ALI-ABA Course of Study Global Warming: Climate Change and the Law Cosponsored by the ...

302 Pages·2007·2.8 MB·English

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ALI-ABA Course of Study
Global Warming: Climate Change and the Law
Cosponsored by the Environmental Law Institute
March 22 - 23, 2007
Washington, D.C.
Corporate Governance and Climate Change: Making the Connection
Submitted By
Anne L. Kelly
CERES
Boston, Massachusetts
© 2006 CERES. All Rights Reserved.
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Corporate Governance
and Climate Change:
Making the Connection
Authored by A Publication of
Douglas G. Cogan
March 2006
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Ceres commissioned this report from the Investor Responsibility Research Center (IRRC).
Ceres is a national coalition of investors, environmental groups and other public interest
organizations working with companies to address sustainability challenges such as global climate
change. Ceres directs the Investor Network on Climate Risk, a group of more than 50 institutional
investors from the U.S. and Europe managing nearly $3 trillion in assets. IRRC is a research firm
that has been a leading source of high quality, impartial information on corporate governance and
social responsibility issues affecting investors and corporations since 1972. IRRC was acquired by
Institutional Shareholder Services in August 2005.
IRRC wrote and prepared this report for informational purposes. Although IRRC exercised due care
in compiling the information contained herein, IRRC makes no warranty, express or implied, as to the
accuracy, completeness or usefulness of the information, nor does it assume, and expressly disclaims,
any liability arising out of the use of this information by any party. The views expressed in this report
are those of the author and do not constitute an endorsement by IRRC or Institutional Shareholder
Services. Changing circumstances may cause this information to be obsolete.
This report was made possible through grants from the Energy Foundation, the Henry P. Kendall
Foundation, the Nathan Cummings Foundation, the United Nations Foundation/Better World Fund,
and the Wallace Global Fund. The opinions expressed in this report are those of the authors and do
not necessarily reflect the views of the sponsors.
The author wishes to thank Peter DeSimone, Sol Kwon and Susan Williams of the Investor
Responsibility Research Center for their critical role in conducting primary research on the companies
profiled in this report. The author also wishes to thank Heidi Welsh of IRRC for her help in building
a database to manage this flow of information. This report could not have been completed without
their efforts. The author also wishes to thank Dan Bakal, Debra Hall and Andrew Logan of Ceres,
who reviewed company profiles and provided valuable insight and information.
The author also wishes to thank Carolyn Mathiasen of IRRC, Jim Coburn and Dan Mullen of
Ceres, as well as Miranda Anderson of David Gardiner and Associates, who reviewed drafts of
this summary report and provided helpful editing suggestions. The author wishes to thank
Christopher Clark of Cave Dog Studio, for his instrumental role in preparaing the final report,
which required patience and perseverance. Finally, the author wishes to thank Peyton Fleming
of Ceres, who helped manage this project from beginning to end. His contributions are
reflected throughout this report, for which the author is especially grateful.
Copyright 2006 by Ceres
Copyrighted IRRC material used with permission by Ceres
Ceres, Inc.
99 Chauncy Street
Boston, MA 02111
www.ceres.org
Investor Responsibility Research Center, Inc.
1350 Connecticut Ave., NW
Washington, DC 20036
www.irrc.com
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Contents
Click on section titles below to hyperlink to actual content.
Hyperlinks also available on company scores table (page 4).
Foreword by Mindy Lubber, Ceres President v
Executive Summary 1
How Companies are Scored 3
100 Company Scores 4
Climate Change: A Growing Sense of Urgency 7
Climate Change and Corporate Governance: Making the Connection 11
Why Companies Must Act Now 11
What CEOs Are Saying 14
What Companies Should Do 14
Investor Actions 15
How Companies were Selected for this Report 17
How Companies Are Scored 19
High Scoring Industries 20
Middle Scoring Industries 22
Low Scoring Industries 23
Company Scores (by Industry) 25
Appendix: Profiles of 100 Companies
Chemicals
Air Products & Chemicals Inc. 32
BASF AG 35
Bayer AG 38
Dow Chemical Co. 41
DuPont (EI) de Nemours 44
Imperial Chemical Industries PLC (ICI) 47
Monsanto Company 50
PPG Industries Inc 53
Praxair Inc. 55
Rohm and Haas Co. 58
Electric Utilities
American Electric Power Co. Inc. 62
AES Corporation 65
Calpine Corp. 67
Cinergy Corp. 70
Constellation Energy Group Inc. 73
Dominion Resources Inc. 75
DTE Energy Co. 78
Duke Energy Corp. 81
Edison International 84
Corporate Governance & Climate Change
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Contents
Entergy Corp. 87
Exelon Corp. 90
FirstEnergy Corp. 93
FPL Group Inc. 96
PG&E Corp. 99
Progress Energy Inc. 102
Sempra Energy 105
Southern Company 108
TXU Corp. 111
Xcel Energy Inc. 114
Motor Vehicles
BMW (Bayerische Motoren Werke AG) 118
DaimlerChrysler AG 120
Ford Motor Co. 123
General Motors Corp. 126
Honda Motor Co. 129
Nissan Motor Co Ltd. 132
Toyota Motor Corp. 135
Volkswagen AG 138
Industrial Equipment
ABB Ltd. 142
Caterpillar Inc. 145
Deere & Co. 147
