The Asian Development Bank was established in 1966 to help its forty eight
developing member countries reduce poverty and improve the
quality of life of their citizens. In 2009, the Bank launched a new
program of technical assistance to encourage the growth of small- and
medium-enterprises (SMEs) in India and Indonesia that provide
environmental and social benefits.
Ella Delio works in WRI’s New Ventures project, which
promotes business solutions that align the need for sound
financial returns with environmental and social goals. She and
her team were the Bank’s primary advisors in developing the new
program. “SMEs,” Delio explains, “are the engines of equitable
economic growth in emerging market nations. Accounting for an
average of 34% of the GDP and employing in excess of 60% of
the labor force, SMEs are great sources of innovation and often
provide strong linkages to poor communities. They have the
capacity to transform the economic development paradigm by
delivering business models that are pro-poor and pro-environment.”
Alexander Perera leads WRI’s work in renewable energy. Looking back to the year
2000, he recounts how few companies were thinking about green power options
and how few utilities offered them. “Commercial and industrial use of renewable
energy in the U.S. totaled less than 250 megawatts – equal to just one quarter the
output of a large coal-fired power plant.”
Nine years later, a pioneering group of fifteen U.S. companies quadrupled this
output, reaching a collective goal of purchasing 1,000 megawatts of new, cost competitive
green power generated from renewable resources. In reaching this
landmark, the Green Power Market Development Group (GPMDG) has helped
catalyze a dramatic scale up of the domestic renewables industry.
WRI convened the Group and has worked with companies to explore workable
renewable energy technologies, financing strategies, and partnership arrangements.
It also helped the Group establish best practices for green power purchasing.
“Companies now obtain green power from a variety of sources,” says Perera,
“including solar and wind power, biomass, low-impact hydropower, and landfill gas.”
Core members of the GPMDG include Alcoa, Dow Chemical, DuPont, FedEx,
GM, Georgia-Pacific, Google, IBM, Interface, J&J, Michelin NA, Natureworks,
Pitney Bowes, Staples, and Starbucks.
In January 2010, the U.S. Securities and Exchange Commission issued new guidance clarifying that publicly-traded companies need to disclose financially material impacts related to climate change. Material impacts may range from compliance costs related to emissions regulation, to the physical impacts of changing weather patterns on operations.
The SEC ruling creates more incentives for capital to flow to sustainable businesses, while also improving awareness of the importance of climate change among the financial community. Companies are expected to improve GHG emissions accounting and reporting - an important stepping stone to managing and reducing corporate carbon footprints. WRI plans to continue engagement with the SEC, companies, and other advocates to help develop more specific rules, methodologies, and guidance relating to environmental disclosure.
For the past decade, WRI’s Markets and Enterprise Program (MEP) has been working to analyze material impacts of climate change on companies. MEP’s publication, Coming Clean, was one of the first reports identifying the need for improved corporate disclosure and providing specific recommendations for the SEC that were grounded in detailed financial analysis. Since then, WRI has worked closely with the investment community, as well as businesses, to foster support for better financial analysis and climate change-related reporting.
Meanwhile, WRI’s GHG Protocol team has worked over the last six years to build the foundation, constituency and the accounting infrastructure for companies to engage in corporate emissions disclosure and prepare for exactly this type of requirement. The GHG Protocol’s Corporate Accounting and Reporting Standard in particular is an important precursor to the SEC requirements. The SEC guidance refers to three business programs – the Carbon Disclosure Project, The Climate Registry, and the Global Reporting Initiative - that illustrate increasing corporate disclosure of climate change impacts and risks. All three of the programs’ greenhouse gas emissions reporting components are based on the GHG Protocol’s Corporate Standard.
Since 2007, both the Markets and Enterprise Program and the GHG Protocol Team have also been working through an international collaborative effort – the Climate Disclosure Standards Board (CDSB), which includes the Carbon Disclosure Project (CDP), The Climate Registry (TCR), CERES, and the World Economic Forum (WEF) to inform and guide SEC and other national financial accounting regulatory boards to address the issue of climate change reporting in the financial statements.
Brazil’s economy has been booming. During the past decade, it grew from the ninth to the sixth-largest in the world. While this growth has brought many socioeconomic benefits, it’s come with a downside: significant environmental impacts. Brazil has the highest rate of deforestation worldwide, while pollution threatens the country’s drinking water supply. Despite a decrease in national greenhouse gas emissions of late, agriculture emissions and energy demand are still rising.
While manufacturing is a critical part of the U.S. economy, it’s struggled over the last several years—both financially and environmentally. Overall U.S. manufacturing employment has dropped by more than one-third since 2000. Meanwhile, U.S. industry—of which manufacturing is the largest component—still uses more energy than any other sector and serves as the largest source of U.S. and global greenhouse gas emissions.
The good news is that energy efficiency can help U.S. manufacturing increase profits, protect jobs, and lead the development of a low-carbon economy. The Midwest’s pulp and paper industry is a case in point: New WRI analysis finds that the pulp and paper sector—the third-largest energy user in U.S. manufacturing—could cost-effectively reduce its energy use in the Midwest by 25 percent through use of existing technologies. These improvements could save hundreds of thousands of jobs, lower costs, and help the United States achieve its goal of reducing emissions by 17 percent by 2020. As the White House moves to cut carbon dioxide pollution in America, energy efficiency improvements in Midwest pulp and paper mills are a tangible example of the win-win-win emissions-reduction opportunities in U.S. industry.
