Groundbreaking Analysis Reveals Route for Businesses to Uncover Billions in Hidden Profits from Climate Change Action
- Date: 18 June 2013
- Author: Nick Sundt
Smart companies innovate their way through business challenges. A new analysis shows they can also innovate to solve a global challenge – and profit along the way.
The 3% Solution: Driving Profits Through Carbon Reduction, released today by World Wildlife Fund (WWF) and CDP, provides a groundbreaking assessment of how companies can reap big profits from cutting their carbon emissions, simultaneously helping the world avoid runaway climate change.
The analysis demonstrates that if US businesses act now to reduce emissions by an average of 3% annually, they can save up to $190 billion in 2020 alone, or $780 billion over 10 years.
According to the report, reducing carbon emissions by 3% annually from now to 2020 – equivalent to cutting total annual greenhouse gas emissions in 2020 by 1.2 gigatonnes of CO2 from 2010 levels – is enough to put the US corporate sector on track for a 25% reduction against 1990 levels. This reduction pathway is consistent with the lower end of what the Intergovernmental Panel on Climate Change (IPCC) says is needed by 2020 to help avoid a global temperature increase of 2 degrees Celsius above pre-industrial levels.
The report shows that 4 out of 5 companies from the S&P 500 who report their emissions to CDP see bigger financial returns on their carbon reduction investments than their overall capital investments, making reallocation of their capital expenditures a sound business decision.
To unlock the billions of dollars in cost savings, on average the US corporate sector would need to invest 3 to 4% of their capital expenditures each year on low-risk, profitable carbon reduction projects.
"World governments have moved far too slow to address the climate change threat and people are looking for leadership from the brands they trust to take concrete actions now,” said Carter Roberts, President and CEO of WWF. “These numbers provide a glimpse into the future – where smart companies slashed emissions, increased profits and helped secure a better future for all of us.”
Paul Simpson, CEO of CDP added: “The report points to specific financial opportunities that US corporations can seize. But it is critical that senior management devote much more attention to the issue to drive the necessary near-term increase in capital expenditure required for companies to capture the full economic benefit of greenhouse gas emissions reductions.
“Corporations must act now not only to address environmental risk, but also to aid economic recovery in the United States and build resilience. Investing in energy efficiency and renewable energy saves cost, stimulates innovation, creates jobs and builds energy independence and security.”
To help companies reach these goals, the report also includes an innovative Carbon Target and Profit Calculator, which provides a guide for companies to set emission reduction goals and to claim their share of the savings.
The analysis also introduces the Carbon Productivity Portfolio, a set of five actions built upon the experiences and successes of leading companies that form a new strategic approach to maximizing business value and carbon reductions.
WWF and CDP are now recommending that companies interested in capturing these savings do the following:
- Run the calculator and set or revise a carbon reduction target to claim the company’s share of the savings
- Reallocate capital to deliver better returns at lower risk
- Translate the savings to the company’s bottom line
The report is built upon rigorous analysis by several of the world’s leading consulting firms, namely McKinsey & Company, Point380 and Deloitte LLP. In addition the report draws upon data reported to CDP from major U.S. businesses, case examples from WWF’s Climate Savers program in the US, dozens of interviews with corporate leaders, and the real-world experience of consultants working directly with businesses to cut costs and shrink their carbon footprints.
Here’s what major companies are already saying about The 3% Solution:
“This report shows that not taking action to reduce emissions and fight climate change is like leaving big money on the table,” said Chris Librie, Senior Director, Sustainability Programs, HP Sustainability & Social Innovation. “HP is already taking actions in line with those recommended by The 3% Solution. During 2012, we completed a comprehensive carbon footprint analysis to better understand the impact of our company and our products. HP is among the first companies globally to publish this level of information. We work to reduce the impact of our products and operations. In addition, we collaborate with suppliers to improve their environmental performance – resulting in a 24% decrease in production supplier GHG emissions intensity over four years. HP calls on other American businesses to heed the call made in The 3% Solution and capture their share of these savings – all while doing some good for the planet.”
"This study shows that there are tremendous opportunities for companies to make operational changes that benefit both the environment and their economic bottom-lines," said Jeff Seabright, Vice President, Environment & Water, The Coca-Cola Company. "There is a pressing need for business, government and civil society to work together to pursue these 'no regret' opportunities if we are to stabilize emissions in this decade."
“The 3% Solution analysis shows that good environmental stewardship can pay off. DuPont has looked at the important issue of energy efficiency brought up in the report in two ways,” said Linda Fisher, Vice President – Safety, Health & Environment and Chief Sustainability Officer, DuPont. “First, we focused on how to become more energy efficient in our own plants and as a result have realized year-over-year energy cost savings of $230 million. Secondly, we have looked at it from a business growth perspective and focused our science and innovation to create products that will improve the energy efficiency of our customers throughout the value chain. Last year we generated $1.9 billion from products that enable energy efficiency and greenhouse reductions in the use phase.”
"Sprint is the first and, to date, only U.S. telecom company to publicly announce an absolute greenhouse gas (GHG) emission reduction goal (an absolute 20% reduction of scope 1 and scope 2 by emissions by 2017 below 2007 levels)," said Bill White, Senior Vice President of Corporate Responsibility, Sprint. "We continue to look for opportunities to drive energy and emission efficiencies and The 3% Solution presents business leaders with strong evidence that can significantly reduce costs and their environmental impact.”
"Congratulations to World Wildlife Fund and CDP on the release of The 3% Solution,” said Olof Persson, President and CEO, The Volvo Group. “The Volvo Group’s vision is to become the world leader in sustainable transport solutions and this robust report further proves what we have already found to be true; that reducing CO2 emissions can simultaneously contribute to the sustainability of companies and the climate. As a Climate Savers partner, the Volvo Group has set meaningful greenhouse gas emission reduction targets and, through our products, are helping our customers do the same. We hope this report helps motivate other companies to make similar commitments."
"Mars welcomes this compelling report, the findings of which echo our own belief in climate science based targets and approaches to sustainability,” said Kevin Rabinovitch, Global Sustainability Director, Mars Incorporated. “In 2010, Mars committed to become Sustainable in a Generation by eliminating fossil fuel energy use and greenhouse gas emissions in our Operations by 2040 with a 25% reduction by 2015 – in line with the 3% annual goals. A sustainable approach to business is profitable and this report demonstrates we’re not alone in that belief, or the approaches outlined here. We hope businesses will join this movement toward a more sustainable and productive future for all.”
“J&J understands the critical relationship between human health and a healthy environment,” said Jed Richardson, Global Energy Director, Johnson & Johnson. “For more than 30 years, we have been committed to reducing energy usage through efficiency measures that are cost effective and environmentally sound. The 3% Solution does a great job highlighting these win win opportunities that are available to corporations.”
The 3% Solution: Driving Profits Through Carbon Reduction. By World Wildlife Fund (WWF) and CDP, June 2013.
Watch the Report Launch Webcast Recording. On June 18, the CEOs of WWF and CDP, joined by Steven Swartz, partner at McKinsey & Company, will unveil this groundbreaking analysis during a free GreenBiz webcast hosted by Joel Makower. Watch the recording and download the slides.