US companies lead the world in carbon efficiency: Oracle (NYSE:ORCL) is No 1
American companies are leading the way when it comes to carbon efficiency – how much carbon they emit per $1 million of revenue, with Oracle (NYSE:ORCL) at Number One. The world’s biggest companies could save 1.4 billion tonnes of CO2 or the equivalent of the annual emissions of Japan, if they achieved just the mid-range of carbon efficiency for their sector.
These are some of the findings of the 2016 ET Carbon Rankings report just out from ET Index Research, dedicated to helping investors and corporates identify, understand and manage carbon and climate-related risks.
Analyzing the carbon efficiency of the world’s largest listed companies, it reveals that out of the world’s 2,000 biggest companies, the 1,000 that are According to this analysis, companies in the top half of the 2015 ET Global 800 Carbon Ranking, that is the most carbon-efficient 400 global companies, have experienced greater Return on Equity, Return on Assets, Growth in Net Income, and Growth in Revenue over the past year to October 2016 than companies in the bottom half.
Investors are likely to want to take note on multiple fronts. They have the power to help drive a decarbonization of the economy – and perhaps also make money - by switching their investments to reward companies with above mid-range (median average) carbon efficiency for their sector, suggests the report.
While computer software company Oracle is the world’s most carbon efficient company, emitting just 34 tonnes of CO2 for every $1 million it generates, it is not alone in flying the American flag here.
Oracle is followed in the rankings by two other U.S. companies: Biogen Inc (NASDAQ:BIIB) the biotechnology company, produces just 40 tonnes of CO2 for every $1 million it generates, while software company Adobe Systems (NASDAQ:ADBE) is at 41 tonnes.
“Sector by sector there are champions and dunces. Some companies can be over 100 times less carbon intensive than others in the very same industry. Backing the champions makes sense because carbon-efficient companies have outperformed the market average over the last five years," said Chris Huhne, former UK Secretary of State for Energy and Climate Change and Co-chair of ET Index Research.
While out of the world’s 800 largest listed companies just 363 have fully disclosed their direct emissions from their operations and the electricity they use (defined by the report as Scope 1 and 2 disclosure), they have increased their carbon efficiency by an average 15 percent from 2015 to 2016, saving 360 million tonnes of CO2.
The ET Carbon Rankings measure the carbon efficiency of the world’s 2,000 largest listed companies, which account for $45 trillion in market capitalization or 85 percent of world stock market value – and more direct emissions than the U.S., Canada and EU put together. They describe themselves as “the only public rankings to go beyond Scope 1 and 2 emissions to assess Scope 3 emissions from companies’ value chains - from transporting raw materials to the use of their products.”
“Scope 3 emissions are vital in understanding the full extent of a company’s exposure to carbon risk because they usually account for by far the largest part of its carbon footprint. For example, Honda’s (Honda Motor Company LTD ADR) carbon intensity is 43 times higher when you consider consumer use of its vehicles and other Scope 3 emissions,” said Sam Gill, Co-founder and CEO of ET Index Research.
“It is virtually impossible to imagine a scenario in which carbon-intensive companies, across the entire value chain, are not penalized after the Paris Agreement,” he added.
Carbon risk has become a mainstream investor concern following the climate agreement in Paris committing countries to keeping global temperature rises well above 2 degrees C. A task force set up by the international Financial Stability board is due to make recommendations later this month on how companies should report on the potential impact of climate change on their bottom line.
The list of 25 ET Carbon Disclosure Leaders includes those companies that are doing most to measure and communicate their carbon exposure. “These are companies that are reporting public, complete data for Scope 1 and?2 emissions, obtaining independent assurance of this data, and disclosing all 15 Scope 3 Categories,” it said.
The 2016 rankings are available here.
Dina Medland is an independent writer, editor and commentator with a strong focus on issues around corporate governance, ethics, the workings of the boardroom and sustainable business. She is on the team of contributors to @ForbesEurope and is an ex-Financial Times staff member who has been a regular contributor in recent years. Further details about her background and a portfolio of work – including her commercially sponsored blog ‘Board Talk’ are available on her website.