Climate change affecting bottom lines of America’s major public companies

Clare Saxon Ghauri
16 May 2014

LONDON: 60 of America’s biggest public companies report climate change is increasingly impacting their business operations, prompting the urgent need to enact bold national climate policy.

In a new report by CDP, it is revealed many S&P 500 companies across different economic sectors find climate change risk to be 'increasing in urgency' with many related costs already being felt by America's leading corporates, including Google, Wal-Mart and PepsiCo.

CDP tracks environmental performance of companies on behalf of investors that this year represent US$92 trillion in assets. The report presents risk-related company disclosures from 2011 to 2013.

"Dealing with climate change is now a cost of doing business", Tom Carnac, President of CDP in North America, said in a press statement. "Making investments in climate-change-related resilience planning both in their own operations and in the supply chain has become crucial for all corporations to manage this increasing risk".

Examples of businesses and sectors being affected by climate change in the report include the following:

  • Major drinks companies are being impacted, with PepsiCo stating changing temperatures, unreliable crops and surging energy costs disrupting business, and Dr Pepper Snapple Group reporting changing weather and water availability is putting US$2.5 billion of their sales costs at risk.
  • Leading technology businesses such as Google says global temperature changes impact the costs of cooling data centers, and HP reported a 7% drop in revenue following the 2011 floods in Thailand.
  • Energy giant Consolidated Edison estimates costs related to Superstorm Sandy in America at more than US$431 million.
  • Retail is equally at risk with clothing leader Gap disclosing a higher cost for cotton because of changing rain patterns as well as drought in China, and supermarket chain Wal-Mart stating losses at an average of US$20 million each year due to power outages and other extreme weather-related costs. 

Earlier in the year CDP published another report showing how the world's leading companies are beginning to include climate risk in their supply chains. The report found almost three-quarters of businesses identified a current or future climate risk, with 90% of these citing regulatory risk as a barrier to emission reduction investment, and 56% saying consumers are becoming more receptive to low carbon products and services.

As well as better integrating climate risk, increasingly businesses are preparing for climate change by adopting new strategies such as the 'Net Positive' approach, as recently outlined by Forum for the FutureThe Climate Group and WWF-UK.

The report – Net Positive: A new way of doing business – includes case studies from BT, Capgemini, Coca-Cola Enterprises, The Crown Estate, IKEA Group, Kingfisher and SKF, and provides a route map to help businesses engage with the concept that they should change from ‘doing less harm’ to becoming ‘Net Positive’, and therefore have a positive impact on the world.

CDP's latest research also follows a report published yesterday from the world’s biggest and oldest insurance market, Lloyd's of London, that caused a stir in the sector by urging insurers to include climate risks in their models.

Lloyd's reports the most expensive year on record for natural disasters was 2011, when insured losses cost the industry more than US$126 billion. In 2012, Superstorm Sandy caused $35 billion of insured losses, making it the most expensive hurricane in US history after Hurricane Katrina in 2005.

Read CDP's new report

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By Clare Saxon

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