Getting a Grip on Context: Initial Findings of World's First Science-Based Approach to

Corporate Sustainability Ratings

New Metrics of Sustainable Business ConferenceSeptember 24, 2013 (v2)

For Climate Counts – Why Context?

4 Pillars: 4 Pillars:

Measure Measure

Reduce Reduce

Report Report

Policy Stance Policy Stance

0 100

Great progress – but is it enough?

81% of the world’s 500 largest public companies listed on the Global 500 engage with CDP to enable effective measurement of their carbon footprint and climate change action.

Company scores have improved 60% from 2007 on the Climate Counts scorecard.

Are we sustainable?

Enter Context-Based Metrics

• In late 2012, CC was approached by Center for Sustainable Organizations (CSO) with a proposal to enhance CC’s methodology

• Agreed to pilot a new form of ranking that would be context-based (i.e., that would rate corporate emissions against science-based standards)

• World’s first context-based sustainability ranking in the capital markets!

Brief Introduction to Context-Based Carbon Metrics

Mark W. McElroy, Ph.D.

Center for Sustainable Organizations

Context-Based Carbon Metrics

• One of a new class of metrics called context-based metrics

• Not like conventional relative or absolute metrics

• Impacts measured against norms, standards, or thresholds (science-based) for what they would have to be in order to be sustainable

• Thresholds for carbon expressed as concentration limits in the atmosphere (e.g., 350 ppm)

Context-Based Carbon Metrics (cont.)

• How we build context-based carbon metrics:

1. Choose a science-based mitigation scenario (PoleStar)

2. Measure company emissions in baseline year (2005) and express as emissions per dollar of contribution to GDP ($CGDP)

3. Then set reduction targets per $CGDP for all downstream years based on science-based scenario

4. Adjust for changes in size of GDP and inflation, and adjust further to ensure that maximum allowable global emissions, if applied to all GDP-related sources on Earth, will not exceed maximum allowable global emissions per the science-based scenario.

5. Then compare actual company emissions to reduction targets and compute scores accordingly.

Actual EmissionsPer $CGDP

Normative EmissionsPer $CGDP

< 1.0 = Sustainable

> 1.0 = Unsustainable

Initial Results – World’s First Context-Based Carbon Ranking

Mike Bellamente

Climate Counts, Inc.

Initial Results

• Survey Sample– 100 public companies in multiple sectors– Range of analysis: 2005-2012– Data gathered with assistance of South Pole

Carbon in Zurich (Bloomberg) and CDP

• Top-line Highlights– 49 of 100 scored sustainably, 51 unsustainably– At least 3 of the sustainably scoring companies

are known for their histories of using context-based carbon metrics, including the top two performers:

• Autodesk and Unilever

Initial Results (cont.)

• Top 10 Scorers (Sustainable)1. Autodesk (0.449)

2. Unilever (0.600)

3. Eli Lilly (0.601)

4. Canon (0.611)

5. L’Oreal (0.679)

6. GE (0.685)

7. Reckitt Benckiser (0.699)

8. Abbott Labs (0.708)

9. Hyundai (0.730)

10. State Street Bank (0.739)

Initial Results (cont.)

• Bottom 10 Scorers (Unsustainable)91. Cisco Systems (1.566)

92. GM (1.650)

93. Wells Fargo (1.670)

94. Citigroup (1.737)

95. Dow Chemical (1.887)

96. Conagra Foods (1.889)

97. Royal Bank of Scotland (2.009)

98. UPS (2.083)

99. Molson Coors (2.721)

100. Weyerhaeuser (3.144)

Initial Results (cont.)

• Other interesting results– We also measured emissions intensity (per $ of

sales) and found no positive correlation between context-based and intensity scores:

• #1 Autodesk ranked 6th on intensity• #2 Unilever ranked 52nd on intensity• #3 Eli Lilly ranked 74th on intensity• Worst intensity performer (Cemex) scored

sustainably in the context-based ranking (26th)

– 23 of the 49 companies (47%) that scored sustainably actually increased their average annual emissions between 2005 and 2012 (decoupling is possible!)

Q&A with Representatives of

GE and J&J

Gretchen Hancock, GE

Jed Richardson, J&J