The Next Steps for Carbon Reporting
Public reporting, or a lack of it, has been big news lately.
Clinton’s emails, Trump’s tax returns, Volkswagon’s fraudulent fuel efficiency stats, the reason for Brad and Angelina’s divorce… if there’s information available, the public want to know.
Here at XCO2 HQ, the big news in public reporting is all about greenhouse gases.
We like to stay in the know, so we’ve compiled the answers to common questions and next step uncertainties, particularly in relation to the inclusion of science-based targets in the extension of traditional carbon reporting.
What is carbon reporting?
Carbon reporting is the public announcement of a corporation’s greenhouse gas emissions. This declaration of environmental impact, theoretically, leads to benchmarking, corporate comparison for bragging rights, and a reduction in greenhouse gas emissions from businesses across the globe.
Carbon reporting is obligatory for all listed companies in the UK. There’s also been a surprising rise in voluntary undertaking from other organisations for whom reporting is not compulsory. The one weakness in this is that there is a lot of flexibility in the carbon reporting process, leading to a lack of consistency when comparing businesses like-for-like.
Why should companies report their greenhouse gas emissions?
Big business is responsible for a sizeable chunk of the world’s GHG emissions (14% of anthropogenic emissions in 2014). Although the most recent trends show the first hint of a positive decoupling between economic growth and carbon emissions, the bottom line is that gross greenhouse gas emissions are still continuing to grow.
Percentage Anthropogenic Carbon Emission Sources
With the economic power of these few businesses swamping that of even relatively wealthy nations, the fiscal inertia needed for the fight against climate change must come from these corporate superpowers.
The influence of big business on the climatic future of the planet, positively or negatively, is huge. With such a large share of emission responsibility laying on so few shoulders, a large-scale call to action to reduce atmospheric pollutants could have far reaching benefits.
What’s the situation with current carbon reporting?
Currently, all UK companies listed on the UK Stock Exchange are legally required to announce their annual carbon emissions. Additionally, the vast majority of FTSEE 100 companies (96% in 2012) voluntarily report their greenhouse gas emissions through the Carbon Disclosure Project.
This all sounds good on paper, but there’s just one issue – currently carbon reporting is just not done very well. Compliance with carbon reporting laws is often a corporate after-thought, a sweetener for investors or the easy route to CSR bonus points. And it’s understandable. Environmental initiatives are expensive, they eat into profit and they are not a priority.
This lack of motivation is leading to uninspiring reduction promises and inconsistent reporting across industries. Reported emissions lack uniformity and precision between companies, which makes benchmarking and comparison a challenge. Given that reporting of emissions, rather than reducing, is the legally advocated measure there isn’t a similar emphasis on mitigation or offset strategies. The majority of companies are targeting greenhouse gas emission reductions, but as targets can be plucked out of thin air, they are rarely earth-shattering in their pursuit for excellence.
The result of that is the reporting of a lot of data, but not a lot of action.
This is where the problem lies. And where science-based targets come in.
What are science-based targets?
The United Kingdom is committed to reduce national greenhouse gas emissions in line with the COP21 target of limiting global warming levels to no more than 2 degrees Celsius above pre-industrial levels. The UK Carbon Plan states that energy use per capita needs to be between 20-50% lower than it is today to meet our 80% greenhouse gas reduction target by 2050.
Currently, we aren’t on track. A major reason for that is business not having the motivation or obligation to do anything about it.
One way to improve the sector’s carbon reductions? Set better targets. And base them on up to date, scientifically-agreed climate science.
Science-based targets are about setting greenhouse gas emission reduction objectives that fall in line with the carbon cuts required to meet COP21 levels of warming limitation. There are a range of target-setting methodologies being used by hundreds of businesses across a range of industries – including sectoral approaches, blanket percentage reductions, and savings as a proportion of GDP.
Perhaps the biggest strength of science-based targets is that it’s not a directive strategy. It’s not enshrined in law. It’s not prescribing PV tiles as wallpaper or wind turbines in your garden. Companies are free to implement their science-based target as they see fit, choosing the appropriate method so their enhanced environmental consciousness does not hamper financial performance.
The second benefit is that the formal organisation of science-based targets creates a platform for knowledge creation with all companies involved in this process. By sharing and utilising the expertise and experiences of fellow businesses in a comparable manner, lessons learnt become part of a collective knowledge pool. Therefore science-based targets can drive the profitability of carbon-saving and generate legitimate competition within carbon reporting and benchmarking.
Are these targets going to achieve what we need them to?
A fair question, particularly in light of the monstrous reductions in greenhouse gas emissions per capita that are required to limit warming below 2 degrees Celsius. In predicting the success of science-based targets, it’s really a question of uptake.
Science-based targets help companies substantially reduce their own emissions, but unless they are near-universally adopted, mitigation efforts are just one drop (fewer) in the ocean of atmospheric carbon. This does raise the question – are science-based targets going far enough to reduce greenhouse gas emissions? Does business actually need a prescription to implement their targets, through a range of options? Carrot or stick? Economic incentive or legal enforcement?
History has taught us that fundamentally, a dictatorial approach to just about anything –particularly greenhouse gas reductions – is unlikely to deliver long term success. Voluntary sign-up powered by a desire for change is the ideal scenario, but a U-turn in corporate priorities seems unlikely. Public reporting, a trend for journalistic scrutiny and an awareness of the significant reductions needed suggests it’s only a matter of time before inaction on emissions becomes newsworthy. It’s our responsibility as stakeholders, investors, customers and employees of big business to encourage and pressure the take-up of science-based targets. With public backing and a supportive political situation, there is no reason why science-based targets cannot drive large scale reductions in corporate carbon emissions.
Want to get ahead of the curve and explore how your company can produce a science-based carbon emissions target? See below for more information: