Ceres' David Gardiner examines how companies prepare for carbon constraints

From measuring greenhouse gas emissions to improving energy efficiency, many U.S. companies are already acting with future climate change regulations in mind. But are U.S. businesses doing enough to prepare for a carbon-constrained economy? Ceres -- a coalition of investors and environmental groups -- recently ranked energy companies, automakers, chemical manufacturers and other businesses based on what they are doing with regard to climate change. During today's OnPoint, Ceres senior adviser David Gardiner discusses the group's report. Gardiner, former director of the White House Climate Change Task Force under President Clinton, also talks about what he expects to see from Congress on climate policy this year.


Brian Stempeck: Hello and welcome to OnPoint. I'm Brian Stempeck. Joining me today is David Gardiner. He's a senior adviser to Ceres and also a former director of the White House Climate Change Task Force. David thanks a lot for being here today.

David Gardiner: Thank you.

Brian Stempeck: Now Ceres is basically a group of shareholders, institutional investors, that tries to pressure companies on environmental issues and other issues as well. The group recently put out a report ranking 100 companies basically on what they're doing on global warming. Tell us what you found, how the companies were ranked, who came out as the real winners in this report.

David Gardiner: Well we've ranked these 100 companies and what we found is that there are actually quite a few companies that are doing a pretty good job of, from an investor's standpoint, beginning to pay attention to climate change. What investors are really worried about is they want to make sure that corporate management and the whole organization are actually not asleep at the switch on climate change, which is going to be and is a big strategic issue for these businesses.

Brian Stempeck: Now what were the type of factors that you looked at in kind of grading these companies on what they're doing?

David Gardiner: Well we're looking at what management and the board of directors are doing. We're looking at whether they make public disclosures to investors and are open about what they're trying to do. We look at whether they count their greenhouse gas emissions and we look to see whether they have a strategic plan for going forward in terms of dealing with climate change.

Brian Stempeck: Now you listed a lot of the most carbon intensive industries, from oil and gas producers to electric utilities to the automakers. Who really kind of fared the best in this report?

David Gardiner: Well the kind of sectors that we found looked pretty good were the chemical industry, the utility industry; sectors that seemed to be doing less well were the oil and gas industry and the airline industry. This is, again, keep in mind, focused on are these companies prepared for this issue? Are they preparing themselves to deal with climate change because that's what investors are really focused on.

Brian Stempeck: Talk for a minute about the specifics. If you were looking at BP for example, that was one of the oil and gas companies that scored highest in that sector. What are they doing that makes them so much different from a company like Exxon Mobil, which scored really towards the bottom?

David Gardiner: Well, a company like BP has not only a very strong commitment from its board and from the top management company to addressing the issue they've got a strategic plan for going forward. And BP in particular is investing now, as a part of that plan, a lot of money to try to capture the economic opportunities, the business opportunities that they see being created by climate change. They're making an $8 billion investment in renewable energy technology, which they think is a part of a climate friendly strategy for the future.

Brian Stempeck: Now how does it compare to what Exxon Mobil is doing?

David Gardiner: Well, a company like Exxon has done much less work to try to think through from the board and from top management what's a strategy for dealing with both the risks and the opportunities that climate change presents to us? They don't have an investment in renewable energy technology that's very substantial. Whereas a company like BP does.

Brian Stempeck: In this report it seemed like a lot of the multinational companies, companies with operations like DuPont, who have operations in Europe and other countries as well, were faring a lot better than some of their kind of American based counterparts. Why was that?

David Gardiner: Well some of it may have to do with the fact that of course if you're operating in Europe or Japan you're beginning to see the kinds of things that the Kyoto Protocol is going to bring. You're seeing the kinds of limitations that you're going to have to deal with. But I don't think that's a good excuse for a company in the United States, which operates here, has to see the handwriting on the wall. Has to see that in this country we are already beginning to see policies put in place that presents both risks and opportunities to companies, that the science continues to develop on a regular basis. You don't necessarily have to -- as an investor, you don't have to believe the science, but you can see that the public is beginning to react to it and respond to it. And it seems inevitable to investors and to many companies that we're going to deal with climate change. And a company that doesn't have a plan for that is going to be in big trouble.

Brian Stempeck: But aren't some companies just between kind of a rock and a hard place? I mean some of the coal companies in this report fared particularly badly in terms of how they were scored. I mean, yeah, they might look down the road and see that climate regulations are coming at some point, from the U.S. government, something similar to Kyoto or maybe not. But at the same time what can they really do about it? I mean their business is so carbon centric. Is there anything they can really do besides having -- you know, if they have a blueprint what could that blueprint possibly say?

David Gardiner: Well I think we see in this report that there's a number of companies that are very dependent on coal, for example, that still see there being a path forward for them and the opportunity to go there. A number of the leading utility companies for example, like American Electric Power and Cinergy, are very focused on developing the integrated gasification combined cycle technology and looking forward for those technologies and trying to test them out, put them in place and move ahead with them. And there's no reason why any company can't design a proactive strategy to get ready to seize the opportunities that climate change is going to present.

