Who measures their emissions, and why?

As part of her thesis at ESCP, supervised by Aurélien Acquier, on the tools and methodologies developed and used by carbon consultants, Camille Habé, with the support of Louise Badoche, presents a series of articles offering an overview of what the research says about carbon accounting.

As climate change intensifies, as an increasing number of reports warn of the impacts it poses to human societies and biodiversity, and as it is now indisputable that human activities are the cause^[1], it is absolutely essential to reduce our greenhouse gas emissions in order to slow climate change and limit its impacts.

To achieve this, policymakers, businesses, and individuals each have, at their own level, their share of responsibility in the fight against climate change.

Carbon accounting for organizations is now one of the most widely used tools by companies and is one of Carbone 4’s long-standing areas of expertise. It involves estimating an organization’s greenhouse gas emissions based on its operational data. The underlying idea is to enable organizations to identify their most significant sources of emissions in order to understand their energy and carbon dependence and develop a tailored action plan for reducing emissions.

Introduction

In France, a number of companies are required to report their greenhouse gas emissions^[2]. However, this requirement is not always met^[3] and the measurement and reporting of these emissions remain voluntary in most other countries around the world. One of the first questions researchers focused on was identifying what motivated companies to voluntarily adopt carbon accounting and to make this data public through reporting mechanisms^[4]. These factors can be grouped into two categories: external pressures and company characteristics.

Among the most influential factors are:

• The regulations, which not only require but also encourage companies to be more transparent about their environmental impacts and goals
• Methodological guidelines, published by the authorities, that encourage widespread use and serve as a basis for decision-making
• External pressure from stakeholders (such as NGOs or investors), which can also serve as a motivating factor for companies
• Diversity (gender, age, nationality, etc.) among members of leadership teams, which leads to greater transparency in environmental data

External pressures that encourage transparency regarding emissions

Among the external pressures driving companies to report on their carbon footprint, the most widely recognized is the impact of regulations such as the reporting requirements or the existence of a carbon market^[5][6]. Based on the case of Australia, researchers have also found that the requirement to report to public authorities not only increases mandatory reporting but also the reporting of climate data not required by public authorities^[7].

In the absence of regulations, the mere publication of methodological guidelines by public authorities would also have an impact on the proportion of companies that engage in carbon reporting^[8]. This is what was observed in the United Kingdom, where the publication of a guide by the Department for Environment, Food, and Rural Affairs significantly increased the proportion of companies reporting their carbon emissions, even though guidelines such as the GHG Protocol already existed^[8].

Pressure from other stakeholders—consumers, the media, employees, etc.—would also increase the likelihood of offsetting one's emissions^[9][10]. For example, Liesen and his colleagues found a link between being monitored by NGOs and climate reporting^[10].

However, the link between investor pressure and reporting seems difficult to establish, and studies on the subject suggest either no link or a weak positive link between investor pressure and reporting^[10][11].

Furthermore, the findings of Liesen et al. suggest that while stakeholder pressure does increase the proportion of companies that publish data, it does not necessarily ensure the quality or completeness of the published data^[10].

Finally, a competitive environment can encourage reporting. It has been observed that the more concentrated the market is (i.e., with a few large companies), the more likely it is that companies operating in that market will publish their carbon data^[12]. One possible explanation is that the most polluting sectors report more carbon emissions than others because they face greater regulatory pressure^[13][14].

Organizational characteristics that facilitate carbon reporting

Company-specific factors may also play a role. The largest companies^[5][13][14] and generating the most profit^[12] would be more likely to postpone their greenhouse gas emissions.

Furthermore, it appears that greater diversity in the composition of corporate boards—in terms of age, nationality, gender, etc.—would increase the likelihood of reporting.^[15][16]. Having more women on boards would even improve the quality of the data published^[17]. This is the conclusion reached in the study “Women on Boards and Greenhouse Gas Emission Disclosures,” for which the authors analyzed a sample of companies in Australia at a time when publicly traded companies were not required to appoint women to their boards of directors or to report their greenhouse gas emissions. The results revealed that companies with at least two women on their boards publish higher-quality data on carbon emissions than others. In general, companies with multiple female directors tend to share more information regarding strategies, initiatives, and goals related to greenhouse gas emissions.

However, the research does not provide a definitive answer to the question of whether the companies best able to publish their data are those with the best environmental performance^[12][18], or, conversely, those with poorer performance that might seek to establish their credibility by sharing more data^[5][19].

Conclusion

Research therefore indicates that several factors encourage companies to delay reporting their greenhouse gas emissions and, more generally, their environmental data.

Whether through regulation, the sharing of methodological tools, the influence of stakeholders such as NGOs or consumers, competition among companies, or diversity in leadership teams, there are various ways to encourage companies to measure and report their emissions.