Why Businesses should report carbon emissions.
By Polly Green
The reporting of carbon emissions is not a new operation implemented in the battle to reduce the greenhouse gasses in our atmosphere. There are already institutions and agreements in place such as the Emissions Trading Scheme in the European Union, and the UK’s Companies Act which require various companies to report their greenhouse gas emissions. Along with these implements, comes the gradual yet necessary transition to a low carbon future, this transformation of the economy is becoming more widespread and necessary than ever before. At this point it is not a matter of if, but of when, as we have no choice but to improve our efficiency, and sustainability. In order to minimise the risk of a completely chaotic future in business, where companies miss the opportunity to transform, and therefore cannot compete with those that have carbon reporting, businesses will need to report emissions. A worldwide transparency of greenhouse gas production would allow societies to adapt together and encourage the individual and corporation to make the vital changes needed.
The economic benefits of reporting emissions are not solely advantageous to the environment. One may believe that reporting company emissions will increase its transparency, exploiting the institution’s poor sustainable business model therefore loosing customer loyalty and investment. This in fact is not the case, as emerging research from the European Centre For Corporate Engagement shows a significant and negative relation between disclosing CO2 emission levels and the cost of bank loans, and more favourable lending conditions for those who voluntarily disclose. As well as this, the disclosure of information and the research towards it is beneficial in portraying carbon emissions as a serious metric and performance indicator, and those businesses that pioneer this movement, will be favoured by both individuals and stakeholders.
Businesses have the moral duty to report their carbon emissions, as this improves transparency for investors and individuals to make certain choices in the future regarding their loyalty and safe investment. With society becoming more aware of the detrimental effects deriving from global warming, customers will favour businesses which aim to reduce their emissions and can publicly prove a track record of constant improvement. Investors, with the use of standard measurements provided by organisations such as the Greenhouse Gas (GHG) Protocol, can safely comprehend and compare companies using the emissions reports. When the transition to a low carbon future becomes more evident, those which haven’t published their emission figures will be seen in a different light. This transparency therefore reflects an impressive business model built on trust, improvement and future orientated thinking.
The improvement in transparency provides a starting point for businesses to transform, and adapt to a low carbon future. Sustainability consultancy firms (such as Carbon Smart) assist in spotting inefficiencies, saving money and convert the idea of reducing emissions from a compliance, into a successful business strategy. With hundreds of case studies already proving advantageous business impacts, there is no doubt that reporting and reducing emissions is beneficial.
Criticism of carbon reporting comes from stakeholders complaining of methodological weakness, as well as the risk of double counting from reports. It is all well and good encouraging carbon reporting, but in order for it to be worthwhile and impact investor decisions there must be a credible way of reporting carbon emissions, providing transparent and standardised reporting to bring about change. More recently, there has been pressure for firms to also report their carbon reserves, due to new theories of unburnable carbon and stranded assets proving how these fossil fuels cannot be extracted in a below two degree scenario. In summary, a credible, transparent carbon reporting structure is required to bring about a sustained change from businesses, which they have a moral obligation to comply with.