Brian Stempeck: I think some are skeptical about this, maybe at some of the environmental groups I know you've mentioned, have said that you know they don't want to give too much credit to the utility companies or the oil and gas companies here because -- like the IGCC plants that you mentioned for example. There's only really a handful of them being built by AEP or by Synergy, that's only, you know, one or two plants out of the hundred or so that they are running in this country. It's only a small sliver of what they're actually doing in total. So do they deserve kind of the kudos for only building, you know, one plant out of a hundred that is more technologically advanced?

David Gardiner: Well, let's keep in mind what this report is and what it isn't. This is a report for investors to try to help them understand how it is that companies are getting prepared for addressing climate change. It's not designed to give people kudos. It's designed to help investors figure out who are the leaders. Who are the ones that I'm most interested in investing in? And for those companies that may be doing less well, as the report scores them, what are the ones that I want to work on to try to get them to do a little bit better?

Brian Stempeck: Ceres did a similar report to this in 2003, kind of looking at where these companies stood. And by all accounts it's a pretty dramatic improvement in the past three years, what these companies have done. You know talking about boards of directors looking at this in a whole new light that they weren't before. When you talk to some of the CEOs or to some of the business people who responded to this survey, what are they pointing to as the primary drivers that are leading them towards this? Is it the science? Is it the general public reaction? Is it Congress? What reasons were they giving?

David Gardiner: Well, I think we see from the leading companies a range of reasons, not the least of which is the opportunities that climate change does present. A company like GE for example, which in the report we did several years ago didn't score particularly well, has done remarkably well in this report in part because they see the climate friendly technology market growing to be as much as $20 billion by 2010. And their corporate strategy has really turned around and focused on this opportunity. And that's the thing, it seems to me, that's driving it the most. That they see a business opportunity out there and they've got a plan to seize it.

Brian Stempeck: A lot of these companies like GE, a lot of the utilities we talked about, they're all weighing in right now. There's going to be a Senate roundtable next week where they talk about climate change for a full day in the Senate Energy Committee. There's a lot of responses going in, even companies like Southern Co. are kind of submitting plans to look at what they want to do, what kind of climate structure they would like to see. What do you expect the business community to push for? There's a lot of varied interests here. What do you think is going to end up being kind of a common plan that a lot of these industries can agree upon?

David Gardiner: Well, I think what we've heard from the business community over the last couple of years is an increasing desire for government to provide certainty. That for them it's very difficult to plan how to go forward, how to make their investments that they have to make every single day in these very large facilities like power plants, automobile manufacturing plants, oil refineries, without having some sort of certainty. And government can provide that kind of certainty. Government can put a policy in place that tells the business community here's what we're looking for going forward into the future and you can plan with that in mind. That's what we're hearing more and more from companies over the last couple of years.

Brian Stempeck: What about some of the specifics? I mean there's a number of bills already on the table, McCain Lieberman, from Senator Bingaman, Senator Carper, was there any -- I mean obviously this survey didn't want to have to do with that. But did you hear any kind of response from some of these CEOs saying, you know, they favor one approach over the other?

David Gardiner: I think that certainly many companies have particular interests about how to shape legislation, but, again, we kept coming back to the fact that you see an increasing number of people from the business community who are simply saying just give us certainty. Tell us what the path is that we need to follow in the future. And we can mobilize the capital and the people that are necessary to meet that target and provide electricity, automobiles, whatever the other products are that they provide.

Brian Stempeck: What are the industries in the report there we're kind of ignoring this year? I know the airlines were one of those kind of mentioned as still is kind of turning a blind eye towards climate change and global warming.

David Gardiner: Well, I think airlines and oil and gas were a couple of industries that scored less well in this survey. It seemed as if they were less well prepared for tackling the strategic challenge of climate change. But again, the interesting thing is that we see a number of industries that are substantially ahead, the chemical industry for example. We see a company like DuPont, which has not only reduced its emissions already by 70 percent in the last 15 years, but is also looking for market opportunities that they can seize as the world moves toward addressing climate change.

Brian Stempeck: What happens next from Ceres' perspective? I mean basically a lot of times Ceres helps organize shareholders in terms of filing resolutions with these companies, trying to get the company board of directors to change their policy on climate change. How do you see this report kind of playing into the overall mission of your group?

David Gardiner: Well obviously our objective is to try to move more and more companies into the position where they are taking climate change seriously and developing plans to capture the business opportunities. And so we'll want to be looking at the hundred companies on this list and trying to move them in the right direction. We have already got a number of efforts under way already to step up the level of engagement between investors and with companies to try to have more leaders across the community. And I think we see in this report the results of those efforts over the last couple of years. There are more companies today that are taking climate change seriously and developing plans to address it than there were just the few years ago.

Brian Stempeck: All right David, we're out of time. Thank you so much for being here today.

David Gardiner: Thank you.

Brian Stempeck: I'm Brian Stempeck. This is OnPoint. Thanks for watching.

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