Some of the world’s biggest companies are reducing their emissions at a faster-than-expected pace, in some cases the equivalent of what an entire country can produce in a year. But what does the effort yield to their investors?
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00:00The climate crisis is an economic crisis. Data for data's sake is actually worth nothing.
00:05Every dollar a company spends on reporting is a dollar that they're not spending on action.
00:17Welcome to The Big Question, the series from Euronews addressing some of the most important
00:21topics in business, including how to uncover the environmental impact of some of the world's
00:26biggest companies. Today, I'm joined by Sherry Madeira, CEO of CDP, a charity that helps
00:32to do just that. Thank you very much for joining us. So you work with some of the world's biggest
00:35companies like Apple, Microsoft, and Walmart. Are they doing a good enough job of leading
00:40by example? You mentioned Walmart. So Walmart, back in 2017, they launched the gigaton project,
00:47which was planning to take one gigaton of carbon out of their emissions through their
00:52supply chain before 2030. In 2024, they have gotten there already. So six years early. How
01:00they do that is look at the data from each of their suppliers. And don't leave it at that,
01:04because data for data's sake is actually worth nothing. It is what action is being taken. So
01:10Walmart looking at that data and understanding what does that mean? How does that compare? How
01:15do other suppliers in that classification compare to them? And what can we do to be proactive and
01:21help those suppliers to actually decrease their carbon emissions? And that's something that's
01:26really impactful. Because remember, one gigaton is 2.5 times the amount of emissions that the UK
01:32as a country emit every year. Anyone who maybe isn't familiar with CDP, can you just explain
01:44exactly what it is that you do and why it's important? CDP has been around for the last 24
01:49years as being the world's global disclosure platform for climate and nature data. So we have
01:5524,800 companies that report to us. That's over two thirds of the world's market capitalization
02:01that report into CDP. So again, that data has all been accumulated over 24 years. We supply that data
02:09to investors. We have over 700 of the world's largest investors representing $142 trillion
02:16worth of assets that are requesting this data through CDP. So you mentioned that investors
02:21are often asking for this data. Is that quite a big benefit for a company in terms of their
02:25declaring their data and maybe is it making them more appealing to investors? Yeah, increasingly,
02:30I think that we're seeing that investors are including climate and nature and impact data
02:34in their decision making to allocate capital. But it's not just investors, right? We look at
02:39that as saying access to capital. So it might be public companies, private companies, even private
02:44equity are looking at this information. That access to capital is important, but business
02:49efficiency and how your customer uses the data, how you use the data yourself in order to be able
02:54to meet your sustainability goals as a business, that business efficiency is also a driver. We've
02:59identified 21 different indicators that if a company is not looking at them and disclosing
03:05against them, it becomes far, far more difficult to believe that their target is credible and that
03:11their transition plan is credible. Sadly, the information there is that less than 1% of
03:17companies that disclose to CDP that they have a transition plan are credible transition plans. So
03:23there is a lot of work to be done there. Thinking about all this data that you're collecting, what
03:28else is it showing us from an economic perspective? So I think that it's showing us both risk and
03:32opportunity. You know, we're seeing sort of on the opportunity side, if we get this right,
03:37GDP should be increasing by 7% by 2030. There's also the downside if we get it wrong. You know,
03:44some of those quotes are a 20% decrease in GDP over the course of the next 20 years in various
03:49parts of the world. And again, you know, if we look at it from that point of view, we have to
03:54admit that actually the climate crisis is an economic crisis. However, I think what we are
03:59seeing is an encouraging number of companies increasing their transparency. And why I'm
04:05excited about that is some of the data from CDP has shown that once a company discloses to CDP,
04:11within two years, their emissions go down by 7% to 10%. And on the 1st of January,
04:17the European Commission introduced the Corporate Sustainability Reporting Directive's new
04:21sustainability reporting regulations. Quite a muscle. Indeed. What will this mean for companies
04:26in Europe? Well, it's already meant a lot, Hannah. Companies have been preparing for
04:33mandatory disclosures, particularly in Europe for a number of years. Certainly,
04:372024 was a year of preparation. Of course, this has also sort of brought a lot of discussion
04:45about disclosure and about what is meaningful and how is it that this is going to be helpful
04:50to not only the companies, but also the rest of the economy and perhaps the wider ecosystem. We
04:56need to make sure that we're really driving interoperability. Let's try and make it as
05:00easy as possible. Because every dollar a company spends on reporting is a dollar that they're not
05:06spending on action. And all of this mandatory disclosure we're talking about, the regulation
05:11there is very welcome. But actually, until action is taken, it's again, just a pot of data. And so
05:18for those companies that maybe don't come under the new regulations, how do we incentivize their
05:26declarations? Is the cost to benefit ratio right for them at the moment? Surfacing information
05:32about climate and nature, it has to be a benefit to the company itself. Around the boardroom table,
05:39we need to have a seat available for climate and nature around that table. Because those are not
05:45only the risks that company is facing, but there are huge opportunities as well. So in Europe alone,
05:51we identified in 2023, through the CDP disclosures, $3.47 trillion worth of opportunity
05:59that comes from making changes in order to lean into a sustainable future. And you might say,
06:05well, that's all great. But what would those opportunities cost for the same companies to
06:09be able to fulfill them? Well, Hannah, I'm pleased to say it's only 620 billion in relation to that
06:153.47 trillion. When you say this 3.47 trillion euro worth of opportunity, what do you mean?
06:23What does this look like in the real world? So depending on what type of business a company is,
06:28they would be looking at an R&D opportunity to change the product or the offering that they
06:33put into the marketplace in order to be more sustainable. It could be packaging. It could be
06:39the fundamental product itself. It could be a delivery mechanism. So all of these changes are
06:44being looked at so that companies can make those decisions to take steps towards a more sustainable
06:51future. And I think that this is where some of the discussion around targets can come in.
06:56Finally, we're at the start of a new Trump presidency, and there is some speculation that
07:00he might dismantle the ESG-related regulations during this time. Do you have any concerns
07:05about this? Our largest country that discloses data is the US. And it's really encouraging
07:14to see companies that are making choices independent of who is in the White House.
07:21However, there will be headwinds in this, certainly. We saw that in the first Trump
07:26presidency. And again, CDP has weathered through that and increased the data year on year.
07:32So it says to me that that 86% of the S&P 500 that already disclosed to CDP and has been
07:39maintained year on year are looking at data disclosure as a business advantage.
07:46Thank you very much for your time today and for joining me on The Big Question.
07:49Thanks so much, Hannah. I appreciate it.