It could be good corporate policy to prepare for global warming.
So, when I heard that CDP, a climate research group, had ranked corporate readiness for a low-carbon economy, I took a look. Their focus was 16 of the largest Consumer Goods companies.
The Ranking
The Lists
Using a weighted average, CDP concluded that U.S. companies were the least ready to make the transition to a low-carbon economy. The Europeans fared better. You can see that Danone was at the top and Kraft Heinz at the bottom for the food and beverage companies:
Somewhat similarly, Unilever and L’Oréal topped the household and personal care products list:
The Criteria
Essentially we are just asking who is ready to make the transition to a lower emissions economy. The food companies have the biggest problems on the supply side because they depend on agriculture. Meanwhile the personal care companies have consumers to worry about. The concern here is the water and energy that their products require.
More precisely, CDP selected criteria in four areas::
- Companies had “transition risks” from raw material and emissions exposure.
- Their “physical risks” would come from water management problems.
- But, there were “transition opportunities” if they recognized consumer preferences and the potential of renewable energy.
- However, they had to have the appropriate “climate governance and strategy.” We could just say they needed the right corporate structure for a new strategy.
The report concluded that companies still had a long way to go. Yes, they were using less packaging and replacing petrochemicals. And, many recognized they needed more of a vegan identity. But instead of changing their core operations, they were acquiring smaller environmentally friendly brands. They point out that many were not positioned to respond to new consumer preferences.
Our Bottom Line: Private Cost and Social Benefit
If we look back to the early and mid-19th century surge of canal building in the United States, the private firms that built them insufficiently profited. However, the social benefit of a canal network was immense. A canal network facilitated the regional specialization that propelled economic growth. Because of a canal network, we could move people and goods over a vast portion of the nation.
Now, with large consumer goods companies planning for global warming, I suspect similar questions are relevant. We can compare their private cost and societal impact. Our answers could lead us straight to the government subsidies that have been fueling environmentally friendly industries.
I assume though that Kraft’s Mac & Cheese is not due for a subsidy.
My sources and more: Listening to Bloomberg radio today, I heard about a new report from the CDP (originally the Carbon Disclosure Project). CDP is a highly rated climate change research group. The report ranked the carbon awareness of major consumer products firms.
