Business gets on board with new carbon economy at summit

Phillip Ludvigsen still laughs at some of the responses he came across when businesses first started responding to the Carbon Disclosure Project (CDP).

It was the early 2000s and the global initiative that encourages companies to measure and report on climate change was just getting off the ground.

Not everyone took it seriously, recalls Ludvigsen, director of Carbon Advisory Services with the advisory firm KPMG Canada.

“I remember there was one company that would just put down ‘we choose not to respond’ for every question. They did that for four years straight,” Ludvigsen says, adding “then we saw them release their first sustainability report and it said ‘we’ve been reporting to the CDP since 2005.'”

Ludvigsen says businesses have come a long way since then, with 73 per cent of all responding Global 500 companies now disclosing their emissions to the public survey.

But he and other presenters at the recent Carbon Economy Summit ― a forum for industry on climate change risks and opportunities ― say it’s going to take more than just carbon reporting to survive in the new environment and economy.

“In the last year we’ve had the BP incident and more recently, the Enbridge spill, driving an increased call for action on public policy,” says Elisabeth DeMarco, a partner with Macleod Dixon, a Calgary-based law firm with global offices.

A host of new GHG reporting requirements have come out from Canada, the US, the World Climate Initiative, and the province of Ontario, in the past couple of years, DeMarco says.

“We’re up to four or five, depending on how you count them and particularly if you’re a cross-border company,” she says.

Regulations are also calling on companies in the US to report on climate change risks, such as reputational consequences or higher fuel and input pricing.

DeMarco points to one logistics company that used an ice road for transporting goods, but as a result of increased temperatures over the last decade, had to switch to the more expensive alternative of airlifting.

“This was a very material and significant consequence of climate change that had to be disclosed by the company,” she says.

When DeMarco first started working with industry on these kinds of liabilities a decade ago, it was “a big deal” to find one or two shareholder resolutions related to climate change.

“Now in 2009, about 10 per cent of Canadian shareholder resolutions are pertaining to climate change,” she says.

But there are silver linings to doing business in the context of climate change, and companies should be disclosing opportunities as well as risks.

She turns to one example found in operating rooms that use high-emitting anesthetic gases.

“A little company comes along and finds a way to capture and reuse those gases up to 20 times, saving hospitals millions of dollars annually and reducing emissions by multiple millions of tonnes,” DeMarco says.

As climate change-related risks and opportunities become more common, industry ― particularly the financial sector ― is responding.

“Climate change is an economic issue,” says Bruce Kahn, senior investment analyst for DB Climate Change Advisors in New York, a Deutsche Bank asset management firm.

“Changes in precipitation, temperature and access to natural resources are all going to have impacts on how a company operates, capitalizes cash flow needs, and ultimately how well it will perform,” Kahn says.

The market is paying close attention to how businesses are handling these changes, he says, noting there’s more than 25 trillion dollars currently signed up for responsible investment.

“There’s another 10 trillion dollars of members of the Investor Network on Climate Risks and another 50 trillion dollars signed up for CDP,” he says.

Kahn says as more companies get a handle on their own “metabolism”, the concept of environmental and social governance has evolved.

“It used to be about are you doing the right thing,” he says, adding “now we have analysts asking not only if you’re doing the right thing, but is it making you money?”

The answer from at least several Canadian cleantech companies is a resounding “yes!”

CSR Electronics Inc., a Welland, Ont. company, broke into the international LED market with its patented lights, recently selling more than 21,000 of its units to the US government.

Another Ontario company, Organic Resource Management, saw an opportunity to turn organic waste into renewable energy, becoming the largest provider of liquid organic waste collection, transportation and recycling in Canada.

Hemisphere GPS developed a technology that uses precise, automated control to improve the accuracy of farming, reducing the use of gasoline, nutrients and chemicals. The Calgary-based company now sells its products in more than 35 countries.

Representatives from these Canadian start ups shared their success stories, inspiring hope for at least one budding company in the audience.

“This whole new carbon economy will probably become the largest trading business we will see on the market in the future,” says Denis Duguay, a conference attendee and vice-president, finance with Corruven Inc., a New Brunswick company that is developing greener wood panel products.

Duguay admits, “we are just at the beginning” but says attending summits like the Carbon Economy are “a good start.

This activity should be a recurring one, and then, even small companies will find their path in this new global economy.