A company’s carbon footprint is defined as the total amount of greenhouse gas emissions created by a company’s operations. In light of shareholder, consumer, and regulatory concerns, more and more companies are measuring carbon emissions. Unfortunately, many companies struggle to determine the right level of internal and external disclosure. Today, leading companies are choosing to disclose greater amounts of information and to increase transparency. If you are looking to understand the basics about carbon reporting, then this post is for you.
WHAT IS CARBON DISCLOSURE?
Carbon disclosure is a process by which companies produce a report to disclose quantitative and qualitative information about their carbon emissions. Typically this exercise is conducted annually and details the company’s emissions, evaluation of associated risks and opportunities, and management oversight/accountability. Included in these findings is information related to corporate reduction initiatives and a roadmap for how the company will tackle each initiative. Common questions addressed include:
- How are you accounting for your carbon emissions?
- What methodology did you use to define your organizational boundaries and what emission scopes are you reporting on?
- What process do you use to evaluate material risks and opportunities?
- What are you doing to reduce your carbon emissions?
- How do you incentivize key stakeholders responsible for achieving your carbon reduction goals?
MANDATORY VS. VOLUNTARY REPORTING
In 2011, the U.S. Environmental Protection Agency (EPA) began regulating greenhouse gases under the Clean Air Act. As with regional programs, such as California’s Assembly Bill 32 (which established in California a now-operating cap-and-trade system for carbon emissions), regulated entities that must mandatorily report their GHG emissions are typically limited to large single-point emitters. The vast majority of businesses in the US are not required to account for and disclose their emissions―leaving them in a voluntary reporting category. Since no federal or local regulatory framework requires disclosure, these organizations must weigh the pros and cons of voluntarily reporting their emissions.
WHY YOUR COMPANY SHOULD VOLUNTEER
Companies that choose to voluntarily report do so for a variety of reasons. The first and most important reason is to meet the increasing disclosure requests from investors and financial analysts. These stakeholders view these new data points as another metric by which to evaluate the risk of investing in a given business.
In a B2B capacity, large and influential corporations are beginning to request and, in some cases require, that their business partners and suppliers report the carbon emissions associated with the goods and services they provide, which are in turn reported as part of the requesting corporation’s supply chain emissions. Supply chain reporting requirements such as this are primarily found in the consumer packaged goods sector.
Second, there is inherent brand value to showing your employees and the public that your company is a leader by voluntarily reporting carbon emissions. In an age of Big Data and even bigger and growing transparency expectations, employees and consumers want to know they are engaging with a good corporate citizen.
EVERYONE’S DOING IT
If your company chooses to voluntarily report your carbon emissions, you will be joining an elite group of businesses who are doing the same. While many companies in the S&P 500 participate in carbon reporting, we are seeing more and more companies, both large and small, following suit. If you are interested in identifying how to voluntarily report your own carbon emissions, contact our Carbon Management team to get started.