In 2011, as part of the Carbon Disclosure Project (CDP), over 3,700 companies disclosed information about their energy use, emissions, risks, opportunities, and strategy to their institutional investors and customers. In this article, the Chief Innovation Officer of CDP discusses five ways that such disclosure is expected to lead to changes in corporate behavior.
The first two are “internal” mechanisms that tend to encourage constructive change more or less directly as a result of going through the process of disclosure. One is known as “WGMGM,” which is shorthand for the often-cited principle that “what gets measured gets managed.” The second is the tendency of disclosure to bring about valuable changes in strategic thinking.
The next two are mechanisms that work to effect change through “external” channels. One relies on the use of data to enable investors, regulators, and other corporate stakeholders to draw comparisons among companies and industries in assessing the value implications of climate change disclosure. The second involves competitor benchmarking and the growing use of data in investment research.
Fifth and last, recent evidence suggests that a growing number of investors are willing to raise the bar in terms of the expectations they place on companies to act responsibly now in the face of current and expected future changes.
Each of these five change processes are discussed while citing evidence drawn from CDP's long experience of managing the disclosure process and working with both investors and companies to convert data into action.