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8/19/2010

Transport Sector Lags in Addressing Climate Change

A report from the Carbon Disclosure Project finds that despite being a major contributor to greenhouse gas emissions, the transport sector lags in setting reduction targets and recognizing risks and opportunities.

SocialFunds.com -- According to a recent survey by Forrester Research , the abandonment by the US Senate of climate change legislation will not alter an increasing adoption of climate mitigation practices by US business. As Christopher Mines, a vice president and research director at Forrester, stated in an article on GreenBiz.com , "The lack of cap-and-trade legislation won't actually affect the behavior of most businesses all that much, since they are pursuing energy efficiency and other steps toward sustainability for other reasons."

"The potential for cost-reduction is the primary motivation for green IT and sustainability investments and initiatives," Mines continued.

Unfortunately, a look at the Carbon Disclosure Project's (CDP) recent report on the transport industry sector%151a major contributor to greenhouse gas (GHG) emissions, as it consumes almost 60% of oil in high-income countries and is responsible for 13% of global GHG emissions, according to the report%151suggests that an optimistic perspective on the willingness of business to address climate change in the absence of legislative support may be premature.

The report found that "the Transport sector is behind other industries in terms of environmental impact reporting and goal-setting," and that "many transport companies also are struggling with identifying and reporting climate-related risks and complete carbon emissions." The sector consists of surface, air, and sea transport; road transport alone contributes 80% of the sector's GHG emissions.

The report found that transportation companies lag behind the largest global companies in setting emissions reduction targets and recognizing climate-related risks and opportunities. On the other hand, some companies are "identifying and developing opportunities in new low carbon fuels and advanced technology vehicles," and a small number of companies are reporting low carbon investments totaling $31.93 billion.

SocialFunds.com spoke with Zoe Tcholak-Antitch, vice president and head of Investor CDP, about the findings of the report.

"The report is an interesting expansion for CDP, because we usually write to large market cap companies on behalf of investors," Tcholak-Antitch said. "This report is one of the first times that we've chosen to write to companies based on their carbon intensity."

Although the report is not the first sector-specific publication by the CDP%151it published a report on electric utilities in 2008%151it is the first time that it specifically addressed the transport sector. For the report, the CDP requested data from 291 of the largest global transport companies in 2009, and 154 responded.

"It's clear that transport companies do have an impact, and it was disappointing to see such little action being taken, compared to other sectors such as electric utilities," Tcholak-Antitch said.

Asked for possible reasons why the overall performance of the sector was so disappointing, Tcholak-Antitch responded, "The industry is less regulated than electric utilities, and because of that they are under less pressure to provide data to various stakeholders. Another reason for low disclosure may be that it's such a sprawling sector in terms of the companies in it."

"One of the first things for companies to do is identify risks, in order to identify the opportunities they can take on board," she continued. "One of the things we discovered is that when companies have indentified risks, they have been able to put into place significant energy efficiency drives."

One such leader among transportation companies identified in the report is UPS, which has been reporting to the CDP since 2000. SocialFunds.com spoke with Lynette McIntire, Director of Corporate Reputation Management at UPS, about the company's strong sustainable performance.

"One of the things we believe in as a company is transparency," McIntire said. "We think the CDP report is so important because it should help encourage our peers to participate."

"The report points out the expectations for reporting, and what the leaders are reporting on," she continued. "It puts a stake in the ground for the industry, and brings the issue to the forefront."

Referring to the company's 2009 Sustainability Report , McIntire said, "We strongly believe that our report has be detailed and credible, and we're increasingly using third parties to prove that what we do is viable."

In the company's Sustainability Report, UPS Chairman and CEO D. Scott Davis states, "Our contributions extend to effectively utilizing technology to optimize the miles we fly and drive; introducing more green products to help our customers streamline their logistics operations; leveraging all modes of transportation (particularly rail) to offer customers a fuel-efficient delivery network; and working with industry and environmental groups like the World Resources Institute to tackle shared challenges like bio-fuels in aviation and carbon mitigation."

By minimizing the number of miles traveled on its route, McIntire said, "What we're doing makes green sense, but it also makes dollars sense for us. Fuel costs are a big part of our cost structure, so the more efficient we can be the better it is for our bottom line."

The alternative energy vehicles that have been added to the UPS fleet use energy sources such as all-electric, propane, compressed natural gas, and hydraulic hybrids. According to McIntire, the vehicles have covered over 200 million miles so far.

"The CDP report gives people the opportunity to expand their definition of supply chains," McIntire added. "Because we are the supply chain for so many customers around the world, we want to help those companies green up their supply chains."

Tcholak-Antitch seconded the importance of the sector in the supply chains of other companies, saying, "Companies looking to reduce carbon emissions in their supply chains, in response to pressure from investors and consumers, will look to the innovative transport companies as a way of reducing their supply chain emissions."

"The leading companies are recognizing the competitive advantage of being the companies of choice in the supply chains of other members of the economy," she added.

Asked for recommendations for companies in the transport sector, Tcholak-Antitch said, "The recommendation to all transport companies is to wake up and realize that the low-carbon economy is unavoidable, and that transport has to be part of the solution. Companies that are able to identify where the opportunities are will be the leaders in the transport industries in the future."

Referring to an appendix to the report in which the response state of companies is listed, Tcholak-Antitch said, "If companies have not responded to our request for information, I would recommend that investors engage with them to provide this critical information."