Carbon Disclosure Project 2013

How are the world's largest companies
responding to climate change?


Sustainability factors are now potentially important drivers of value in many transactions.

Sustainability as a broad agenda covers issues as diverse as carbon management, energy efficiency, ethical procurement and employee welfare. It is driven both by regulation, as with carbon markets, and by consumer preference, for products with ethical, organic or low-carbon profiles. Businesses have long realised the importance of managing these issues to avoid risk. Increasingly, there is also an opportunity to generate business value by providing goods and services that satisfy these preferences and contribute to a low-carbon future. It is therefore increasingly important to recognise that valuations may be affected by performance on a range of sustainability issues. Asset values must increasingly reflect measurable sustainability adjustments.

Sustainability due diligence differs from more established environmental due diligence in breadth of focus. While environmental due diligence considers the environmental impact of operational activities, sustainability due diligence looks up and down the value chain at the likelihood of reputational impact from, for example, poor labour practices in the supply chain. PwC assessed the risk of poor labor practices, for example, occurring among the Southeast Asian suppliers of a UK-based furniture manufacturer.

Carbon is increasingly a source of risk and opportunity and needs to be understood in order to be managed. PwC undertook a carbon footprinting exercise for an artificial ski resort because the potential buyer was concerned that negative public perceptions about the energy and carbon intensity of creating artificial snow might impact the resort’s attractiveness. The results compared favourably with the ”alternative” flight-related impact of transporting customers to the Alps.

Looking downstream, the market for goods and services may be affected by regulation. For example, product take-back and recycling obligations may affect the electronics and automotive sectors. Consumer preferences for, or rejection of, products according to their evolving expectations could also affect markets. Sustainability due diligence can identify such trends and assess their materiality in the context of other operational and commercial drivers.

PwC advises on the sustainability implications for all facets of transactions including:

  • Assessments of the full range of sustainability risks and opportunities, including those related to climate change, in all types of transactions, including M&A, joint ventures, IPOs, etc.
  • Startup to expansion financing options for both the private and public sectors for renewable energy and low-carbon projects
  • Evaluations of new sustainability-related investment funds, such as carbon technology funds
  • Project validation and registration, marketing, tax structuring, auctions, valuation as well as due diligence for buyers and sellers of carbon credits on all major markets as well as for CDM (Clean Development Mechanism) and JI (Joint Implementation) projects


  • Are there sustainability-related regulations we should anticipate that will affect the value of our products?
  • How will the growing consumer trend for local food affect my food import business?
  • Will customers, concerned about energy use and carbon emissions, react negatively if we build an outdoor pool at our winter ski resort?
  • What is the risk that our clothing suppliers’ practices would offend international labor norms?
  • Is our water usage in arid areas likely to bring us in conflict with local water users?

Case studies

PwC provided guidance to the Ministry of the Environment for an Eastern European country in its effort to develop regional operators and to finance private-public water partnerships (PPP) in four medium-sized cities and counties. As a result of comprehensive advice ranging from regulatory compliance to financing, the client was well-positioned to evolve the PPP opportunities.

The client, a European airline operator, was considering partnering with an NGO as part of an effort to reduce environmental impact and improve stakeholder perceptions. To help the client define partnership objectives and expectations, PwC conducted a carbon due diligence review consisting of a sectoral benchmark, stakeholder analysis, and interviews with management and NGO representatives. The final deliverable set parameters for agreement terms that were mutually beneficial and economically feasible.

When a PwC US based pigment manufacturer was seeking to acquire a Chinese competitor, PwC's added value to the negotiations by outlining environmental and social risks and a mitigation strategy.

The client's challenge

The client sought review of material environmental health and safety risks and liabilities associated with its proposed acquisition of a paint manufacturing company based in the northeast China.

Our approach

PwC professionals:

  • Reviewed the relevant EHS documentation
  • Conducted site visit to the target company and interviewed management
  • Identified key risks and liabilities associated with transaction and presented recommendations and costs for mitigation
  • Advised client on selecting a specialist contractor to for sampling and laboratory analysis

Benefits to the client

PwC's detailed review covered a broad range of potential liabilities including voice of the customer emissions, worker's safety, chemical storage risks, and groundwater contamination risks. This provided critical perspective for the client on moving forward with valuation and deal terms. Our follow-up analysis provided specific details on the nature of soil and groundwater challenges as well as specific strategies for managing the damage and costs.

PwC worked with a worldwide manufacturer of energy, power, telecom, optical fiber, and submarine cables, to identify environmental, health and safety (EHS) risks and liabilities associated with an acquisition target. After evaluating conditions and compliance documentation, PwC compiled a detailed report of material issues as well remediation recommendations and costs. The assessment enabled informed and strategic decision-making regarding business plan, purchase price, capital investment requirements and other key deal considerations.