Sunday, 30 December 2012

The Day After Tomorrow

The latest issue of Scientific American provides an excellent summary of the state of the Arctic polar ice cap, or what's left of it.

For those of us concerned about climate change, and everyone else, the ice caps are of tremendous importance. Those vast white expanses reflect most of the sunlight that strikes their surface back into space, whereas the surrounding seawater absorbs most of the solar energy and re-radiates it as heat. The logic is straightforward: more ice = less warming; less ice = more warming.

According to Mark Fischetti's SciAm article, the amount of sea ice that remained after the annual Arctic summer thaw (aka "minimum ice cover") fluctuated around six million square kilometers for the two decades before 2000. Then it began to shrink -due,  presumably to global warming.  When the IPCC published its last assessment report in 2006, the scientific consensus was that the shrinking ice would mean ice-free summers towards the end of the century.

Then something happened. In 2007, the summer melt began to accelerate, and the ice that reformed in the winter was not as thick. Since then the ice has continued to retreat. In 2012 the minimum ice cover hit a record low of 3.4 million sq. km - barely 50% of the average a few decades ago. A few years ago the IPCC thought we'd have an ice free Arctic summer by the end of the century. Now climate scientists think we could see it as early as 2020-2030.

2020-2030!  That's no time at all - practically the day after tomorrow. We don't have much time left if we want to avoid that outcome.

And I do think we should do everything we can to slow the arctic ice melt.  Another article, by Charles H. Greene in the same issue of Scientific American points to more links between climate and weather. In particular, Greene describes how a warming Arctic affects the jet stream and allows it to fluctuate more widely in response to seasonal oscillations like El Nino and the North Atlantic Oscillation. When the jet stream dips further south than normal we get unforgiving wintery weather. When it surges northward we get record heatwaves in March. Given the oscillations currently in place, Greene argues that "the deck may be stacked for harsh outbreaks during the 2012–2013 winter in North America and Europe."

What does a "harsh outbreak" look like? Here's how it looked in Eastern Europe earlier this year, under 10-15 feet of snow:

Not fun. 35 people died in that part of Romania in two days.  Images like that remind me of the 2006 Hollywood disaster flick "The Day After Tomorrow". While that was a movie, and not a prediction, warnings about the near term impacts of Arctic warming are getting worryingly specific.  The lesson- the faster the ice melts, the more things look like a disaster movie.

But catastrophic climate change is not inevitable - not even now, after yet another global climate summit where progress is measured in half-steps. Individuals, businesses, communities and nations can take action now to slow the buildup of greenhouse gases in the atmosphere. Simple no-cost actions to change behaviour, money saving investments in energy efficiency, resilience-boosting renewable energy investments and use of the carbon markets to spur similar measures around the world - all of these make a difference. There is no need to wait for a global treaty in order to set ambitious targets and embrace a lower-carbon future.

We can start today. Or, if you prefer to get things started on New Year's Day, we can start the day after tomorrow.

Wednesday, 19 December 2012

Defra's Mandatory GHG Reporting: Some Answers, Even More Questions

The UK's Department for the Environment, Food and Rural Affairs (Defra) has been holding consultation workshops over the last three days to get feedback on the proposed guidance document for the Mandatory Greenhouse Gas Reporting legislation that will go through Parliament next year. Carbon Clear and other members of the industry organisation we helped found, ICROA were on hand to lend our expertise and learn more about Defra's intentions.

There have been a few changes to the proposed legislation since the consultation draft was released in July. Most notably, companies now have to include their GHG emissions totals in their Directors' report only for fiscal years ending after 1st October 2013. This is a change from the 1st April date that Defra originally proposed, but there is no time for complacency.

If your company's fiscal year follows the calendar year, you need to start collecting your data as of 1st January - two weeks from now.  Are you ready?

Defra clarified that the GHG footprint report should state totals in terms of carbon dioxide equivalent (CO2e), but that companies should be including emissions data from the 6 main Kyoto gases (carbon dioxide, methane, nitrous oxide, perfluorocarbons, sulfur hexafluoride, and hydrofluorocarbons). The newest addition to the Kyoto greenhouse gas list, nitrogen trifluoride (NF3) has been excluded from the list - according to Defra's representative at the consultation, they cannot include it until Parliament amends the Climate Change Act.

