Emissions reporting is vital, yet the multitude of different standards and metrics around the world have resulted in a disjointed system – one that’s moving so fast procurement professionals may struggle to separate the laggards from the leaders.
The pressure to decarbonise is mounting as the clock ticks on global warming. Natural disasters and geopolitical events such as the war in Ukraine are putting greater emphasis on the need to end our reliance on fossil fuels. In response, public institutions, private organisations and governments have set, or are setting, targets to hit net zero. But what does this actually mean? And with such a volume of disparate plans in action, how will we know if we get there?
Net zero is still a relatively new concept, created under the Paris Agreement at the UN Climate Change Conference in 2015. Sweden became the first country to put a net zero target into law in 2017 and was followed two years later by the UK, France and the EU, though the latter only gained the legal power to reach its goal in 2021 with the European Climate Law.
Then in a rare positive for 2020, a key milestone was reached when China, which accounts for almost 30% of the world’s CO2, committed to carbon neutrality “before 2060” (though detail on how has been sketchy).
By 2021, non-profit the Energy & Climate Intelligence Unit (ECIU) calculated that net zero pledges covered around two thirds of the global economy. It assessed 4,000 “significant entities” and found 124 countries, 73 states and regions, 155 cities and 417 companies had made some form of net zero commitment – 19% of the total number. However, the ECIU said their “net zero commitments vary hugely in their quality”.
Inconsistent carbon measuring and reporting
Part of the reason for this may well be the lack of a definitive approach to measuring and tracking carbon emissions. A 2020 study, Carrots & sticks by the Global Reporting Initiative (GRI) and the University of Stellenbosch, found there were 614 mandatory and voluntary ESG reporting standards globally, up from 383 in 2016. Climate and emissions dominated the field, with 85 specifically addressing this topic.
David Shields, director of procurement, sustainability and social impact at NHS Shared Business Services (NHS SBS) and CEO at social value consultancy Value Match, sums it up when he tells Supply Management: “It’s confusing for everyone including sustainability professionals, let alone procurement professionals. Often procurement professionals are unsure which indices are more important relative to another, particularly if customers or stakeholders are asking for compliance against differing standards.”
A 2021 Washington Post investigation, covering 196 reports submitted to the United Nations Framework Convention on Climate Change under the Paris Agreement, found a “giant gap between what nations declared their emissions to be versus the greenhouse gases they are sending into the atmosphere”. This gap ranged from 8.5bn to 13.3bn tonnes a year of unreported emissions.
UN secretary-general António Guterres conceded at last year’s COP26 climate conference in Glasgow: “There is a deficit of credibility and a surplus of confusion over emissions reductions and net zero targets, with different meanings and different metrics. That is why I am announcing that I will establish a group of experts to propose clear standards to measure and analyse net zero commitments from non-state actors.”
Work has already started in this direction. In 2020, five key framework and standard-setting international institutions – CDP, the Climate Disclosure Standards Board, the GRI, the International Integrated Reporting Council and the Sustainability Accounting Standards Board – published a “shared vision of the elements necessary for more comprehensive corporate reporting”.
In a statement of intent, the organisations said: “A building-block approach to a global corporate reporting system is emerging. The combination of our existing frameworks, standards and standard-setting processes can provide the basis for progress towards a comprehensive corporate reporting system that would enable companies to provide more complete and comparable information to their stakeholders.”
Choose the right standards and training
John Lang, net zero tracker lead at the ECIU, recommends organisations use CDP, the Task Force on Climate-Related Financial Disclosures (TCFD) – set up by the G20 Financial Stability Board – and the Science Based Targets initiative (SBTi), a partnership of CDP, the UN Global Compact, the World Resources Institute and the WWF. Lang tells SM: “Do your due diligence, be decisive and go for a standard that is global and able to evolve as scientific and market realities change. CDP, TCFD and SBTi are a great trio to ensure your company is aligned to science and CSR norms in this, the decade of accountability.”
Shields agrees on CDP but says a nuanced approach to standards is necessary: “CDP is quite widely accepted as one of the larger and better known international climate standards. However, there are other national and international standards, hence training and education must play an important role for procurement professionals.
“It’s not enough to include indices as a ‘yes/no’ when assessing suppliers; understanding sustainability metrics, measures and indices needs to form a crucial part of ongoing training to identify the most appropriate indices for the product or service being procured.”
In 2021, the UK government said companies hoping to win major public contracts must produce a carbon reduction plan, as part of the UK’s net zero target, and the government created a template to help buyers assess these plans. “There’s definitely a general consensus at NHS SBS that this is the right thing to do, but it’s such a complex area that doing this well and doing it consistently is hard when there are so many options to report,” says Shields.
“It’s a step in the right direction to have one single template that outlines emissions in a consistent way across the supply base for customers to utilise. However, how we validate and keep track of these is still difficult and needs more thought and understanding to ensure it’s impactful, not just a tick-box exercise.”
Don’t rely on offsetting
One area where there seems to be consensus is avoiding net zero pledges that rely on offsetting carbon emissions. “Companies should not flirt with the temptation to compensate Scope 1 and 2 emissions with offsets,” says Lang. “Although some hard-to-abate sectors like cement may struggle to eliminate 100% of their emissions, IT companies, for example, have no excuse. Most importantly, there is no substitute for early demonstrable action that reduces emissions at source.”
So would it make sense to develop a global standardardised approach to emissions reporting? Shields thinks so. “Standardisation would certainly help, and I think it would drive organisations to engage more. Individuals and companies thrive off competition, and when it’s clear how far behind or in front you are, it can support hurrying up the journey,” he says.
“It is critical that governments, the finance sector and global bodies in collaboration with the private sector finalise carbon measurement standards if we are going to see the level of change in behaviour we desperately need.”
Lang agrees but is doubtful about the timetable: “Given the complexity of the topic and the importance of getting it right, it’s likely to be some time before consensus is forged. But it’s a necessary project given the importance of benchmarking like for like, so we can separate laggards from leaders and speed up decarbonisation.”