General Electric Co. 149
Hitachi Ltd. 152
Mitsubishi Heavy Industries Ltd. 155
Siemens AG 157
United Technologies Corp. 160
Metals & Mining
Alcan Inc. 164
Alcoa Inc. 167
Anglo American PLC 170
BHP Billiton Ltd. 173
Mittal Steel Company NV 176
Newmont Mining Corp. 178
Nippon Steel 180
Nucor Corp. 183
Phelps Dodge Corp. 185
United States Steel Corp. 187
Forest Products
Abitibi-Consolidated 190
Georgia-Pacific Corp. 192
International Paper Co. 194
MeadWestvaco Corp. 196
Weyerhaeuser Co. 198
Corporate Governance & Climate Change
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Contents
Petroleum
Amerada Hess Corp. 202
Anadarko Petroleum Corporation 204
Apache Corp. 207
BP PLC 209
Burlington Resources Inc. 212
Chevron Corp. 214
ConocoPhillips 217
Devon Energy Corp. 220
El Paso Corp. 222
Exxon Mobil Corp. 224
Marathon Oil Corp. 227
Murphy Oil Corp 229
Occidental Petroleum Corp. 231
Royal Dutch Shell plc 233
Statoil Asa 236
Sunoco Inc. 239
Tesoro Corp. 241
Total SA 243
Valero Energy Corp. 246
Valero Energy Corp. 247
Williams Companies Inc. 248
Coal
Arch Coal Inc. 250
CONSOL Energy Inc. 252
Foundation Coal Holdings Inc. 254
Peabody Energy Corp. 256
Rio Tinto PLC 258
Food Production
Archer-Daniels-Midland Co. 262
Altria Group Inc. 264
Bunge Ltd. 266
ConAgra Foods Inc. 267
General Mills Inc. 268
Nestlé SA 270
PepsiCo Inc. 272
Unilever PLC 274
Airlines
Air France-KLM Group 278
AMR Corp. 280
British Airways 282
FedEx Corp. 285
Southwest Airlines 287
UAL Corp. 288
United Parcel Service Inc. 289
Corporate Governance & Climate Change
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A preponderance of evidence shows that worldwide temperatures are rising, glaciers are melting and hurricanes
are becoming more fierce. This confluence of events is forcing governments worldwide to enact limits on the
pollutants that are trapping heat in the atmosphere.
These trends present enormous risks and opportunities for companies and investors. With the launch of the
Kyoto Protocol and expanding greenhouse gas limits, power companies and other energy-intensive businesses
face growing risks from the energy they use and how efficiently they use it. Companies also face risks from
direct physical impacts, including stronger and more frequent storms, droughts, floods and sea level rise. In turn,
forward-thinking companies that fine-tune their operations and develop new climate-friendly products can prosper
from climate change.
This report is the first comprehensive measurement of how 100 leading global companies are preparing and
positioning themselves to face these challenges. It pays particular attention to the job that corporate executives and
board members are doing to enact well-functioning governance systems to face the climate challenge.
The report employs a “Climate Change Governance Checklist” to evaluate how 76 U.S. and 24 non-U.S. companies
are addressing climate change through board oversight, management performance, public disclosure, emissions
accounting and strategic planning.
The results are encouraging. In 2003, Ceres released a report on 20 companies showing that major U.S. businesses
were largely ignoring these issues. By contrast, this report shows that corporate leaders in many key industries are
now facing the challenge head-on—companies such as DuPont, Cinergy, American Electric Power and General
Electric, which earned the highest scores in their respective industries.
Yet for all of the positive momentum in elevating climate as a governance priority, most American companies
lag behind their international peers—a trend that is already resulting in competitive advantages for overseas
companies developing low-carbon technologies in the auto and power sectors. No less worrisome, dozens of U.S.
businesses in various climate-vulnerable sectors—including power, oil and gas, coal, air transportation and food
products—are ignoring the issue with ‘business as usual’ responses that are putting their companies, and their
shareholders, at risk.
This report is a valuable tool for company executives, board members, investors and Wall Street analysts.
Here’s how each group should use it:
• Company executives should evaluate their own company’s performance relative to their particular set of
circumstances and their industry peers. If their governance scores fall short, they should pursue the four key
steps to manage climate risks and opportunities outlined later in this report.
• Board members at low-scoring companies should address the issue with management and begin educating
themselves on the business and financial dimensions of this issue.
• Investors should evaluate how companies score relative to their industry peers—especially in high-risk sectors
such as electric power, oil/gas and the auto industry—and should engage with poor corporate performers.
• Wall Street analysts should use the information in this report as a basis for rewarding companies that are
responding to these challenges, and assigning risk to those that are not.
Tackling these issues is an enormous challenge. It requires that corporate leaders deliver short-term financial returns
while also building capacity for the challenges that climate change presents in the long term. Companies such as
GE and DuPont have stepped up to the challenge, but many other U.S. companies have not. There’s simply too
much at stake for that not to change.
Mindy S. Lubber
President, Ceres
Director, Investor Network on Climate Risk
Corporate Governance & Climate Change v
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