One of the concerns we heard during the initial consultation process was that Defra seemed to be reinventing the wheel - coming up with its own footprint boundary definitions that do not match the ones used by popular standards like ISO 14064-1 and the WBCSD/WRI GHG Protocol. It turns out there is a reason for the discrepancy - the new requirements integrate with the country's largest pieces of existing legislation, the Companies Act. What is more, the reporting legislation does not oblige businesses to use a specific standard. As a result Defra has attempted to develop their carbon measurement rules using terminology consistent with the Companies Act, and in a way that does not give preference to any one existing footprint standard. Easier said than done!

This approach means that there is still considerable ambiguity in the legislation and even in the guidance documents.  Questions remain about the use of intensity ratios, Defra's definition of Scope 2 emissions, whether and how companies can include their emissions from agricultural and land use activities, and range of other subjects.  While the final draft of these documents will address some of these points, they will still leave room for interpretation by companies, assurance providers and - importantly - enforcement authorities.

Defra has, importantly, clarified the enforcement aspect of the legislation. They note that the Conduct Committee of the Financial Reporting Council will enforce the provisions of the legislation, and can use section 456 of the Companies Act to obtain a declaration that the annual report of a company does not comply with the requirements of the Act.  They also note that Section 397 of the Financial Services and Markets Act means a person who makes a misleading or false statement is liable to a fine or up to six months' imprisonment. These enforcement measures make it more important than ever for companies to ensure their carbon footprint report meets the requirements of the law.

Carbon Clear will continue working with companies throughout the year to help them assess their readiness for Mandatory Greenhouse Gas Reporting, and put in place measures to comply with the requirements of the law. Please contact our carbon advisory team to find out what you should do next.

After Doha: Living in a 3-Speed World

It's December, and that means we're once again picking through the results of a two-week United Nations climate change conference in search of meaning.

The UNFCCC website contains the text of all the official decisions reached in Doha. There's enough in there to keep the climate policy wonks busy for days.

But what does all of this mean for day-to-day practitioners involved in the fight against catastrophic climate change? It means, among other things, that we are living in a three-speed world. The UN negotiations are meant to pave the way for a unified international emissions reduction framework, with a global emissions reduction target that trickles down to individual country governments, and then to organisations and communities. When the Kyoto Protocol was drafted back in 1992, the plan was for a coordinated approach that ensures everyone made a fair contribution to truly ambitious global emission reductions.

With each subsequent climate change conference - from Bali to Copenhagen to Cancun to Durban to Doha - the limitations of this approach have become apparent. Government negotiators bicker over details small and large, for reasons of national sovereignty, economic advantage or sheer principle. The negotiating text, consequently, has splintered into parallel tracks, each of which must be agreed by consensus by 194 countries plus the EU - no majority voting here! With each subsequent round, the pace of negotiations has slowed, and the level of ambition seemingly has diminished.

In our three-speed framework, we'll label UN-speed "super-slow".

The news is slightly better at the country level.  The UK has set an ambitious 2050 reduction target and gradually is devising measures to meet a series of 5-year carbon budgets.  Australia has implemented an economy-wide cap and trade scheme to achieve its emission reduction targets.  So have New Zealand, South Korea and California (a U.S. state with an economy larger than many nations). Meanwhile, a host of other countries are developing national and regional cap and trade schemes, implementing some form of carbon tax, or are rolling out various greenhouse gas reporting regulations and financial incentives.  And of course, the European Union has deepened the reduction targets linked to the granddaddy of GHG cap and trade mechanisms, the EU ETS.

