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CDP6 Canada 200 and Global 500 Report launch Henry Stoch Senior manager 1 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. Context Companies that persist in treating climate change solely as a corporate social responsibility issue, rather than a business problem, will risk the greatest consequences. The effects of climate on companies’ operations are now so tangible and certain that the issue is best addressed with the tools of the strategist, not the philanthropist. Michael Porter, Harvard Business Review 2007 2 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. Implications of climate change What do we depend on? Organization What do we deliver? And how? What do our operations look like? •Natural resources •Culture/vision/ mission •Workforce •Governance •Supply chain products/ materials •Business plan and strategic priorities •Infrastructure •Energy •Weather 3 Deloitte Canada CDP Report Launch 2008 End user •Products •Services •Transportation •Infrastructure •Routines, processes •Demographics •Location/regions © Deloitte & Touche LLP and affiliated entities. Responding to climate change Drivers of change Politicians & regulators Customers Investors & creditors Rating agencies Employees Communities NGOs, SIGs, etc. Opportunities and threats Business operations (carbon exposure) Changing laws and regulations Impact on competitiveness Strategy, risk management and governance 4 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. Is change happening? 5 Deloitte Canada 2008 AGM © Deloitte & Touche LLP and affiliated entities. Standard & Poor’s announcement Standard & Poor’s currently incorporating ERM in its criteria for rating the credits of financial companies Announcement May 7, 2008 – “we will enhance our ratings process for non-financial companies through an enterprise risk management (ERM) review” Goal: to improve / augment their analysis of management and corporate governance 6 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. Rating agencies – Risks to be assessed 7 Industry Proposed key risks Chemicals Commodity prices, environmental, liability lawsuits, M&A/restructuring, supply chain, terrorism Natural resources Commodity prices, liquidity, political Oil & gas Commodity prices, environmental, expropriation, pandemic, regulation/legislation, weather/disasters Electric utilities Electric utilities Commodity prices, environmental, M&A/ restructuring, political, regulation/legislation Integrated gas Commodity prices, labour skill shortages, M&A/ restructuring, physical damage, project management, terrorism, weather/disasters Power generation Commodity prices, credit, environmental, financial market risk, liquidity, M&A/restructuring, physical damage Consumer products Failure to innovate, M&A/restructuring, reputation Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. Business responses are not consistent with perceived level of risk Will climate change affect your organization? Formal climate change action plan in place? No 1% Yes 18% Yes 99% No 82% Source: Conference Board of Canada. 2008. Leaders Roundtable on Climate Change Adaptation. 8 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. Increased demand for disclosure • Of 306 shareholder proposals in North America in 2006 and 2007, over half were related to sustainability topics • Approximately 33% of proposals of the Fortune 50 were submitted by shareholders owning less than 200 shares Source: Shareholder proposals were found in a database compiled by Interfaith Center for Corporate Responsibility. http://www.iccr.org/ethvest.php 9 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. OSC Staff Notice 51-716 • A targeted review of 35 issuers’ continuous disclosure for environmental matters: Environmental liabilities ARO Financial and operational effects of environmental protection requirements Environmental policies fundamental to operations Environmental risks • Financial statements, MD&As and annual information forms • Web sites and corporate responsibility reports 10 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. OSC Staff Notice 51-716 (cont’d) Findings • Disclosure in most cases is “boiler-plate” and not adequate • Inconsistent levels of disclosure • Material environmental liabilities should be disclosed in the MD&A irrespective of whether they can be quantified in the financial statements or related notes • Supplemental ARO disclosure should be included in the MD&A – Specifically, material commitments and events or uncertainties that are likely to have an effect on the issuer’s business 11 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. Carbon reporting and disclosure – Information requested 12 Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. Integrated response is required Responses Mitigation Adaptation Definitions Reduction of emissions (regulated, non-regulated) Drivers Cost driven Internally focused Compliance driven Revenue driven Externally focused Market focused Adaptation of operations to climate-related changes in market conditions Adaptation of infrastructure to changing climate New opportunities 13 Deloitte Canada CDP Report Launch 2008 Exploration of new business opportunities © Deloitte & Touche LLP and affiliated entities. Deloitte’s support for CDP “… our belief that well-managed companies address their environmental risks and liabilities— including those relating to climate change— and provide fair and accurate disclosures to stakeholders.” Alan MacGibbon Managing Partner and Chief Executive 1414 CDP6 Canada Launch Deloitte Canada CDP Report Launch 2008 © Deloitte & Touche LLP and affiliated entities. © Deloitte & Touche LLP and affiliated entities. Deloitte, one of Canada’s leading professional services firms, provides audit, tax, consulting, and financial advisory services through more than 7,600 people in 56 offices. Deloitte operates in Québec as Samson Bélair/Deloitte & Touche s.e.n.c.r.l. The firm is dedicated to helping its clients and its people excel. Deloitte is the Canadian member firm of Deloitte Touche Tohmatsu. Deloitte refers to one or more of Deloitte Touche Tohmatsu, a Swiss Verein, its member firms, and their respective subsidiaries and affiliates. As a Swiss Verein (association), neither Deloitte Touche Tohmatsu nor any of its member firms has any liability for each other's acts or omissions. Each of the member firms is a separate and independent legal entity operating under the names “Deloitte,” “Deloitte & Touche,” “Deloitte Touche Tohmatsu,” or other related names. Services are provided by the member firms or their subsidiaries or affiliates and not by the Deloitte Touche Tohmatsu Verein. 15 Deloitte Canada 2008 AGM © Deloitte & Touche LLP and affiliated entities.