In 2015, 6.2 gigatonnes of carbon (tCO2e) were traded globally valued at $52.8Bn, and the figures are accelerating. The Greenhouse Gas (GHG) market is big business and a win-win for savvy business leaders and eco-warriors alike. (Figures by Climate Observer)
This two-part blog series introduces environmental reporting as a means of compliance, adding value, efficiency and competitive advantage. Part one of this blog series introduces the market and explains how and why we should all be reporting our carbon footprint. Part two will explain the five simple steps to join the 86% of Fortune 500 Companies who use the ISO14064 based GHG reporting protocol.
Mandatory Compliance
Since 2013, quoted companies (as defined in the Companies Act 2006) have reported their GHG footprint within their annual report (complying with the Climate Change Act 2008). Other countries have since adopted or are planning to adopt a similar approach for their main markets.
Companies trading in certain industries within the EU are provided with CO2 quotas that are tradable on the EU-ETS market; the largest carbon trading market in the world. Companies can also buy and sell carbon credits voluntarily to enhance their corporate social responsibility (CSR) performance.
Investor expectations
The size of the global sustainable investment market is growing rapidly, and according to a GSIA report, the market was valued at $21 trillion in 2014. Investors are clearly advocating a move towards social responsibility as a pre-requisite to becoming shareholders. This, in turn, raises the demand and hence, the value of the share price.
Installing a successful GHG protocol is also a clear message of intent and competency, as the investor will know the company’s capacity to tackle large issues successfully which impacts positively on future performance perception.
Business efficiency catalyst
Many of the terms and techniques used to define and drive understanding and analysis of GHG reporting are derived from accounting standards and practices. The technique of defining cause and effect chains for companies’ emissions is the same for controlling cost; therefore, companies that adopt a lean approach for the purposes of reducing GHG are also likely to reduce cost. A recent study commissioned by DEFRA estimate these savings for businesses at £23Bn for the UK alone and increasing to £55Bn for longer payback periods.
Implementation of the ISO14000 series can provide a company with an auditable globally recognized standard upon which to build their environmental understanding, management and reporting.
Corporate and Social Responsibility (CSR)
CSR is a philosophy of ensuring a company takes positive steps towards becoming environmentally, ethically and socially responsible and accountable, and seeks to give back to communities and societies as a whole.
Being environmentally aware and actively monitoring and reducing GHG emissions is a part of a company’s overall CSR, which is also reported annually, and part of an investor’s decision-making process. Added to this (according to a Harvard law school forum) is the possibility of attaining competitive advantage from targeting your CSR activities
Companies seeking to enhance their overall CSR tend to nurture cultures around efficient working and reduce cost in return. Additionally, they provide education to the employees and their families, which in turn will reduce the personal consumption of this group.
CONTINUE ON TO READ PART 2:
5 steps to create value by managing your eco-footprint [Part 2]
This two-part blog series introduces environmental reporting as a means of compliance, adding value, efficiency and competitive advantage. Part one of this blog series introduces the market and explains how and why we should all be reporting our carbon footprint. Part two will explain the five simple steps to join the 86% of Fortune 500 Companies who use the ISO14064 based GHG reporting protocol. Read blog >
Further reading
I welcome comments on this or any other topic concerning corporate services and business transformation.
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Maria Jonsson
Well written Steve! As you said one might think that we have taken part of each other’s work. We must have hit the nail on the head.
It is my opinion that the only way forward for businesses is sustainability and that they will be expected to lead the development in this regard, together with bodies such as ISO. You manage to show that there is much to gain by taking part in this development. Not only for businesses but also for ERP-providers.
An interesting finding from my Master’s thesis is that companies that have some type of environmental certification (such as ISO 14000-family) actually provide more high quality environmental disclosures. This indicating that making use of the ISO tools available gives you more control and enables you to easier manage something that is otherwise seen as complex and abstract. Something that is becoming more important for not only investors, but also customers, employees and society as a whole.
If you are interested in further readings about investors view of sustainability you might like this: http://www.ey.com/Publication/vwLUAssets/EY-tomorrows-investment-rules-2/$FILE/EY-tomorrows-investment-rules-2.0.pdf
Steve Treagust
Maria, thank you for taking the time to read and comment. I agree that business has a huge role to play in both advancing the cause, and delivering on their full range of corporate social responsibilities. It is no coincidence that companies already advanced in environmental reporting are those doing well in their respective industries.
Steve Treagust
In general I would start with considering what outcomes you want from an Eco project and consider these in light of your company strategy. I would also seek to elect senior governance to roles within the project and establish an initial milestone that is quite easy to achieve. This will provide momentum, quick results and be a positive start to your Eco journey.
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