These are encouraging moves, and can take us part-way towards our global emission reduction targets.  The problem is that these are piecemeal efforts that are dependent in most cases on the whims of elected legislatures.  It is difficult for companies that operate under this system to make long term plans when the scheme may change with the next election.  What is more, the lack of international coordination encourages "environmental arbitrage", with some companies threatening to base their business investment (and employment) decisions on the relative cost of climate change legislation in different jurisdictions. Real or not, these arguments about economic competitiveness discourage many governments from taking more ambitious action to drive emission reductions.  At the country level, then we have real signs of progress, but fragmentary and subject to reversal.  Let us call national-speed "medium-slow" but inconsistent.

And then there is the business community. Taken together, the footprints of the 350 largest listed companies on the FTSE are greater than the UK's total direct emissionsAs our carbon maturity assessment showed, many companies are going far beyond their legal obligations to tackle their climate change impact.  Some companies have already achieved reductions of 20% or more and have set reduction targets that drastically outstrip those contemplated by governments or the United Nations.  In the U.S., Walmart has reached out to its global supply chain of over 100,000 businesses to help them evaluate and improve their environmental performance.

In the UK, meanwhile, Unilever is working with its customers to help them use its products in a more sustainable manner and Centreparcs has rolled out an incentive scheme to help employees save energy at home.  Other British firms, like Marks & Spencer and Sky, have gone "carbon neutral" taking immediate responsibility for 100% of their emissions* even while they work towards longer term footprint reductions.

We may be nearing a tipping point in which the business community as a whole embraces the need for an ambitious low-carbon transformation, but most of the action to date has been confined to a handful of global leaders, and primarily consumer facing brands. The emissions-intensive extractive industries have done significantly less to measure, report, reduce and offset their footprint beyond the bare minimum required by legislation, and efforts within other industry sectors remains spotty at best.

Let us call business-visionary-speed "fast", even as we acknowledge that there are not nearly enough companies in this category.

The Doha climate change negotiators reaffirmed this three-speed model of the world. COP 18 in Doha gave us a global commitment to extend the existing Kyoto Protocol mechanisms until a new global agreement is negotiated in 2015, and this new post-Kyoto agreement is expected to come into force no later than 2020. Encouragingly, some countries and negotiating blocs unilaterally increased their reduction targets. Distressingly, many of the biggest polluters - China, the U.S., Japan, Russia and Canada - have refused to commit to "Kyoto 2", but will continue to participate in negotiations. All of this is better than no effort to reach a comprehensive agreement at all, but it lacks the sense of urgency required to keep us within the 2 degree warming target required to stave off the worst climate change impacts.

While the global-level debates dragged on nearly 48 hours beyond the official deadline, individual country governments moved faster. Maldives pledged to become carbon-neutral by 2020, while Norway has made an unconditional 30% reduction pledge below business as usual over the same period. A host of companies, meanwhile, have pledged even greater reductions and a growing number are declaring themselves carbon-neutral every day.

Speaking in 2011, Christiana Figueres, Executive Secretary of the UNFCCC acknowledged the importance of the business community in this three-speed system, noting, "It is essential that from the outset we take into account the needs of the private sector, as, in the end, it will be the engine for action."

I think Secretary Figueres's observation captures the most important lesson from the recent Doha climate change conference. This three-speed system is a reality. We will - we must - continue working towards binding agreements that ensure every nation is doing its part to reduce global emissions levels. But the importance of that effort does not diminish the impact that pioneering nations can have when they set their own targets to drive emission reductions in advance of a global pact.  If anything, it is more important than ever for those countries to show leadership so that the rest of the international community can follow suit.

And the sometimes stuttering pace of national regulations does not dim the light shone by visionary corporate leaders, who go beyond compliance to achieve ambitious emission reductions in their operations, with their suppliers and customers, and through the use of offsets beyond even the boundaries of their own footprint.  Corporate leadership in our three-speed system can give country governments the courage to increase the scale of their ambition and encourage a faster transition to a low carbon world.

Wednesday, 12 December 2012

Can everyone really be "above average" when it comes to Carbon Management?

When I lived in the States I was a fan of Garrison Keillor’s News from Lake Wobegon. As part of his weekly radio show, Keillor told homespun stories from a small town where “all the women are strong, all the men are good looking, and all the children are above average.”

