Every year, CDP, a non-profit that drives companies and governments to cut their greenhouse gas emissions, safeguard water resources and protect forests, produces its ‘A List’ of companies that are leading on environmental transparency and action.
The list is based on annual disclosures through CDP’s climate change, forests and water security questionnaires. Thousands of companies are asked to disclose through CDP by investors and corporate buyers – a record-breaking 9,600+ companies disclosed in 2020, 70% more than when the Paris Agreement was signed in 2015 and 14% up on last year.
Out of the 5,800+ companies scored by CDP on their climate change, forests and water security disclosures, just the top 5% made the A List by achieving the highest rankings. However, despite the challenges of Covid-19, the 313 companies that did make the list represent a 45% increase on 2019 and have a combined $15 trillion in market capitalization. Along with the high levels of disclosure, this shows how environmental awareness and the momentum for change has grown in the business world in 2020.
In another important development, the proportion of A List companies based in Asia has grown to 32%, now second after Europe and well ahead of North America. The list includes companies such as Alphabet, Bank of America, Mars and HP as well as General Motors and United Airlines.
Most companies (270) are on the A List for their climate scores, reflecting the importance of climate disclosure and increased market pressure for transparency. While only 16 companies earned a place for their work tackling deforestation, this is double last year’s number and suggests that this is an issue that will become increasingly important in coming years. More than 100 companies earned recognition for their work on water security and this issue is set to become more prominent in future, too.
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This year’s A List comes just ahead of the five-year anniversary of the Paris Agreement, with world governments expected to deliver updates on their national climate plans to build momentum ahead of COP26. In November, the UK government, which will host the postponed UN climate meeting next year, was the first G20 government to announce plans for mandatory disclosure on climate change risks, sending a powerful signal to the market and other governments that they should follow the UK’s approach. China, Japan and South Korea have all made important net zero announcements recently, and US President-Elect Joe Biden has announced that one of his first actions as president will be to rejoin the Paris Agreement, which the US left last month.
“This week marks exactly five years since global leaders shook hands on the Paris Agreement. It’s encouraging that 70% more companies are now reporting on their environmental action than in 2015, and that, this year, over 300 have reached the A List. Through their action and transparency, they are getting ahead of the pack and will seize the benefits as we transition to a net-zero sustainable economy,” said Dexter Galvin, global director of corporations and supply chains at CDP. “CDP data shows growing environmental awareness among the business world in 2020, which is hugely positive considering the unprecedented challenges business and society have faced this year. Now, we need these pioneers to inspire the sluggish majority of corporates if the private sector is to take a leadership role when climate targets ratchet up at COP26 next year. The race is on.”
The A List companies are based all around the world, with most coming from Europe (132), followed by Asia (100) and North America (61). The top countries for A List headquarters are Japan (66), US (58), UK (21), Germany (19) and France (18).
“Robust, independent assessment by organizations like CDP is helpful to critique corporate progress and promote examples of sustainability leadership,” said Kevin Rabinovitch, Global VP Sustainability at Mars, which has introduced context-based water targets and accelerated efforts to stop deforestation in our global supply chains. Mars has simplified its palm oil supply chain, reducing the number of mills used overall has improved accountability and allowed for satellite tracking to monitor land use for deforestation. “Recognition of our progress is very welcome, though we know there is still much to be done.”
Other examples of action by CDP’s A-Listers include:
· Japanese auto manufacturer Toyota has achieved 100% renewable electricity at all its European production plants and four South American plants.
· Indian technology company Tech Mahindra has installed rainwater harvesting systems to decrease dependency on sources of water that are threatened by overuse.
· American apparel company Levi Strauss & Co. is working with designated suppliers to identify and implement renewable energy and water saving interventions across ten countries.
· Global computer giant HP Inc has increased the percentage of its branded paper that is FSC-certified from 3% in 2009 to 100% now and can track product origin to individual mills.
· Japanese company KAO Corporation, which produces consumer goods and chemicals, has introduced internal carbon pricing to promote energy-saving investment.
· German flavors and fragrances company Symrise AG sources 100% RSPO-certified palm oil and offers training and financial incentives to its suppliers.
While there has been a big increase in the A List this year, almost three quarters (74%) of companies scored by CDP achieved D-C scores, meaning they are only just becoming aware of how environmental issues impact their business. Even more concerning, 3,700+ companies failed to disclose any data at all when requested to by investors or customers, and over three times this number received an F for at least one theme.
“These companies are expected to face increasing pressure to demonstrate they are taking environmental risks seriously,” CDP said.
The demand from shareholders for corporate environmental transparency is louder than ever: 515 investors with $106 trillion in assets under management, and more than 150 large purchasers with $4 trillion in buying power requested thousands of companies to disclose through CDP in 2020. They use CDP data, including scores, to inform their investment and procurement strategies.
Leading environmental action is correlated with financial success, CDP says. “Data from STOXX has shown that the A List has outperformed its reference index by an average of 5.3% per annum over a 7-year period,” the group says.