Key Findings

• Response rates among FTSE 350 companies increased dramatically from 49% in 2006 to 70% in CDP5. Although 92% of FTSE 100 companies answered the CDP5 questionnaire, the improvement was largely driven by a tremendous increase in responses from FTSE 250 companies from 36% in CDP4 to 61% in 2007. The improved response rate indicates increased recognition of the business implications of climate change and the cumulative effect of the CDP. However, an increase in the number of companies which refused to allow their responses to be disclosed publicly raises questions about their willingness to improve transparency to all stakeholders.
• Response rates increased markedly in the Information Technology, Telecommunication Services, Industrials, Consumer Staples and Consumer Discretionary sectors. EU-led policies to address energy efficiency and constrain carbon emissions, rising electricity costs and potential climate-related market opportunities are driving energy use and carbon emissions up corporate agendas.
• Disclosures on quantitative emissions data improved significantly. The percentage of FTSE 350 companies which provided quantitative emissions data rose from 27% in CDP4 to 46%. Importantly, disclosures on Scope 1 data specified under the GHG Protocol increased from 10% to 38%, with 64 companies auditing this data. Companies are starting to recognise the need to standardise data and develop more robust reporting and verification mechanisms.
• Total emissions reported under Scopes 1 and 2 by FTSE 350 companies amounted to more than 563 million tonnes of carbon dioxide (CO2). Emissions from the 134 companies which provided Scope 1 data totalled more than 466 million tonnes of CO2. The Information Technology sector disclosed Scope 1 emissions for the first time, and there was a notable improvement in the level of quantitative disclosures by the Industrials, Consumer Staples and Consumer Discretionary sectors.
• Under Scope 2, companies reported that they purchased more than 195 million Megawatt hours of electricity globally. Sixteen per cent of this was said to be from renewable sources. Where energy use by companies in Annex B countries was reported, 14.5% was from renewable sources. Annex B countries are required to reduce greenhouse gas emissions under the Kyoto Protocol. The Materials and Financials sectors use the most renewables overall, while the Information Technology and Energy sectors reportedly used entirely conventional electricity.
• Carbon intensities in direct and indirect emissions varied significantly. Whereas carbon intensity under Scope1 was greatest in the Utilities and Energy sectors, the Materials and Utilities sectors are most carbon intensive regarding use of purchased electricity (Scope 2 emissions). This suggests greater potential for companies in these sectors to abate emissions through energy efficiency measures and switching to low-carbon supplies.
• More companies are assessing Scope 3 emissions. Of the FTSE 350 companies that reported on Scope 3, data was provided most frequently on business travel emissions, followed by external distribution/logistics. Few were able to estimate other supply chain emissions, although some were in the early stages of assessing these. Only a handful of companies reported on use/disposal of products and services, but CO2 emissions from these sources were significant.

Why did CDP commission the report?

This report, compiled by Trucost, was intended to provide investors with an analysis of how the UK’s largest companies are responding to climate change. Companies have made significant progress in reporting and verifying standardised, quantitative data which can be used by investors to compare performance meaningfully. However, many have further to go in making comprehensive and comparable disclosures on direct and indirect operational emissions, as well as in assessing risks and opportunities regarding supply chains, shifts in target markets, and evolving regulatory frameworks.

The CDP's intention was that a continuing increase in the robustness of data and further transparency would help investors make better informed decisions with respect to carbon reduction strategies and performance, and help markets take account of the cost of carbon emissions within asset pricing.

Report image: Analysis of FTSE 350 responses

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