Despite growing financial losses in various business sectors from climate change, over half of the nation’s 500 largest publicly traded companies are doing a poor job of disclosing climate change risks to their investors, according to a first-ever report analyzing climate disclosure practices among S&P 500 companies last year.

The Ceres/Calvert report concludes that America’s largest companies still aren’t taking climate change seriously enough. Less than half (47 percent) of the S&P 500 companies responded to a global survey last year by the Carbon Disclosure Project requesting information about their climate risks and strategies, and those that did respond failed to provide much of the information investors are seeking. Nearly a third (30 percent) of the responders, in fact, declined to publicly release their responses, calling them “confidential.”

“Many US companies are still downplaying climate change and its far-reaching business impacts,” said Mindy S. Lubber, president of Ceres, a leading coalition of investors, environmental groups and other public interest organizations. “More-extreme weather events, regulatory changes and growing global demand for climate-friendly technologies are just a few of the ways that climate change will ripple across all sectors of the economy. Yet, many US companies are not addressing these trends and are leaving investors in the dark about their strategies for mitigating those risks.”

Poor survey responses among lower-emitting companies – in particular, retailers, banks and insurers – was especially conspicuous. Many companies in these sectors provide insufficient climate disclosure to investors, even after suffering large financial losses from climate-related events, such as the 2005 hurricanes. Lubber said that all companies should disclose their risks using the three most common disclosure mechanisms: SEC filings, CDP, and sustainability reports using Global Reporting Initiative guidelines.

“All companies have a duty to provide shareholders with more analysis and disclosure on climate risks and their strategies for managing or mitigating those risks,” said Dr. Julie Fox Gorte, vice president and chief social investment strategist at Calvert. “Lower-CO2-emitting sectors and companies also face potential risks from new regulations, physical changes, and other climate-related impacts. Power and oil companies are improving their climate disclosure and it is now time for retailers, banks and telecommunication companies to start doing the same.”

The Ceres/Calvert analysis was based on S&P 500 company responses to a questionnaire distributed last year by the Carbon Disclosure Project (CDP), to obtain more information relating to corporate management of climate change. CDP is a coordinated effort by 225 global investors with total assets of $31 trillion. The report authors used the Global Framework for Climate Risk Disclosure to analyze the quality of responses.

Other key findings from the Ceres/Calvert report include:

• Poor Greenhouse Gas Emissions Management: 80 percent of the 228 companies that responded to the survey (182 companies) addressed the need to reduce greenhouse gas emissions, but only a quarter (59 companies) disclosed measurable emissions reductions targets and specific time frames for reductions.

• Physical Impacts Not on Radar Screen: Nearly 75 percent of the responding companies (171 companies) acknowledged bottom-line risks associated with extreme weather events such as hurricanes, fires and floods. However, very few of the companies surveyed link more-extreme weather to climate change and fewer still—only four percent – disclosed strategies for mitigating and adapting to the growing physical impacts from climate change.

In his best-selling book, The Tipping Point, author Malcolm Gladwell describes the tipping point as "that magical moment when an idea, trend or social behavior crosses a threshold, tips, and spreads like wildfire." Business is edging toward such a tipping point, where a new model for business is about to catch on. It’s a model in which sustainability, social responsibility and governance are integral components of business strategy. And corporate performance is measured by more than just financial results.

According to Gladwell, a number of factors converge to cause something to tip and become an epidemic. I believe that is what’s causing companies to embrace sustainability and corporate responsibility. Three areas of growing concern are converging to pressure businesses: 1) Corporate scandals have brought ethics and governance front and center in recent years; 2) Realization that global warming is a serious threat has heightened public concern about the environment; and 3) Escalating turmoil in the Middle East is driving home the perils of our dependence on oil and raising concerns about energy costs and supply.

The media is giving all these issues extensive play and people are starting to pay attention. Businesses cannot avoid the responsibility to do their part to mitigate these risks. But it’s not just about doing the right thing, it’s also about creating corporate value through sustainable business performance. And an increasing number of CEO’s see sustainability as vital to success.

"At Ford Motor Company, we have made sustainability a long-term strategic business priority. The reason is simple: we are a 100-year-old company, and I want us to become a 200-year-old company. Sustainability is about ensuring that our business is innovative, competitive and profitable in a world that is facing major environmental and social changes."   — William Clay Ford, Chairman

Ford Motor Company is an icon of American business but today they are struggling. And they clearly understand that "business as usual" is not an option. But should a company in trouble be thinking about the next 100 years? I think so because I believe that too narrow a focus ultimately leads to failure. The healthiest companies are those that are built to last. A company in trouble cannot ignore its immediate problems, yet to survive it needs to strike a balance between short term goals, such as quarterly earnings, and long term objectives like new product development. A more holistic view of business is in order. That is, to recognize that a business does not exist in a vacuum … a business depends upon the communities in which it operates for customers, for employees, and for infrastructure. Accordingly, it is in the best interest of any business to operate responsibly and sustainably.