Labeled the “queen of the forest” for its size and beauty, the Brazil nut tree plays an important social and environmental role in the Amazon. During the annual harvest, from November to March, when both its seeds and nuts are collected, the tree also provides a critical supplementary source of income for communities across the region.
While other natural resource management activities risk increasing deforestation in the Amazon, nut harvesting is not harmful to nature, since it depends on the forest’s continued existence. Local company Ouro Verde was created with this in mind, selling Brazil nut products marketed as sustainable, including extra virgin nut oil, nut butter and granulate. Ouro Verde created 47 jobs, and many more new business opportunities in the Amazon region, placing an economic value on the rainforest for local communities. About 1.3 million hectares of rain forest are sustainably managed by Ouro Verde supplier partners.
Ouro Verde is a shining example of the type of company WRI’s New Ventures project was created to support. Founded in 1999, New Ventures identifies, mentors, and provides promising small- and medium-sized enterprises (SMEs) with access to investment. New Ventures supports companies in six rapidly growing emerging markets – Brazil, China, Colombia, India, Indonesia, and Mexico – where the environment and development decisions being made today will impact the entire world. To date, we have facilitated more than $225 million in investment and worked with 346 innovative enterprises.
In 2010, SMEs supported by New Ventures reduced CO2 by 135,021 tons, the equivalent of removing over 112,000 cars from the road for one year. In addition, 1,490,448 hectares of land – an area larger than Connecticut - was placed under sustainable management by New Ventures companies or was conserved by sustainable land use companies in the New Ventures portfolio.
Managing carbon is not just good for the environment. It’s also a way for business to save money, cut risks, and create new business opportunities.
The Greenhouse Gas Protocol (GHGP), created by WRI and the World Business Council for Sustainable Development (WBCSD), is the leading international standard for companies to measure their carbon emissions so they can manage, report on, and reduce them.
In 2011, the GHG Protocol launched two new standards in response to demand from both the market and stakeholders for greenhouse gas emissions information across a company or product’s value chain. The Corporate Value Chain Standard can help a company identify which parts of its value chain it should target to reduce emissions. The Product Life Cycle Standard may be used to develop new low-carbon product lines that can give companies a competitive edge or pinpoint climate-related risks in a product’s life cycle.
The new standards took three years to develop. Close to 2,500 partners worldwide participated and 60 companies from 17 countries road-tested the standards. Even before their release, two major initiatives – The Sustainability Consortium and the Consumer Goods Forum – committed to use the standards. Their endorsement is a breakthrough and a clear signal that the new standards will be widely adopted by companies globally. The Consumer Goods Forum, for example, represents over 400 companies and retailers with a combined three trillion dollars in sales.
By enabling corporations to reduce their use of carbon, the new GHGP standards can play a role in significant global GHG emission reductions.
Supply chains are a major contributor to the environmental footprint of multinational companies, particularly in their use of water. By working with suppliers to decrease water-related risk, large companies can help reduce pressure on the world’s over-stretched water resources.
In July 2012, global food service retailer McDonald’s added a question to the Environmental Scorecard it distributes to its top suppliers. The addition requested that suppliers determine the water stress associated with their facilities’ locations. WRI played a pivotal role in this landmark initiative, providing the Aqueduct water risk mapping tool, which McDonald’s asked its suppliers to use when calculating their water footprints.
Measuring Water Risks
McDonald’s distributes an annual Environmental Scorecard Questionnaire to its top suppliers. The suppliers asked to respond to the water risk question include providers of beef, poultry, pork, potatoes, bakery products, and toys. Incorporating this question into the Environmental Scorecard was an important step in advancing McDonald’s dialogue with its suppliers beyond efficiency to include water risk and overall water stewardship.
The 2012 Environmental Scorecard directed suppliers to, “Use the WRI Aqueduct Tool to determine the water stress of the facility’s location and provide the water stress [level] of the facility’s location.” McDonald’s also urged its top suppliers to use the data they acquire from using Aqueduct to update their environmental management processes to take water risk into account. By the end of September 2012, all 353 of the facilities asked to complete the Aqueduct water risk assessment had done so.
This McDonald’s initiative provides an important precedent for evaluating water-related risk among agricultural producers, who account for 70 percent of water use worldwide.
Making Change Happen: WRI’s Role
WRI’s Aqueduct tool, developed by our Markets & Enterprise Program, allows companies and other organizations to access information on water risks in a given region or area. Our global database uses 12 indicators of water quantity, water quality, and regulatory and reputational issues to calculate water risk around the world.
The practical, straightforward, user-friendly nature of our Aqueduct tool made it possible for McDonald’s to begin assessing water risk across its vast global supply chain. Suppliers survey the data available for their facility’s location, and then choose from a drop-down option that indicates whether overall water risk is low, medium, or high. The Coca-Cola Company, a supporter of the Aqueduct project, vouched for the usefulness and credibility of the maps to McDonald’s, one of its largest customers.
McDonald’s high profile endorsement of the Aqueduct tool and data will help WRI scale our work with companies to address water scarcity challenges worldwide.