Rory Sullivan

An assessment of the climate change policies and performance of large European companies

How are large companies responding to the challenges of reducing their greenhouse gas (GHG) emissions? An analysis of the published climate change policies and performance of 125 large European companies is presented. The results suggest that most large European companies have now developed the management systems and processes necessary for them to effectively manage their GHG emissions and related business risks. However, there is a significant disconnect between the targets that companies set for themselves and the more ambitious targets being set by the European Union (which has committed to a 20% reduction in its emissions by 2020 against a 1990 baseline). Of the companies surveyed, just over one-third had stabilized or reduced their total GHG emissions over the period 2002–2007, and fewer than one-third expected their emissions to stabilize or reduce in the coming years. The relationship between the quality of corporate policies and performance outcomes (in terms of GHG emissions) suggests that while companies with stronger policies are likely to have relatively better performance, only a minority of those companies with the highest-quality policies are committing to absolute reductions in their GHG emissions.

Improving cleaner production through pollutant release and transfer register reporting processes

An effective cleaner production programme requires the efficient collection and interpretation of data relating to a facilitys activities, including information of pollutant emissions, wastes generated and raw materials consumed. Many of these data are required to be collected and reported under national Pollutant Release and Transfers Registers (PRTRs) which are an increasingly common environmental policy tool in the OECD countries. This article considers the relationship between cleaner production and PRTR reporting, and discusses whether cleaner production programmes can be enhanced by the use of PRTR data. A case-study of a fertiliser manufacturing facility reporting under the Australian National Pollutant Inventory (NPI) is used to analyse and illustrate the practical issues around linking cleaner production with PRTR reporting. PRTR reporting can assist in identifying cleaner production opportunities and in generating the data sets required to design, implement and monitor cleaner production programmes. There are, however, some limitations in PRTR data that need to be recognised. Specifically, these are issues around data quality and comparability (e.g. PRTRs rely heavily on default emissions factors rather than the monitoring data that are generally required for cleaner production programmes) and the different data sets required for PRTR reporting (which generally require reporting at the site level rather than at the individual process unit level that is required for cleaner production).

Funding low carbon cities: local perspectives on opportunities and risks

There are compelling reasons for policy makers to be interested in the low-carbon agenda. More than half of the worlds population lives in, and more than half of the worlds economic output comes from, cities. Up to 70% of global carbon emissions can also be attributed to consumption that takes place in cities. Recent research has shown that cost-effective investments in low-carbon options could deliver a 40% reduction in GHG emissions from cities by 2020, while also providing wider economic benefits such as enhanced competitiveness and increased employment. As yet, however, investments in low-carbon cities have not been made at scale due mainly to the scale of the finance required, local government budgetary constraints, and perceptions about their costs and benefits. With a focus on the UK, a contemporary account is provided of what local authorities see as the major financial risks associated with funding low-carbon cities. Practical proposals – which also have more general relevance to the future financing of low-carbon cities around the world – are offered on how local authorities, in conjunction with central government, the private sector, and institutional investors, can effectively manage these risks. Policy relevance Cities house more than half of the worlds population, generate more than half of the worlds economic output, and produce between 40% and 70% of all anthropogenic GHG emissions. In the UK, 70% of such emissions are under the influence of its local authorities. Thus, one of the key public policy challenges for the low-carbon transition is how it should be financed. There are several obstacles and related risks to this transition, including financial and legal obstacles and the differing views and perceptions of stakeholders. These can be attenuated, somewhat, by national government support at scale, local authority leadership, and cooperation between other authorities and the private sector, and the development of tools and guidance to reduce transaction costs.

Climate Change Policy Uncertainty and the Electricity Industry: Implications and Unintended Consequences

Power generation companies are among the biggest emitters of greenhouse gases and are, therefore, potentially among the most exposed companies when it comes to regulatory risk and uncertainties in climate change policy. In practice, however, their risk exposure is reduced by the ability of power companies to pass through the additional costs to the price of electricity. Uncertainties in climate change policy create a financial incentive for power generation companies to delay new build and to keep old plant running for longer. This may, in turn, lead to greenhouse gas emissions remaining higher for longer than would otherwise be the case. This paper considers the actions that need to be taken by policy makers to address the issues caused by policy uncertainty, and to accelerate investment in new build, low carbon generation.