That may sound good in theory but the conventional wisdom says we need to establish a quantifiable business case to support it. Reduce the costs and benefits to dollars and cents and prove that a focus on sustainability is the key to success. As a CPA, it may be heresy for me to suggest this, but I think we sometimes spend too much time and effort fiddling with financial models when a little common sense will do. If business and community are linked, then a business is compelled to contribute to the well-being of its community to help ensure its own well-being. As such, it should be the mandate of every corporation to strive for sustainable business performance. Building sustainable businesses will promote sustainable communities and, in the broadest sense, a sustainable world. We all win. Forgive my simplistic view but I think that’s the business case.

So are we at a tipping point? Are we ready to model today’s businesses to serve the interests of all stakeholders, not just shareholders? Will the issues of sustainability, social responsibility, and governance be integrated into core business strategy? Will environmental and social performance be uniformly reported with financial results?

As you know, we’re not there yet. But leading companies and thought leaders are showing the way. Our mission with this blog is to put you on the forefront of new thinking on the subject of sustainable business performance. We’ll provide relevant, practical information that you’ll want to know. After all, it’s going to tip and you want to be ahead of the curve.

There’s definitely a buzz about the greening of business these days. Climate change is a “hot” topic and that probably has something to do with the buzz. After all, business is viewed both as the main culprit and the potential savior. To me what’s most interesting is how being “green” is being placed in a broader context. Businesses are increasingly viewing green practices as not only good for society, but also good for the bottom line. Have tree huggers invaded the corporate suite? Not likely, but it seems that a new green line of thinking is catching on with top management.

A 60 Minutes feature on NASA climate scientist, Jim Hansen, started me thinking seriously about green business. Hansen has been studying climate change and sending warning signals for years. He’s very well respected and credible. While I’ve always been concerned about the environment, the fact that I recycle, turn out lights and pick up litter hardly makes me an activist. And I do have a fondness for SUV’s … so I’m light green at best. My commitment changed when I heard Hansen on 60 Minutes tell how government lawyers had edited a recent report to soften his warnings about climate change. That did not sit well with me, to say the least. I decided it was time for me to get involved, to do something. But what?

Since business is my vocation, it seemed logical to see what I could do in the context of the business world. I began my quest by searching the internet to learn about green businesses. I was quickly overwhelmed with information and it wasn’t limited to environmental matters. My search led me progressively to the inter-related issues of sustainable development, corporate social responsibility, corporate citizenship and ethics. I found myself looking at the dynamics of business differently than I have for over 30 years as a CPA, management consultant and business owner. And surprisingly it reinforced my long held belief that business is far too short-sighted and too narrowly focused on the financial bottom line.

It’s not that I was naïve about the ability of business to contribute to society. In the 90’s, I co-founded a company that produced and distributed television and video programming on the subject of crime prevention. We provided life-saving information and I was proud of our work, especially when we heard from people who had relied on our programming to stay safe. But now I am looking at business’ role in society from a broader and more strategic perspective, and I have a deeper appreciation for the imperative to create value for all stakeholders. I now think of a green business as a healthy enterprise that strives for sustainable performance.

My exploration of the greening of business is on-going and I look forward to sharing what I learn with you. In conjunction with my firm, Duma Tau, I have started this blog and an e-newsletter under the umbrella topic of sustainable performance. Our publications will be an easy way to stay abreast of current developments and new thinking on 3 key aspects of business performance … financial, social and environmental. The blog and the e-newsletter are free.

Our subject matter will be targeted primarily to executives and managers that are in a position to influence their company’s strategic direction as well as those that serve as the custodians of financial and operational information. As more companies make environmental and social performance part of their core strategies, non-financial reporting will need to be on par with financial reporting. Accordingly, our content will emphasize strategy, financial impacts, measurement and reporting.

So do I think every business should go green? You bet. But practically speaking, it must be done progressively … in shades of green. After all, no business has unlimited resources to bring about instant change. And what is appropriate for an energy company is different than for a fast food chain. This is new territory for the corporate world. We all have much to learn. Our mission is to help the process along by providing an easy source of information for those that can make a difference within their companies. 

Perhaps your business is only a light shade of green right now, or not green at all. That will need to change and you can lead the way. Staying informed is a good place to start. Feel free to participate by posting to our blog and by passing along our e-newsletter to anyone that may be interested. I hope you will join us on the journey to greener pastures.