Keeping track of your company’s total emissions makes sense on every level
HEAD OF ACCA UK
IT’S fair to say that climate change issues have stormed into the mainstream of political debate over the past couple of decades.
David Cameron’s 2006 trip with the huskies and the consequent “vote blue, go green” strapline wouldn’t have been possible without the change in perception of green issues; “climate change” got a whole UK government department to look after it in 2008.
Despite finally being taken seriously by politicians, climate change today shares one major problem with climate change yesterday: a concerted and effective international political response is missing.
Individual countries may take positive steps, but in a globalised world, these are undermined by the inaction of others.
One of the few concrete steps on climate change taken by politicians on the international stage, the 1997 Kyoto Protocol, expires next year and attempts to renew it have, despite the pre-event hype, always ended in failure.
This has left a rather large policy vacuum at the centre of the sustainability agenda; a vacuum that business can fill.
FILLING THE VACUUM
Business and sustainability goals are usually presented as mutually exclusive, but this needn’t be the case. Business is in a great position to drive forward the sustainability agenda and benefit their bottom line at the same time.
Discussion of how businesses can benefit from embracing sustainable business practices doesn’t often stray beyond reputational benefits, but this often risks sustainability becoming a PR add-on for businesses.
Businesses that genuinely embrace sustainability can find efficiency savings, manage risk, and identify new opportunities for growth.
Finding these advantages isn’t easy: it takes good information and innovative critical analysis. Above all, it takes measurement.
Without measurement, management of something is impossible. Businesses account for their financial inputs and outputs for a reason, after all.
There’s been plenty of work over the past decade or so to develop credible methodologies to help businesses measure their greenhouse gas (GHG) emissions. However, most of this work has focused on the most obvious kind of emissions: Scope-1 and Scope-2 emissions.
Briefly, Scope-1 GHG emissions are those directly caused by a business; Scope-2 emissions result from the generation of purchased electricity.
What don’t really receive attention are Scope-3 emissions.
MEASURING EVERYTHING
Scope-3 is everything else. Business travel; distribution and logistics; waste disposal. Even the use of a business’s products and the impact of the whole supply chain counts. Unsurprisingly, Scope-3 emissions make up the vast bulk of business emissions, perhaps up to 75 per cent.
It’s from measuring Scope-3 that businesses can find the information needed to understand climate-related risks and opportunities upstream and downstream from operations, beyond operational boundaries and in the products and services developed and sold. It’s from measuring Scope-3 that businesses can gain an edge over their competitors.
Scope-3 reporting lifts the bonnet on businesses to show business leaders how their company works in a way they have never seen it before. It reveals previously unseen trends amongst inputs and outputs that can challenge assumptions and affect strategic decision-making.
Measuring Scope-3 can result in decisions to develop new products rather than adapt old ones; it can highlight where businesses use inefficient and unsustainable resources; it can result in new criteria for evaluating supply chain performance.
In short, measuring Scope-3 can result in change. It can challenge companies to look at what they’re doing, not just how they’re doing it.
In 2009, 409 (82 per cent) Global 500 companies responded to the Carbon Disclosure Project’s request for GHG emission information. Just over half of this group reported any Scope-3 emissions (209; 42 per cent). Only six companies reported on all five classes of Scope-3 emissions.
This lack of engagement is understandable. For one thing, none of the regulatory or voluntary reporting programmes require Scope-3 reporting. Besides, measuring Scope-3 can be tricky. There’s the risk of double-counting, there are questions about what exactly to measure, and how to measure it.
WHO DOES WHAT
Businesses respond to these challenges in three broad ways. There’s the “control” approach, where businesses focus on emissions that they can control. In other words, they ignore Scope-3.
There are businesses that adopt an “influence” approach, an approach in which a business recognises the importance of Scope-3 and uses its influence to change Scope-3 upstream.
Then there’s the “engaged” approach, where businesses identify opportunities for innovation downstream as well as upstream. This kind of business looks not only at how they make their products, but how they are used and disposed of too. Among businesses that report Scope-3, German chemical giant Bayer is one of the leading proponents of this approach.
MUTUAL EXCLUSIVITY
Sustainability and business are not mutually exclusive. Businesses face as many risks from climate change and unsustainable practices as the rest of us, perhaps even more so.
Climate change and other sustainability issues will impact the very foundations of businesses: availability of inputs; market stability; reputation; efficiency; and customer and investor demand.
A better understanding of the risks and opportunities associated with GHG emissions would benefit business by enabling the development of strategies that can create value for organisations and their stakeholders.
In the absence of global political leadership, businesses have the opportunity to shape the sustainability agenda before it shapes them.