Investors are pressing companies that supply goods such as automobiles, food, beverages and furnishing to report greenhouse gas emissions and cut them. Consumers want companies to go green. Avon is among Consumer Goods companies responding.
Federal legislation to regulate or trade greenhouse gas (GHG) emissions has stalled in the United States, but the two largest pension funds are among investors helping to drive action to cut carbon using shareholder rights, asset allocations and public pressure. For instance, climate risk is central to engagement on value related risk by the US$235.8bn California Public Employees’ Pension System (CalPERS) and the California State Teachers Retirement System (CalSTRS) backed the 2011 Global Investor Statement on Climate Change calling for policymakers at the UN climate talks in Durban this week to implement policies to reduce emissions.
Policymakers in California will lead the way in the U.S. when they create the nation’s first economy-wide emissions trading scheme in 2013. Initially, the program will minimize costs to businesses and consumers. Consumers are looking at cutting their own carbon footprints, and expect companies to do the same. Three-quarters of Americans surveyed on green attitudes and behaviors believe that “a manufacturer that reduces the environmental impact of its production process and products is making a smart business decision,” according to findings out last week.
Consumer Goods companies are on the frontline and many are curbing carbon. Trucost’s database of over 4,000 listed companies shows that U.S. firms in the sector are 10% less carbon intensive than their peers globally, on average (see Chart 1). They are also doing better on disclosure. Whereas Trucost records show 35% of Consumer Goods companies globally disclose carbon emissions, the U.S. rate was 47% – up 13% from 2009 levels.
The U.S. Consumer Goods company with the lowest carbon intensity that discloses data publicly is Avon Products Inc. Trucost used data reported by the cosmetics manufacturer on its direct emissions and resources use to calculate its carbon intensity, which also takes into account Trucost estimates of emissions from direct (first-tier) suppliers of goods and services such as business travel. Trucost’s database shows that around 87% of carbon emissions from U.S. Consumer Goods companies were from their supply chains.
At 181 tonnes of greenhouse gas emissions, measured in carbon dioxide equivalents (CO2e) per US$ million of revenue, Avon’s carbon intensity is well below the average for its U.S. sector peers (489 tonnes of CO2e per US$ mn). This contributed to Avon being ranked among the top four U.S. companies in the sector in Newsweek’s Green Rankings 2011. Companies that manage their operational and supply chain impacts – and risks from carbon and resource costs passed on in higher prices – will be better prepared for environmental pressures to come.
Nadia Montoto is head of US supply chain research for Trucost.