You cannot manage what you cannot measure, so the saying goes. Which is why new regulations coming into effect from the start of the next financial year will make it mandatory for companies listed on the London Stock Exchange to publish full details of their greenhouse gas (GHG) emissions.
The idea is that obliging companies to be transparent about what they emit will make them address their environmental impacts and speed up strategies to reduce carbon emissions.
These regulations are timely – it’s been a busy few months in the climate change debate. Barack Obama made his historic pledge to tackle climate change, the IEA warned that international climate goals to keep temperature increases at 2 degrees were dying and the insurance industry has been taking stock of the damage caused by extreme weather events. But can reporting really tackle the risks and complexities thrown up by climate change? We asked a number of experts their views.
CDP thinks it’s a start. Chief operating officer Frances Way believes pushing companies to disclose their emissions will drive “new technologies and increased innovation”. A view echoed by FTSE’s David Harris, who admits reporting is not a “silver bullet” but remains optimistic that mandatory reporting will help embed climate change considerations into investment decisions.
Opinion is more circumspect from the business perspective. Tui Travel’s James Whittingham’s view is “more glass half empty than glass half full”. But he thinks the regulations will have an important role in putting carbon considerations onto the desks of all senior executives within a business, not just the sustainability team.
But companies already complain that they are groaning under the weight of endless, complex reporting obligations. As Steve Freeman of the Confederation of Paper Industries says “there is a real concern that the new reporting requirement will simply be a meaningless addition of a new regulatory burden”.
We would love it if you can add your comments below to deepen and broaden the debate.
Frances Way, co-chief operating officer, CDP
For more than a decade, CDP has pioneered carbon reporting. To satisfy investor appetite for evidence and insight, we drive companies to measure their greenhouse gas emissions, as a first step to reducing them. Companies that voluntarily report their climate change impacts realise other benefits such as saving costs through energy efficiency, the adoption of new technologies and increased innovation. We believe mandatory disclosure could be as effective, if applied in the same way.
This UK regulation is an important start as it levels the playing field for UK companies. However, for investors to be able to make a full assessment of climate risk, and to factor climate change into their decisions, more fundamental than reporting greenhouse gas emissions numbers is an assessment of climate change impacts integrated into the company’s strategy.
In time CDP hopes to see clearer guidance on how to account and report to enable more consistency and comparability. We must continue to think globally and encourage harmonisation of national regulations to enable companies and investors operating internationally to benefit from other carbon reporting regulations in place or development around the world.
James Whittingham, group environment manager Tui Travel
My view on mandatory carbon reporting tends to be more glass half empty than glass half full in terms of whether it can truly tackle the complexities of climate change. Having said that, I certainly foresee it bringing benefits in terms of how seriously senior business leaders approach sustainability in the future.
For starters, businesses will be required to include carbon information within their director’s report which one or more committees will need to sign off internally. This will escalate the profile of climate change to the level of senior executives.
Furthermore, the regulations should ensure that the hard work environmental managers do to collect and report on sustainability data will gain greater recognition from a variety of departments. This will largely be due to the requirement to publish this data within annual reports, rather than only within standalone sustainability reports.
Corporate functions as diverse as company secretary, corporate communications, audit, risk and finance, will all need to play their part. Participating in the carbon reporting process will engage these departments in sustainability and the risks climate change presents to their business in new ways. I hope that this will, at least to some extent, serve to unravel some of the complexity of what can seem a nebulous concept.