissions report include:
- Carbon benchmarking - Carbon intensity can be used to assess a company's carbon emissions relative to its sector peers. Companies that are more carbon-efficient than their competitors can gain a competitive advantage under carbon constraints such as carbon pricing.
- Financial risk - The report reveals calculated carbon costs relative to earnings to identify potential profit risk.
- Other environmental impacts - To compare the importance of other environmental impacts for each sector, such as impacts on natural resources, Trucost calculated environmental costs based on the financial value of damages caused by each impact.
- Strategic implications - Companies with more energy efficient operations and supply chains will be well-positioned during the shift to a low-carbon economy to attract investors and increase market share.
Trucost's general findings include:
- Over 80% of GHG emissions originate from supply chains, representing a serious financial exposure as costs are passed on to manufacturers.
- The cost of carbon may reach as high as 25% of earnings for some firms as measured by earnings before interest, taxes, depreciation and amortization.
- Two-thirds of companies inadequately report their carbon emissions.
- Companies that compete with more carbon-efficient peers could lose market share.
Source: NSF International.