Companies behind some of the best-known consumer products — from soaps to sodas — are beginning to factor climate change into their business equation, a report published yesterday said.
The survey of 16 major corporations by nonprofit group CDP found that many are working to lower their carbon emissions, prepare for the effects of global warming on their supply chain and respond to growing environmental consciousness among customers.
Examples include brewer AB InBev NV’s efforts to develop a variety of barley that needs less water and Unilever NV adjusting its detergent formulas so that they work at the lower “eco” temperature settings on modern washing machines, the London-based group said.
“We were surprised how much these companies were aligning themselves with changes in consumer preferences,” lead author Carole Ferguson said.
This includes chasing trends such as veganism, a small but growing factor in the market that is driven by people who shun animal products for ethical or health reasons, but also because they have larger carbon footprints.
PepsiCo Inc’s acquisition of Health Warrior, a maker of plant-based nutrition bars, is a typical example of a large company snapping up a small brand to fill a niche that it did not yet cover.
Such purchases help companies bolster their green credentials at a time when they are beginning to feel the heat of climate advocates.
Consumer goods account for about a third of greenhouse gas emissions, meaning companies that make them play a key role in efforts to keep global warming below 2oC by the end of the century.
However, manufacturers such as Nestle SA, Coca-Cola Co and Procter & Gamble Co also face growing scrutiny from investors who want to know what business risks they face from climate change before deciding whether to buy their stock, Ferguson said.
CDP ranked the companies surveyed according to how strongly their business is threatened by climate change, what they are doing to prepare for the changes and how much information they disclose to their customers.
“Climate change is going to be disruptive to revenues and costs,” Ferguson said. “What I would want to know as an investor is what kind of strategy they have going forward.”
In general, CDP found that European makers of fast-moving consumer goods are ahead of US rivals in preparing for climate change — a disparity also seen in other sectors, such as automotive or oil and gas.
France’s Danone SA came first in the food and drinks sector, while Kraft Heinz Co came last out of nine.
Similarly, Paris-based cosmetics company L’Oreal SA ranked second in the household and personal care sector, against New York-based rival Estee Lauder Cos, which came last out of seven.
Possible reasons for this disparity include stricter regulation from the EU, Ferguson said.
Consumer concern over plastic waste recently spurred strict new EU rules on packaging, the report said.
“Product labeling and carbon footprinting is on the horizon,” the authors added.
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