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Carbon Disclosure Demands on the Rise: Is Your Organization Ready?

george-ahn2Home Depot battled negative headlines in May when shareholders voted down a resolution to enforce more rigid and transparent energy efficiency measures. The resolution proposed that the organization assess company-wide energy use from its buildings, transportation and supply chain. It also urged Home Depot to set energy use reduction targets and report findings and progress to shareholders.

While the measure did not pass, it received support from the $20 billion Connecticut Retirement Plans and Trust, the advisory firm RiskMetrics Group (RMG), and other investors in the $7 trillion Investor Network on Climate Risk (INCR). Despite the outcome, the resolution foreshadows a future in which shareholders increasingly require reports on energy efficiency improvements and climate change risk. Organizations that fail to put the right systems in place today to meet these reporting requirements will suffer.

Findings from CERES, a coalition of investors, environmentalists and public interest groups, report that “the resolution filed with Home Depot is one of a record 67 global warming resolutions filed with 58 U.S. companies and two Canadian companies as part of the 2009 proxy season.” The findings confirm that companies must start to disclose risks from climate change now and provide stakeholder groups with a plan to mitigate those risks.

Further, despite the evidence that climate change disclosure will quickly transition from a proposal to an imperative, many companies have not started to track or abate their carbon emissions.

In fact, according to a 2009 report co-authored by CERES, over 76 percent of the S&P 500 fail to even mention climate change in SEC filings. This is surprising given that, according to a September 2008 McKinsey survey of 1,453 international executives, 50 percent said that environmental issues ranked among the top three areas that would most affect shareholder value in the next five years. While organizations appreciate investors’ concerns, they often lack the tools necessary to address them.

Further evidence that organizations will face more stringent demands from shareholders comes from INCR, an alliance of over 80 institutional investors and financial firms that collectively manage more than $7 trillion in assets. INCR has suggested that congress mandate climate change disclosure in SEC filings, and INCR Director and CERES President Mindy Lubber states, “climate change is a bottom line issue and investors have a right to know which companies are best positioned for the emerging clean energy global economy.”

To meet shareholder climate risk reporting requirements, organizations need technology that not only measures their current carbon footprint, but also manages abatement opportunities, facilitates emissions reduction initiatives and tracks progress and ROI. To gain a sense of where and how to start reporting, consider real estate. Buildings represent 48 percent of energy consumption and present the most significant opportunities to reduce environmental impact, improve operating costs, and demonstrate carbon reduction accountability.

With a technology framework that can identify underperforming building locations, provide a set of analysis tools to evaluate different carbon reduction options, and manage those options through to completion, organizations can address even the most exacting shareholder resolutions.

Investors will use a number of tools to determine how well companies address risks from climate change, including the Global Framework for Climate Change Disclosure, the Carbon Disclosure Project, CERES, and SEC Filings. Companies should seek out technology solutions that provide flexible reporting platforms to facilitate carbon reporting to multiple agencies. All else being equal, companies that adequately disclose and address risks from climate change will be rewarded with higher valuations and a lower cost of capital.

As your organization evaluates shareholder demands, ask yourself this: do you have the right tools to disclose your impact on the environment, or will you, like Home Depot, face climate nondisclosure backlash and risk losing shareholder support?

George Ahn is President and Chief Executive Officer of TRIRIGA. He has more than 18 years of software industry leadership.

George Ahn
George Ahn is President and Chief Executive Officer of TRIRIGA. He has more than 18 years of software industry leadership.
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2 thoughts on “Carbon Disclosure Demands on the Rise: Is Your Organization Ready?

  1. There has been atmospheric cooling the last 8 years, and no new high global annual temperatures in the last 11 years. None of the computer models replicate this fact. Anthropogenic (or man caused) global warming is not proved.

    The global warming adherents base their argument of proof on more than 20 different computer models called general circulation models (also known as global climate models or GCMs). Each computer model is composed of dozens of mathematical equations representing known scientific laws, theories, and hypotheses. Each equation has one or more constants. The constants associated with known laws are very well defined. The constants associated with known theories are generally accepted but probably some of them may be off by a factor of 2 or more, maybe even an order of magnitude. The equations representing hypotheses, well, sometimes the hypotheses are just plain wrong. Then each of these equations has to be weighted against each other for use in the computer models, so that adds an additional variable (basically an educated guess) for each law, theory, and hypothesis. This is where the models are tweaked to mimic past climate measurements.

    The SCIENTIFIC METHOD is: (1) Following years of academic study of the known physical laws and accepted theories, and after reviewing some data, come up with a hypothesis to explain the data. (2) Develop a plan to obtain and analyze new data. (3) Collect and analyze the data, this may even require new technology not previously available. (4) Determine if the hypothesis is correct, needs refinement, or is wrong. Either way, new data is available for other researchers. (5) Submit results, including data, for peer review and publication.

    The output of the computer models run out nearly 90 years forward is considered to be data, but it is not a measurement of a physical phenomenon. Also, there is no way to analyze this so called data to determine if any or which of the hypotheses in the models are correct, need refinement, or are wrong. Also, this method cannot indicate if other new hypotheses need to be generated and incorporated into the models. IT JUST IS NOT THE SCIENTIFIC METHOD.

    The worst flaw in the AGW argument is the treatment of GCM computer generated outputs as data. They then use it in follow on hypotheses. For example, if temperature rises by X degrees in 50 years, then Y will be effected in such-and-such a way resulting in Z. Then the next person comes along and says, well, if Z happens, the effect on W will be a catastrophe. “I need (and deserve) more money to study the effects on W.” Hypotheses, stacked on hypotheses, stacked on more hypotheses, all based on computer outputs that are not data, using a process that does not lend to proof using the SCIENTIFIC METHOD. Look at their results, IF, MIGHT, and COULD are used throughout their news making results. And when one of the underlying hypotheses is proven incorrect, well, the public only remembers the doomsday results 2 or three iterations down the hypotheses train. The hypotheses downstream are not automatically thrown out and can even be used for more follow on hypotheses.

  2. NucEngineer, your comments are simply false. Climate change is real, the science is peer reviewed, accepted, computer models do indeed show this, and the cause is man made pollution. Current numerical techniques and algorithms used to study climate change prove that without human added pollutants, the climate would remain far more stable.

    You site the scientific method, so I will encourage you (and everyone) to read through the vast body of peer reviewed scientific journal articles on climate change.

    Here is one example, also refer to the References http://www.agu.org/eos_elec/99148e.html

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