One of the charms of the show was Keillor’s knack for saying things that sounded reasonable but upon closer inspection were shown to be ridiculous or impossible. In particular, in order for one person to be above average, someone has to be below average! But few people would volunteer for that role.

The “Lake Wobegon effect”, a propensity to overestimate one’s capabilities, manifests itself in many walks of life – intelligence, driving, choosing the fastest lane on the freeway – even carbon management.  When we talk with large companies, the vast majority speak proudly of their climate change initiatives. In reality, there is a significant spread in the depth and breadth of carbon management programmes in the corporate world.

Some companies, mostly consumer facing retailers, are trail blazing when it comes to measuring and reporting their greenhouse gas emissions. These firms have a variety of projects, strategies and engagement programmes underway and they are setting the bar for being above average fairly high. As a Walmart executive commented recently to Fast Company, “This isn’t a project, it’s the company.”

But there are many other businesses that are only taking the first tentative steps in managing their climate change impact, and a handful are doing nothing at all. Clearly, then, not everyone is above average when it comes to carbon management.

Carbon Clear recently analysed the progress that member companies in the FTSE 100 have made measuring, reporting and managing their carbon emissions. This research, which has gained wide press coverage, builds on similar work we carried out last year. This year, however, we have taken a more nuanced view to better evaluate the maturity of companies’ carbon reporting. As a result, we have gone beyond asking whether or not a company reports its carbon footprint to explore how thoroughly it reports and whether it has obtained independent assurance for its claims.

These tougher evaluation criteria allow us to highlight clearer differences in companies’ carbon management strategies.  They reflect the fact that carbon management and sustainability are processes, not end goals, and the definition of “good enough” will continue to evolve.
Our analysis found that the majority of companies that performed well in last year’s rankings continued to perform well in 2012. One reason for this consistent performance may be because leading companies have put in place systems that help embed carbon management within their operations. Having overcome the initial learning curve, they find it easier to continue and advance their programmes.

Another reason is that leading companies are beginning to recognise the business benefits of carbon management. This should not be a surprise. At Carbon Clear, we have found repeatedly that companies that measure their carbon emissions begin to look at their operations in a different way, identifying efficiency and cost saving measures that strengthen their bottom line.

However, even amongst the biggest publicly listed companies in the UK, only a minority have successfully integrated carbon management into their businesses. In fact, the average overall performance score from our analysis is 47%. A start, to be sure, but not good enough given the benefits that come from an integrated carbon management programme.

More specifically, companies tended to score quite well in the measurement, reporting and verification competency area, with an average score of 58%. High scores in this domain may be due in part to the fact that the scoring criteria encompass those areas of carbon management that a company should logically address first.

Companies scored less well in the strategy competency area and in the carbon reduction competency area, with average scores of 42% and 30% respectively.

The strategy competency area focusses on whether companies have evaluated the risks and opportunities that arise from climate change, whether they have an overarching plan to reduce their emissions, and whether there is a senior leader in the company who takes responsibility for driving the strategy forward along a defined timeframe. Establishing a carbon management strategy requires a fairly sophisticated level of engagement by senior management, so it is not overly surprising that the average score in this area is relatively low.

What is more worrying is that companies are not scoring very well in the carbon reduction competency area. This is a concern as carbon reduction is a central feature of an effective carbon management strategy, helping drive cost savings and lower greenhouse gas emissions. Companies that are not driving ambitious reductions through their operations and supply chain are in many instances leaving money on the table.  Even fewer are offsetting their footprint, choosing for now to release greenhouse gases unabated into the atmosphere without any efforts at compensation. Given the urgent need for business leadership on climate change, we need more action in this area.

Engagement activities are one of the main and most visible benefits of comprehensive carbon reporting, so it’s not surprising that companies score quite well in this competency area, with an average score of 52%. Over half of the FTSE 100 demonstrates a commitment to building a platform with which to communicate their activities and establish a dialogue with their stakeholders around climate change and carbon management.