Farm Animal Welfare as an Investment Issue

Farm animal welfare is an increasingly important issue for companies across all sectors of the food industry – be they retailers, service companies, manufacturers, processors or producers. This has been driven by a range of factors, including regulation, consumer concern, pressure from animal welfare organisations on food business companies and their investors, retailers expecting their suppliers to comply with corporate responsibility policies, and the brand and market opportunities for companies that adopt higher farm animal welfare standards. Yet, despite these drivers, farm animal welfare as a management issue is relatively immature. While some of the more progressive farm animal welfare NGOs have worked with companies to raise awareness and develop appropriate practices and tools, there is still a lack of consensus around how companies should manage farm animal welfare-related issues. Investors are starting to play a more active role as they begin to recognise such issues may represent potential financial risks and opportunities for companies they invest in. A number of ethical (screened) retail funds – such as those in the UK and USA – explicitly consider farm animal welfare issues, and some investors have started to engage with companies to improve their performance and reporting on farm animal welfare. NGOs are beginning to engage with investors and it is possible that this will, over time, result in investors paying more attention to the quality of companies’ management of farm animal welfare issues which, in turn, should contribute to improved practices on the ground. The aim of this briefing paper is three-fold: (i) to explain how investors look at non-financial, or environmental, social and governance (ESG), issues in general in their investment processes, (ii) to analyse how they approach and consider farm animal welfare issues, and the obstacles faced in making farm animal welfare a more ‘mainstream’ investment issue, (iii) to explore and consider how the debate is likely to evolve over time.

Better Returns in a Better World

The 2008 financial crisis raised a series of fundamental questions about the role of investors in society, both in terms of the investments they make, and the manner in which they use their influence to ensure that the positive poverty reduction and development impacts of their activities are maximized and the negative impacts minimized.Oxfam launched the Better Returns in a Better World project (BRBW) in November 2008 with the aims of analysing the role that institutional investors can play (and have played) in addressing poverty reduction and development issues, encouraging investors to take account of these issues in their investment practices and processes, and identifying the barriers to long-term investment that supports sustainable and equitable development in developing countries. This report summarizes the lessons learned during the course of the BRBW project, and makes a series of recommendations to the investment community, policy makers and more broadly to civil society.

Corporate Reporting on Farm Animal Welfare: An Evaluation of Global Food Companies’ Discourse and Disclosures on Farm Animal Welfare

Simple Summary Companies that produce or sell food products from farm animals can have a major influence on the lives and welfare of these animals. The Business Benchmark on Farm Animal Welfare (BBFAW) conducts an annual evaluation of the farm animal welfare-related disclosures of some of the world’s largest food companies. The programme looks at companies’ published policies and commitments and examines whether these might lead to actions that can improve animal welfare on farms. It also assesses whether companies show leadership in this field. The BBFAW found that, in 2012 and 2013, around 70% of companies acknowledged animal welfare as a business issue, and that, between 2012 and 2013, there was clear evidence of an increased level of disclosure on farm animal welfare awareness in the companies that were assessed. However, only 34% (2012) and 44% (2013) of companies had published comprehensive farm animal welfare policies, suggesting that many companies have yet to report on farm animal welfare as a business issue or disclose their approach to farm animal welfare to stakeholders and society. Abstract The views that food companies hold about their responsibilities for animal welfare can strongly influence the lives and welfare of farm animals. If a company’s commitment is translated into action, it can be a major driver of animal welfare. The Business Benchmark on Farm Animal Welfare (BBFAW) is an annual evaluation of farm animal welfare-related practices, reporting and performance of food companies. The framework evaluates how close, based on their disclosures, companies are to best practice in three areas: Management Commitment, Governance & Performance and Leadership & Innovation. The BBFAW analysed information published by 68 (2012) and 70 (2013) of the world’s largest food companies. Around 70% of companies acknowledged animal welfare as a business issue. Between 2012 and 2013, the mean BBFAW score increased significantly by 5% (p < 0.001, Wilcoxon Signed-Rank test). However, only 34% (2012) and 44% (2013) of companies published comprehensive animal welfare policies. This increase suggests that global food companies are increasingly aware that farm animal welfare is of interest to their stakeholders, but also that many companies have yet to acknowledge farm animal welfare as a business issue or to demonstrate their approach to farm animal welfare to stakeholders and society.

