ASX 200 carbon reduction targets: only for the short term

The CDP Australia and New Zealand Climate Change Report 2013, released on 4 December, has shown that most ASX 200 companies’ carbon reduction targets are short term and do not sufficiently acknowledge the scale and long-term attributes of climate change.

The report showed that the average target (completion) year for all emission reduction targets, reported by ASX 200 companies this year, is 2014. Only four ASX 200 companies reported absolute emission reduction targets with a target year of 2016 or beyond.

These carbon reduction targets are important as they indicate a conscious decision and public commitment by a company to focus on achieving emissions reductions. The role of business in helping achieve the required emissions reduction is crucial as three quarters of total global emissions are generated by corporations globally.

CDP research in 2012 found that high-emitting companies that set complete emission reduction targets achieved carbon reductions double the rate of those without targets, reaching 10% higher profitability.

Many of the notable international examples of corporate carbon reduction targets are from companies headquartered in countries with commitments to reduce their emissions by 80% or more before 2050, such as the UK, Germany and Japan. This justifies that Australian governments can play an important role in setting longer term expectations and legislating requirements for reducing carbon emissions.

James Day, director for the Australia and New Zealand CDP, commented, “Many of the notable Australian and international examples of corporate carbon reduction targets reported through CDP in 2013 suggest that governments - city, state, national and regional - can and are playing an important role in setting expectations for companies to set and achieve long-term targets to reduce their carbon emissions, which in turn should reduce the level of climate change risks that investors are exposed to through their investments.”

Four ASX 200-responding companies rated the risks associated with uncertainty surrounding new regulation as high in their CDP 2013 responses. Companies reported uncertainty surrounding the Coalition’s plans to repeal the Clean Energy Future Act if it won government. Company responses to the CDP 2013 climate change investor information request (CDP 2013) were submitted in May 2013, well before the 2013 Australian Federal Election. This was only one less than the number of ASX 200-responding companies that rated the risks associated with carbon pricing as high.

This year, for the first time, CDP has also awarded five climate leadership awards to ASX 200 companies. Award winners were selected objectively using CDP disclosure and performance scores on the implementation of a substantial climate strategy and approach to reducing emissions. Winners included Transpacific Industries, Monadelphous, Commonwealth Property Office Fund, CFS Retail Property Trust and Brambles, as well as numerous joint winners for the Climate Performance Leader 2013 award.

“Two notable examples of longer term carbon reduction targets set by ASX 200 companies are those set by Commonwealth Property Office Fund and Charter Hall for their Sydney CBD buildings to support the City of Sydney’s 2030 carbon reduction target. Both of these companies have committed to targets to reduce carbon emissions from their Sydney CBD buildings by 70% below 2006 levels by 2030,” said Day.

Scientific evidence shows that we need to cut global carbon emissions by 80-95% below 1990 levels before 2050 in advanced economies, like Australia, if we are to avert dangerous climate change and continued disruption to our weather patterns.