Big business still not tackling carbon emissions
— Sam Gill is Operational Director at the Environmental Investment Organisation. The opinions expressed are his own. —
Today’s launch of the Environmental Tracking (ET) UK 100 Carbon Rankings show just how far we have to go in tackling corporate emissions. If the first step is getting trusted, accurate data into the public domain, then 65 percent of the UK’s biggest companies are keeping us in the dark.
Only 35 percent of companies within the ET UK 100 independently verify their Scope 1 and 2 emissions (direct emissions and those from electricity use), but the rest expect us, the public, to accept their data (if even provided) at face value. In light of the financial crisis, independent verification should be the bare minimum, with those verifiers also coming under scrutiny. Recent history should ring alarm bells: it was far too easy for credit rating agencies to hand out Triple A ratings to securities they knew nothing about. In the fight against climate change – where false accounting could lead to irreversible damage to our environment – we need to be equally vigilant. It takes a brave auditor to qualify the report of large company offering lucrative contracts.
The ET UK 100 – ranking the UK’s 100 biggest companies by emissions and levels of transparency – has shown the varying attitudes among British companies in their approach towards climate change. Thirteen percent of companies failed to provide any data, including household names like the City of London Bank, Standard Chartered, and the parent company of P&O ferries, Carnival. This lack of transparency is not limited to one sector or industry but spans all of them.
Those at the bottom represent a whole range of sectors: mining, retail, finance, telecommunications. Far from it being just the worst emitters shirking their responsibility, many of the big emitters have their data independently verified, in part due to the EU emissions trading scheme (EU ETS), which demands it. But it is the difference within rather than between sectors that is most striking: mining company Randgold find themselves bottom of the Rankings having failed to disclose any data, yet their competitors BHP Billiton and Xstrata have both had their emissions independently verified. The same can be said of Shell, who disclosed and independently verified, and BP, who has produced incomplete and general figures.
Transparency is the first step, and the minimum that needs to be demanded. The Rankings show that if 35 percent of companies can fully disclose and verify their emissions, then so can all of the UK’s top 100. There is no longer an excuse when those around you are doing it, especially among the bigger corporate beasts: of all UK companies with a market value over $100BIL, only two (BP and GlaxoSmithKline) report incomplete data for Scope 1 & 2 emissions.
However, if we are going to have a serious impact on corporate emissions, we also need to include Scope 3 – emissions from all other indirect sources, such as company business travel or in the case of the financial sector and emissions linked to their investments. That will mean that Royal Bank of Scotland and HSBC will have to include emissions from investments made in the Alberta Tar Sands. At present, the definitions of Scope 3 are being redefined by the Greenhouse Gas Protocol (who set the internationally accepted and recognised standards), and once introduced into company reporting, they will give the public the a far truer picture of how a company is affecting climate change.
Public disclosure is the first crucial step, but it has to be followed by a second one, which is action. Again, the degree to which companies can be trusted to do anything on their own is debatable, while so far the recession has proved a far more effective tool at tackling climate change than any government policy either domestic or international. Emissions in the UK have fallen by almost 10 percent in both 2008 and 2009, but even the Secretary of State for Energy and Climate Change, Chris Huhne, admits this is down to the economy contracting. What will companies do once the economy starts growing again and tackling emissions is seen as an inconvenient cost?
Only when tackling emissions becomes profitable – or the cost of climate change is incorporated into a company’s profit – will businesses really take action. While Corporate Social Responsibility (CSR) has become more popular, the fact that companies have dedicated CSR departments shows just how shallow integration really is. Milton Friedman’s adage that profit should be the single driving motivation of companies remains true, which is all the more reason why environmental impacts need to be included in the single economic bottom line rather than relying on companies adhering to a triple bottom line. For this reason, the Environmental Investment Organisation (EIO) has developed a series of financial indexes based on the ET Carbon Rankings which, with enough investment, can link emissions and transparency to share price. That way, corporations rather than the public pay the cost of their actions.
Putting the information in the public domain is the first step and can lead to greater transparency and emissions reduction through naming and shaming, but if we are serious about corporations playing their part in tackling climate change, we need to speak to them in a language they understand. Pubic pressure and the power of the financial system can together make the world’s biggest companies face the problem of climate change.