Carbon disclosure: getting on target

Developing and executing a successful strategy to address the issues arising from climate change requires a clear grasp of an organisation’s exposure to the risks presented by climate change. This then provides a basis to prioritise action. It is vital to take control of how information about climate change exposure is identified, gathered and reported.

Organisations are beginning to examine the carbon intensity of their main direct activities. While commendable, the preparation of a carbon footprint rarely considers where the key risks and opportunities presented by the climate change agenda are likely to be, or how changes to policies or sentiment may impact an organisation’s ability to deliver its strategy.

To date, the emphasis has been less on the accuracy and consistency of carbon baseline data and more on just getting data published. There has been limited investment in the controls needed to provide confidence which means that the quality of information varies from organisation to organisation.

Given that this is a key policy issue, the quality of data needs to increase significantly before it can be used to support proper decision making. It is also important that the principles are applied consistently. For example, building in a carbon price to policy formulation and evaluation, as is starting to happen in transport, needs to be applied across all decisions with a degree of commitment and rigour.

Building confidence in carbon data requires an examination of the methods used for generating data for the most significant sources of direct and indirect greenhouse gas emissions. Major emission sources are likely to exist where there is greatest exposure to the risks from the climate agenda and the greatest opportunities for improvement. Accurate data will instil greater confidence when making decisions about priorities, investments, regulatory dialogue and risk management controls.

Generating climate data is not just a one-off exercise. The data will be affected by many things from changes in the business, such as disposals and acquisitions, to changes in the methods used for generating the data, such as the emission factors. It is important to have a baseline against which performance can be judged. Only systems which clearly examine the various sources of movements in carbon data can be used to demonstrate improvements in performance. It is no longer enough to present absolute data and discuss a reduction as an improvement in performance — such movements need to be explained relative to all possible factors.

Both government and organisations have a key role to play in establishing the standards and executing against them. A point made by the recent white paper on innovation, Innovation Nation, was the need for public sector innovation and leadership to stimulate a change in the economy as whole.

There is pressure to back up a commitment to tackling climate change with clear targets to demonstrate progress overtime. Organisations need to approach climate change targets with their eyes wide open. Some questions organisations should ask themselves before publishing targets on climate change include:

Do we have enough certainty in our baseline to be confident that when we set a target we will not actually be committing to a more significant reduction than anticipated?

Should our target be absolute or should we allow flexibility for changes in our organisations?

How will we measure progress in our carbon emissions reduction projects?

Are our targets sufficiently ambitious to demonstrate a real commitment to driving down the carbon intensity of our business?

Without carefully designed measurement processes that allow aggregation at both an organisational and economy-wide level as well as performance tracking of individual projects, it is difficult to establish meaningful targets and even more difficult to monitor and report progress against them. Carbon disclosure is now a fact of life. However, it is important that it is not simply seen as a ‘tick in box’ or PR exercise. Climate disclosures must be accurate, clearly reflect the reasons why an organisation considers it to be important and set out the principle activities in place to manage performance. ‘Ball park’ greenhouse gas data will provide readers with a sense of scale of the issue for the organisation, but ‘ball park’ figures are not useful in managing the issues or disclosing progress. Government also has an interest in accurate reporting as information at an organisational level is necessary to build a picture of overall emissions in the economy and to track progress against climate change targets.