Climate research provider and environmental disclosure platform CDP announced the results of a study indicating that companies are increasingly factoring the cost of carbon into business strategies and decisions.
CDP surveyed nearly six thousand companies, representing more than $27 trillion in market capitalization, on their carbon pricing practices. The study found that more than 850 companies are currently incorporating carbon pricing, a 22% increase over the prior year, with another 1,159 reporting plans to do so within two years, up 27%. According to CDP, nearly half of the world’s 500 biggest companies are now factoring carbon accounting into their business plans.
Companies implement carbon pricing practices for a variety of reasons relating to the risk and opportunities that arise from an increase in the price of emissions, ranging from preparation for future potential future regulatory requirements, to assessing the value of investments. According to the CDP study, driving low carbon investment was the most commonly cited objective for internal carbon pricing, followed by driving energy efficiency, and efforts to change internal behavior.
Nicolette Bartlett, Global Director of Climate Change at CDP, said:
“Our latest data shows a clear correlation between companies putting a price on carbon and those taking other strategic decisions to combat climate change. With the urgency of the climate crisis requiring a systemic shift in corporate behaviour, it is encouraging to see such an increase in the number of global companies taking positive steps forward, and pricing carbon risks into their businesses.”
Other key findings of the CDP study include:
- While more companies are considering the cost of carbon, the median internal carbon price disclosed by companies in 2020 was US$25 per metric ton of CO2e, well below the price implied by the EU emissions trading scheme, which rose to nearly $45 in March.
- More than half of those surveyed report that they do not expect to face governmental regulation on the price of emissions within three years and do not foresee carbon pricing regulation to be a substantive risk. Only 14% of these companies currently use or plan to implement an internal carbon price over the next 2 years.
- The manufacturing industry is the most advanced in terms of carbon price implementation, accounting for more than one third of all companies with an internal carbon price or plans to institute one.