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CORPORATE RISK
Regulation and policy
TRANSPARENCY AND
MEANING
Carbon emissions are a financially material commodity with an economic and
financial value to business. And that’s why they need to be properly defined,
measured, accounted for, audited and reported, says Andrew Raingold
A
s world leaders struggle to progress are not comparable because of the use of is also essential to aid long-term business
a legally-binding international different calculation methods. The Carbon growth and competitiveness. The
framework to reduce global carbon Disclosure Project (CDP) has reported that Government recently estimated the global
emissions, business leaders are beginning to in the UK, only 55% of the FTSE 350 environmental sector to have an annual
re-think their own corporate sustainability disclosed their direct emissions data over turnover around £3B and the race is on to
strategies. A low-carbon price is creating the last year. A clear, consistent, develop the products and services that will
uncertainty, policy risks remain high and comparable definition of carbon disclosure increasingly be demanded in this
public opinion has been significantly is vital for progress towards UK climate competitive and lucrative marketplace.
damaged by the negative news stories over change targets. Carbon may be the most immediate
climate science. Now that the Government has resource issue, but it is not the only one.
These issues may have weakened the published voluntary guidance on Businesses must increasingly look beyond
public perception of climate change, but it greenhouse gas reporting, this should be carbon to address the risks and
still remains one of the most serious long- made mandatory for all large UK opportunities from other environmental
term challenges facing the business organisations to ensure greater challenges. For example, it is evident that
community today. All companies are accountability and transparency. This will resource efficiency – that is, the systematic
exposed to the associated risks – whether in help companies identify cost savings reduction in the quantity of resource
terms of physical risks (ranging from through greater resource efficiency and employed to produce goods and services in
changing weather patterns to extreme more effectively address material climate the economy – will be one of the key
weather events), reputational risks (in risks and opportunities. It would also determinants of economic success and
relation to changing consumer attitudes or create a level playing field, allowing human well-being in the 21st century. The
shareholder pressure) or regulatory risks investors and consumers to make corporate sector must manage the
(as legislation increasingly seeks to reduce meaningful comparisons, thus incentivising significant risks posed by critical resource
corporate greenhouse gas emissions). further emission reductions. The challenges and look beyond short-term
These risks demonstrate that carbon administrative costs would be minimal for global spikes in commodity prices to more
emissions are now a financially material those who report already and can help underlying, long-term trends.
commodity with an economic and financial those who do not to identify significant In summary, recent setbacks for
value to business, investors and the City. cost savings. international climate change policy must
As such, they need to be properly defined, not derail corporate sustainability
measured, accounted for, audited and Global customers strategies. It is critical that organisations of
reported in the same way as other physical Carbon reporting is not only an issue for all sizes continue to question how prepared
commodities and financial instruments. the bigger companies that are part of they are for climate change and to seize
That is why the Aldersgate Group, a mandatory schemes such as the EU ETS or new business opportunities. What are the
coalition of leading companies, NGOs, CRC Energy Efficiency Scheme. Suppliers potential impacts on their operations, how
professional bodies and MPs, has been are increasingly expected by some of their is the regulatory environment likely to
campaigning for the introduction of a global customers to demonstrate GHG change and do policies adequately address
common carbon reporting standard. This emissions management, awareness and loss of production or reputational risks? A
would allow businesses to demonstrate action, in order to maintain business mandatory carbon reporting standard will
that they have used the appropriate process relationships. A recent CDP supply chain help drive this agenda by providing greater
to assess risks, define boundaries, measure survey finds that over half of respondents accountability and transparency.
emissions and report on them in a way that expect to deselect some suppliers in the
is meaningful, consistent and comparable. future for failing to meet carbon Andrew Raingold is deputy director of
Currently, the overall level of corporate management criteria set by the companies. the Aldersgate Group
carbon disclosures is too low and figures Identifying climate change opportunities > www.aldersgategroup.org.uk
14 April 2010 ❘ SB FutureProof
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