The Push Towards Global Net-Zero

Environmental sustainability has become the cynosure of government policies and business operations worldwide. What started in Paris, in Dec 2015, as the COP21 (Conference of the Parties) summit, gathered enough steam along the way to reach Glasgow in Nov 2021 as the COP26. These successive annual summits have echoed the need to further strengthen the ambitious target of achieving a climate-neutral world by mid-century and reduce global warming by slashing reliance on fossil fuels, undoing forest loss and land degradation, cutting methane emissions, and bolstering sales of zero-emission vehicles.

Many developed countries have since announced a slew of measures to expedite and fortify their net-zero plans, including having well-defined carbon reduction plans as part of eligibility for companies to bid for government contracts. The COP26 climate commitments made by world leaders can only be achieved if respective governments successfully mobilize businesses towards the shared goal of net zero. Governments and regimes will eventually increase pressure on industry and investment to reduce emissions, effectively reshaping the global business landscape. Worldwide, corporate boards can expect more stringent pollution policies across sectors, especially in transport, energy, and farming. To effect a meaningful change towards a more sustainable future, businesses will be required to identify activities which release greenhouse gas (GHG) emissions and estimate their contribution.

The rising importance of carbon accounting

The Paris Agreement is at the core of carbon accounting. And at Glasgow, the resounding message from COP26 to businesses was – measure your carbon footprint and develop a robust plan to transition towards net zero, or risk lagging competitors.

The international accounting tool, Greenhouse Gas Protocol, is a standardized framework for measuring and monitoring emissions. It classifies all GHG emissions into three groups or ‘Scopes’. Activities in Scope 1 and 2 emissions are deemed to be within the reasonable control of an organization, while Scope 3 activities are exogenous. Reporting how much they contribute to climate change has typically remained the prerogative of corporations.

However, the luxury of voluntary disclosure might be short lived. In March 2022, the US Securities and Exchange Commission (SEC) gave preliminary approval for new climate disclosure rules. Once enacted, the regulation will require public companies to disclose the material risks that climate change poses to their operations. The law might also require them to mandatorily disclose GHG emissions in full.

In August 2021, the US proposed the ‘Polluters Pay Climate Fund’, which would make the largest US-based oil & gas companies pay a levy based on a percentage of their global emissions. By government estimates, organizations like ExxonMobil, BP, Shell, and Chevron might be pegged annually at about $5 – $6 billion each against this levy.

The Task Force on Climate-Related Financial Disclosures (TCFD), an arm of the Swiss-based Financial Stability Board, regulates the reporting framework for organizations to share climate-related information. This assumes even greater significance, given that at COP26, more than 5,200 businesses voluntarily committed to meet net-zero targets, while 450 banks, insurers and investors pledged to make their portfolios climate-neutral – all by 2050.

All these collectively point towards the central role that carbon accounting will play for businesses globally. Climate-related information disclosure will essentially begin with carbon accounting for organizations. In addition to supporting the transition to net-zero, carbon accounting can help identify and optimize activities that use a lot of energy for organizations. It can also be pivotal for companies seeking funding, as financial institutions are increasingly willing to offer funding to companies with eco-credentials.

The path ahead

While net-zero pledges continue to rise, there’s also an effort to standardize climate goals globally. The United Nations Global Compact, the World Resources Institute, the CDP (a not-for-profit which collects corporate carbon disclosure ratings), and the World Wide Fund for Nature have partnered to create the Science Based Targets (SBT) initiative. The group is urging businesses to set goals based on the latest climate science. More than 2,800 companies have already joined the initiative to reduce their GHG emissions.

But despite a huge quantum of work being done on the matter, accountability remains a concern. A 2021 report by the Berlin-based ‘New Climate Institute’ suggests that 25 of the world’s largest corporations are over-stating the progress towards their net-zero targets. It points out that the climate targets of companies like Amazon, IKEA, and Nestle, although ambitious, are too vague. It is now imperative to recognize the magnanimity of the issue the world is staring at and execute a harmonious and concerted effort to arrest it. Working in silos and having disjointed objectives will take us nowhere.

How ConsultGenics can help

At ConsultGenics, our Environmental Consultants can help businesses across industries navigate the changing landscape of carbon accounting with a focus on global net-zero and carbon-neutrality. We can comprehensively contribute to developing responsible net-zero plans that have elements of accountability and ownership built in. We will establish reporting processes, manage data, and generate reports ready to be published as part of annual reports and other sustainable reporting.

ConsultGenics works with public listed companies in the UK to strengthen their carbon reduction plans by helping them report emissions from various activities, create a detailed dashboard reflecting planned vs actual emissions, identify areas related to utilities (oil, gas, water, electricity) which currently record high emissions and the ones with scope to reduce further.

For more information on how ConsultGenics can help with your carbon reduction strategy, write to us at contact@consultgenics.com

Author: Prithwijeet Mukherjee

Sr. Consultant, Strategy Consulting

Image courtesy:  ANGELA BENITO on Unsplash