Carbon emissions pledges can only be properly validated with automated reporting systems. For many businesses, time is running out to put these in place.
BearingPoint believe firmly that the future of carbon emissions reporting needs to be at a more granular level. But to do this, it will also need to be heavily automated. The effort employed by businesses needs to be redirected into carbon reduction initiatives, not into resource-heavy reporting.
Reporting needs to be more timely – ideally, in real time, so that progress can be tracked throughout the year. It also needs to be available in a form that can be modelled and projected forward, so businesses understand whether they're on track to meet business declarations.
Consumers have become ever more selective in the brands they choose based on sustainability criteria. They’re becoming more socially and environmentally responsible themselves, and want to consume in a more sustainable way. They’re buying from brands that have a similar outlook to themselves, and are acting on these imperatives.
A great number of businesses are starting to be much more upfront around not only their emissions reporting, but also the statements they're making about becoming carbon neutral or carbon positive. They're making more declarative statements in their annual reports and accounts to that end.
Firstly, direct pressure is increasing from customers to be more sustainable, and this is visible across social media and public discourse.
Secondly, pressure is mounting from shareholders who want to see that brands are responding to those market demands. To continue to attract and retain these shareholders as investors, brands increasingly need to make statements about how they're going to become more carbon neutral in the coming years.
In this way, sustainability is now increasingly becoming market-sensitive information that can impact share prices. As a consequence, we’re seeing a number of the leading audit firms starting to challenge businesses on the sustainability statements they’re making.
Typically, brands might be stating their intent to become carbon neutral by a certain date, but there are major transformations that will be needed to achieve this. They will increasingly be held to account to verify they are on course.
In many cases, businesses looking at improving their carbon reduction efforts need to start factoring that into their strategies and approaches, looking a number of years ahead.
In an age of increasing public sensitivity to greenwashing, it’s vital that businesses across the world can demonstrate that they are on course to meet their stated carbon emissions targets. Many businesses are not doing enough to prove this commitment to both customers and stakeholders.
The impact of adverse publicity can be profound. Greenwashing is often seen by consumers as even more serious than doing nothing, because consumers recognize they are being duped. Volkswagen’s emissions scandal in 2015 was a huge blow to the company’s reputation, because it was thought by many to have deliberately lied about the environmental impact of its engines.
Businesses need to adopt a carbon reporting system that lets them overlay their current state of play with future initiatives to reduce carbon and with their business plans.
Such a system shows businesses that, as they are growing, they’ll understand the impact this growth will have on future emissions. It must always keep up to date with the latest legislative standards for reporting.
The system must be capable of delivering frequent reporting, not just annual. That way, you can pivot carbon reporting from being a corporate KPI to a management KPI, in the hands of managers who can act tactically and quickly to deliver improvements.
Carbon reporting systems are relatively inexpensive once up and running, typically adding less than a cent per transaction to the existing cost base. This compares well to the average cost for private sector organizations to measure and manage climate change data and disclosure activities of $533k annual*. And carbon reporting systems offer vital substantiation over and above the ability to report and disclose emissions that comfortably outweighs this implementation cost.
*Source: SustainAbility Institute by ERM (ERM) for Ceres and Persefoni May 2022
BearingPoint have been working on such a system for ten years, called the BearingPoint Emissions Calculator.
Using this Calculator, if a consumer buys for example a pair of trainers online from a major brand, they can find out the carbon footprint of that specific pair from that manufacturer, delivered right to their specific address, anywhere in the world.
For the brand, such a calculator means they can then start visualizing carbon emissions in terms of individual products, supply chains and retailers, or the manufacturer they’re using, and the customers they get delivered to. From this, the business can start to understand where their carbon emissions are greatest, and therefore where they need to target improvement efforts.
The sustainability imperative continues to grow. It won't be long before businesses are required to report Scope 3 emissions as part of their annualized reporting cycle.
This requirement will demand a level of capability that would be unthinkable to put in place manually. Automation is the clear and only option.
It’s clear what businesses and brands must do to support their sustainability pledges.
But importantly, many have committed to carbon neutrality by 2025 or 2030. There is an implicit lead time in identifying and implementing the right carbon reduction initiatives, so it’s important that brands understand their true emissions baseline and forward projection now through more granular reporting and modelling.