Corporate social responsibility, sustainability and the governance of business

Companies are hugely important actors in modern society and clearly have a critical role to play if we are to make the transition to a more sustainable economy and society. To some extent, it is hoped that their contribution to such a transition will be motivated by their commitments on Corporate Social Responsibility (CSR). Such commitments are normally made voluntarily and are delivered through various forms of self-regulation or corporate governance. But they are of course also motivated by market opportunities and driven by different stakeholder pressures and policy demands. The climate for CSR therefore encapsulates many dimensions of broader debates on governance in that it emphasizes the importance of public, private and civic action in shaping the conditions for the governance of business ‘from the outside’ and the role that self-regulation can play in enabling the governance of business ‘from the inside’. Under the banner of CSR, many (particularly larger and higher profile) companies have taken a variety of actions such as reducing their consumption of energy and other resources, reducing emissions, effluents and wastes, and developing products and services with better environmental or sustainability characteristics. CSR commitments and actions are often presented by companies as voluntary or beyond compliance initiatives that are delivered through various forms of self-regulation or corporate governance. In practice, however, these commitments and actions are usually motivated by policy pressures, market opportunities and stakeholder demands.

The Governance of Corporate Responsibility

This paper provides an overview of the literatures on corporate social responsibility (CSR) and on the governance of business, and explores the links between these two, frequently separate, debates. It concludes that while there is a general recognition in the literature of the factors that encourage companies to adopt a proactive approach to CSR, the specific factors and their relative importance are relatively poorly understood. The paper then considers the empirical evidence on corporate responses to climate change. This evidence provides three important insights into the relationship between CSR and governance. The first is that governance interventions such as non-governmental organisation (NGO) campaigns and mandatory disclosure regimes are hugely important in focusing company attention on relevant issues, and in stimulating the development of organisational capacity and potential investment opportunities. The second is that these interventions are more likely to influence company behaviour when they are aligned. Expressed another way, while it may be relatively easy for companies to ignore individual pressures, it is much more difficult to ignore multiple pressures where those pressures have a common message or purpose. The third is that company behaviour is generally driven by their analysis of the business case for action (or inaction). Companies have made most progress in situations where they see a clear business case for action and where the actions do not require dramatic changes to their business models and practices. Delivering change beyond these limits, acknowledging, of course, that companies do learn by doing and that the business case can evolve, is much more difficult and likely to depend on the powers of the regulatory state.

Funding Low Carbon Cities: Mapping the Risks and Opportunities

There are compelling reasons for local authorities - and especially cities - to be interested in the low carbon agenda: it is estimated that approximately 70% of the UK’s economy-wide emissions are under the influence of UK local authorities, and recent research has shown that, at commercial costs of capital, cost-effective and cost-neutral investments in energy demand reduction could deliver a 40% reduction in greenhouse gas emissions from cities by 2020, as well as wider benefits such as enhanced competitiveness, increased employment and reductions in fuel poverty. Despite these compelling arguments, these investments have not yet been made at the scale required to deliver these benefits. This paper provides a contemporary account of how UK local authorities might approach the question of how to ensure the funding of retrofits and investments in low carbon options, with a particular focus on the major obstacles that need to be overcome and the key financial and non-financial risks that need to be managed. The paper identifies market risk (i.e. the impacts of interests rates and energy prices on the economics of low carbon investments) and take-up risk (i.e. that there are sufficient projects available for investment) as the two major risks that need to be managed and offers some practical suggestions on how these risks may be managed.