Our in-depth analysis has found that the FTSE 100 is making useful progress on the carbon management journey.  All of the companies we researched are taking some steps to measure and sometimes manage their carbon impact. And there are many more that have progressed further along the carbon maturity curve and achieved higher scores. What is evident from the analysis is that those companies demonstrating true carbon management leadership remain few and far between: there are many companies performing at the average level and not very many that live in Lake Wobegon.

Tuesday, 20 November 2012

The Missing 95%

Earlier this month, the consulting company PwC released an analysis showing that current efforts to reduce greenhouse gas emissions are not sufficiently ambitious to keep us within the two degrees warming target agreed at the 2009 United Nations climate change conference in Copenhagen.

This news, while distressing for those of us committed to combating climate change, is not surprising.  As Carbon Clear's FTSE 100 analysis shows, many leading companies have not even measured their carbon footprint, let alone put in place measures to drive emission reductions.  And those companies that do work to reduce their carbon footprint are often not making enough progress.

Let's face it: decarbonising an economy - or a business - is hard work. Greenhouse gas-emitting activities are embedded in our daily business lives.  Our vehicle fleets, logistics networks, energy infrastructure, built environment and even food production systems all release vast quantities of greenhouse gases into the atmosphere.  Each of these systems has been developed and optimised over several decades, and represents billions of dollars of cumulative investment.  We have trained generations of engineers, architects and farmers to design and use this infrastructure, and by and large, it works. It would be unrealistic to drop all of this and change overnight to a transportation, logistics, energy, built environment and food production system that releases 80% less carbon.

Seen in this light, the 3-5% annual reduction targets set by the most ambitious companies appear quite reasonable.  Coming at a time of reduced government spending and economic hardship, the 1% or even smaller reductions that developed nations are actually achieving likewise appear understandable.  These are often the "easy" reductions, the ones that save companies money and energise staff and stakeholders. These reductions should by rights be happening anyway.

The trouble is that they're not enough.

Achieving a 5% annual emission reduction target over ten years translates into a 40% reduction below the baseline by the end of that period.  A company that had been emitting a million tonnes CO2e a year would now be emitting only 600,000 tonnes.  Such an achievement would mark any business as a low-carbon leader.

But it isn't enough.

The problem is clear: a five percent carbon reduction target means not taking responsibility for the other 95% of the company's footprint that remains unabated.  And even though the footprint is shrinking year on year and may eventually reach zero, that residual 95% is causing a lot of damage along the way.

At the end of that ten year period, a company that had been releasing a million tonnes of CO2 to the atmosphere will have saved a cumulative total of 2.4 million tonnes, but will still have a cumulative carbon footprint of 7.6 million tonnes.  In other words, more than 3/4 of all the emissions they would have released without an ambitious reduction plan got released anyway.  And all else being equal, once that carbon is in the atmosphere it will contribute to a warming climate for hundreds or even thousands of years. Is that really the legacy of a leader?

As I said earlier, it is challenging for a company to radically alter its internal operations and reduce its carbon footprint immediately. No doubt about it. But the fact of the matter is they don't need to do it alone.  There is a tool that businesses all over the world employ when they don't have the time or local resources to achieve their objectives.

It's called outsourcing.

Companies outsource critical business services all the time: legal representation, website design, accounting and payroll, deliveries, building cleaning and maintenance, cafeteria food service, travel management, and annual report preparation.  They do this because it is faster, more efficient and, importantly, cheaper than trying to achieve an equivalent result in-house.

Outsourcing works for a host of important business activities, so why not carbon footprint reduction? We have already established that it is time consuming, difficult and costly to achieve in-house emission reductions on the the scale needed to avert disastrous climate change. In a situation like this, it makes sense to outsource the rest of the emission reduction effort to people who can do it faster, more efficiently, and cheaper. There are a host of companies (including ours) that can help companies deal with the "missing 95%" of their footprint.

