Achieving Economic and Environmental Efficiencies: Lessons from the Carbon Disclosure Project

February 13, 2019 by Samuel Ruddy

By Robert Adler, Staff Contributor

While some companies celebrate the EPA’s deregulation efforts, other companies are starting to understand that economic and environmental efficiencies can run hand-in-hand. The Carbon Disclosure Project helps companies see the connection.

 

As the Environmental Protection Agency continues to deregulate and limit its use of enforcement authorities,[1] some fear there  will be lasting impacts on public health and the environment.[2] Many businesses in certain industries favor the EPA’s actions because they reduce operational costs.[3] However, other companies are turning in the other direction.

To reach economic and environmental efficiencies, companies are turning to outside organizations for guidance and structure. One of the better-known companies in this line of work is a United Kingdom-based nonprofit company called the Carbon Disclosure Project (CDP). The CDP helps investors, companies, and governments worldwide measure and understand their environmental impact.[4] In order to achieve its mission, the CDP manages a global disclosure system, which has become a comprehensive, self-reporting environmental data set.[5] Through this data set, clients are able to make better business and environmentally friendly decisions.

The CDP focuses on climate control, water preservation, and deforestation prevention. With regards to climate control, the CDP helps companies effectively implement carbon pricing for their own emissions and keeps clients updated with external research on current and emerging carbon pricing practices.[6] Moreover, the CDP helped start the world’s first investment-grade carbon pricing for the power sector, which accounts for about a quarter of global emissions.[7] By providing data tracking and carbon pricing methodologies, the CDP helps companies incorporate the costs of greenhouse gas pollution into their business strategies.[8] And as companies begin using this environmental-impact data in their decision-making, the data will allow these firms to achieve economic and environmental efficiencies.

What makes all of this even more interesting is that companies are responding in turn. From 2016 to 2017, the CDP saw a forty percent increase in company response rates.[9] Seventy percent of that increase involves companies with active boards reviewing environmental impact.[10] The CDP also saw the private sector commit twenty-three billion dollars in over one thousand projects to improve the global environmental outlook.[11] The CDP has created an effective platform for parties to help protect the global environmental impact, which directly supports the global economy.

As I continue to research this topic, I continue to ask myself: if the current administration is committed to deregulating and calling off enforcement, why are state governments slow to respond? Some states are constantly looking to grow intrastate business by attracting companies to work within the state. Two ways in which states attempt to attract business is by lowering taxes and creating a supportive regulatory environment.[12] State governments could kill two birds with one stone by incentivizing business relocation to their state while building incentives for companies to track their own environmental impact. If state governments implemented an action plan similar to the CDP by rewarding incoming companies for reporting environmental-impact data and taking environmentally-conscious actions (i.e. by giving companies tax breaks on their state corporate taxes), states would be able to attract businesses without substantially altering state regulations. This idea could effectively help states replicate the CDP’s mission. Who knows, maybe it could even change the administration’s idea of the relationship between business and the environment.

 

[1] Envtl. Prot. Agency, EPA Year in Review 2017-2018 2 (2018), available at https://www.epa.gov/sites/production/files/2018-03/documents/year_in_review_3.5.18.pdf; Eric Lipton and Danielle Ivory, Under Trump, E.P.A. Has Slowed Actions Against Polluters, and Put Limits on Enforcement Officers, The New York Times (Dec. 10, 2017), https://www.nytimes.com/2017/12/10/us/politics/pollution-epa-regulations.html.

[2] Lindsey Dillon, et al., The Environmental Protection Agency in the Early Trump Administration: Prelude to Regulatory Capture, Am. Pub. Health Ass’n (Feb. 5, 2018), https://ajph.aphapublications.org/doi/full/10.2105/AJPH.2018.304360.

[3] Binyamin Appelbaum and Jim Tankersley, The Trump Effect: Business, Anticipating Less Regulation, Loosens Purse Strings, The New York Times (Jan. 1, 2018), https://www.nytimes.com/2018/01/01/us/politics/trump-businesses-regulation-economic-growth.html.

[4] The Carbon Disclosure Project, https://www.cdp.net/en (last visited February 7, 2019).

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

[10] Id.

[11] Id.

[12] Timothy J. Bartik, Growing the State Economy: Evidence-Based Policy Options 17-19 (Stephanie Eddy & Karen Bogenschneider eds., 1st ed. 2009).