(c) Copyright Carbon Clear Limited

What's surprising is that more companies are not doing this already.  According to our research, while the vast majority of the FTSE 100 have set an emission reduction target, less than 10% of these companies currently have a carbon offset programme of any kind.  Part of the reason is ideological. Google the phrase "carbon offset last resort" and you will find page after page of advice from organisations as varied as Friends of the Earth UK and IEMA (of which Carbon Clear is a corporate member) exhorting companies to treat carbon offsets as a fallback option. A sign of failure.  That same internet search will turn up scores of companies that offset meekly, offering up this "last resort" language as an apology for not doing more on their internal footprint.

This is a "through the looking glass" mentality.  While climate scientists tell us that global greenhouse gas emissions must peak in the next five years, some advisers are reassuring companies that they can demonstrate their leadership by deferring action on the vast majority of their carbon footprint, so long as they prioritise internal reductions.  In reality, the companies that show the strongest commitment to avoiding climate change impacts will reduce what they can, while simultaneously outsourcing the rest of their footprint reduction through carbon offsets.

Clear evidence of the link between environmental leadership and carbon offsetting comes from our analysis of the FTSE 100.  If companies saw offsetting as an "easy" way to relieve their green guilt or make up for a lack of effort in other areas, we would expect to see companies grouped into two clusters: those with a robust internal carbon management programme but no offsetting, and those with a weak internal carbon management programme who use offsets to make up for their lack of effort.

The results are quite different. Companies that are offsetting their emissions also cluster near the top ranks for reporting their footprint, developing an internal climate change strategy, internal emission reduction activities and engaging their stakeholders.  None of the bottom ranked companies on these other criteria offset their emissions.

This result shouldn't be surprising.  After all, carbon offset credits cost money, and the business benefits of a voluntary (or "beyond compliance") carbon offsetting programme, while real, are indirect.  Investors, finance managers and senior executives will face competing demands for scarce capital. A company that scores at the bottom of the league table and isn't serious about tackling the climate change challenge doesn't need to be discouraged from purchasing carbon offsets.  The "last resort" language, then, serves mainly to discourage people who might otherwise consider integrating carbon offsets into their broader carbon management programme. This is a wasted opportunity.

Our review of the FTSE 100 shows that using carbon offsets is not a sign of failure.  For companies that take climate change seriously, offsets are seen as part of their overall carbon reduction toolkit, a way to outsource those emission reductions they cannot readily achieve with internal resources.  Offsets help companies tackle the "missing 95%" of their footprint reductions, achieve business benefits and contribute to the fight against climate change.

Monday, 12 November 2012

Mandatory Carbon Reporting: From Compliance to Competitive Advantage

Four weeks have passed since the close of DECC's consultation on mandatory greenhouse gas reporting. That means we are now four weeks closer to the anticipated launch of the scheme in April 2013.  Now is not the time to rest easy.  We expect yet another consultation - on the guidance notes for the legislation - sometime in December.

We may have weeks or months to wait before DECC publishes the results of the legislative consultation. However, it would be a mistake for companies to wait until the final legislation is published before taking action. As I noted in a previous post, the original Carbon Reduction Commitment rules were only finalised a month before the legislation came into force.  Firms that fail to prepare in advance will find themselves at a disadvantage when it comes to complying with the new carbon reporting rules.

So what can companies do to get ready?

Many firms that need to report their carbon footprint make the mistake of leaping immediately into the data collection phase without specifying how they plan to use the resultant information.  In many cases, this approach yields a carbon footprint report that fails to generate broader benefits for the company.

We recommend that businesses take a more focused approach if they wish to get long-term value from their carbon reporting efforts.  The first step in this approach  is to determine the correct measurement and reporting strategy to pursue.  The measurement and reporting strategy will help dictate the human and financial resources the firm allocates to the initiative, the software and other data collection systems that will be employed to process the information, and even how the company will be able to communicate its accomplishments.

So what questions must the reporting team answer to determine their carbon measurement strategy?  One of the key issues is to understand the types of benefits the company expects to gain from their carbon reporting.  Is the main driver the promise of financial savings that result from better management of corporate resources, or does the business also expect to reap reputational rewards from their carbon disclosure? A logistics business focused on cost savings might go beyond the legislation to collect very fine-grained data on their fleet using a telematics solution, and then drive efficiencies through driver education. Meanwhile, a consumer facing retailer seeking reputational benefits might go beyond the requirements of the legislation in a different way and report voluntarily on a broader range of activities in its supply chain.  Each of these decisions has implications for the types of data a company chooses to collect, and the data collection tools and systems it uses to assemble this information.

Another key consideration in the determination of a company's carbon measurement and reporting strategy is the internal implementation capacity of the business.  Even with the best will in the world, a company that is unable to devote technical, financial and human resources to carbon measurement cannot achieve as much as one with a larger, more experienced team and proportionately greater budget. Understanding your resources, capabilities and limitations can help prevent over-reach and potential underperformance.

What you need, then, is an approach that is tailored to your company.  Carbon Clear has been helping firms determine their carbon measurement and reporting strategy, both in terms of the benefits they can reasonably expect to achieve and in terms of their internal capability to roll out their reporting initiative.

 Among other things, these basic criteria allow us to create a rough snapshot that plots corporate carbon measurement strategies within four quadrants, as shown below:

As firms' carbon maturity increases we expect movement towards the upper right quadrant.
Carbon Measurement & Reporting Strategy Quadrants(Copyright Carbon Clear, all rights reserved)

Every business needs a carbon measurement and reporting approach customised to their requirements.  However, we have found that this snapshot helps companies focus on the issues most relevant to their position, while avoiding the one-size-fits-all approach of some solution providers.

Companies that pursue a "Compliance" strategy tend to have limited internal capacity to implement a sophisticated measurement programme and see little reputational benefit from reporting their carbon data (perhaps because they are not consumer-facing a consumer-facing brand or anticipate limited investor pressure for carbon disclosure).  Firms in the "Compliance Quadrant" tend to follow the letter of the law. Their primary objective is to avoid any negative repercussions that result from failure to meet the legislation's requirements.  Financial savings that result from better data and efficiency improvements are secondary. These businesses may use a simple carbon accounting software package or even a spreadsheet tool to calculate their carbon footprint. 

Like their "Compliance" counterparts, firms in the lower-right "Cost Reduction" Quadrant lack strong reputational drivers for developing their footprint measurement and reporting system.  However, their strong internal implementation capability (budget, staff, management systems) means they are better able to use more sophisticated carbon accounting diagnostic tools to identify emissions hot-spots and drive footprint and cost reductions.

The upper-left quadrant, housing Performance Strategy firms, is for companies that face brand or reputational pressure to disclose their carbon performance, but who have limited ability to put in place a sophisticated measurement and reporting system.  These companies may choose to start with a basic carbon footprint report and embark on a programme of continuous improvement, that encompasses ambitious overall reduction targets.  In most cases, these firms will try to capture more and more of their total footprint as their data management capability improves over time.

Companies that stand to gain brand and reputational benefits from carbon measurement and reporting, and that have the internal capability to implement a robust data collection and management programme may find themselves in the "Leadership Strategy" Quadrant. These firms want to use their carbon reporting to demonstrate to stakeholders their commitment to environmental sustainability, achieve a high score at the top of the CDP and carbon maturity league tables, and use their carbon reporting initiative as a vehicle to engage their staff, their customers and, increasingly, their investors.  They may use more sophisticated carbon accounting tools that integrate with their accounting system and capture data for a range of other sustainability indicators at the same time.

Many companies that begin in the "Compliance", "Cost Reduction" or "Performance" quadrants may move to the "Leadership" strategy quadrant as their systems improve and as the broader benefits of carbon reporting and management become evident.  However, it isn't necessary to begin there, and many firms may be comfortable staying where they are. What it shows, however, is that there is no "one-size fits all" approach to carbon reporting.

Choosing the right carbon measurement and reporting strategy is the first step in preparing a fit-for-purpose carbon footprint report.  Getting it right requires a thorough evaluation of your company's business drivers and of your internal resources and capabilities.

These decisions will influence every other aspect of your company's response to Mandatory Carbon Reporting, so it is important to know where you stand.  The good news is that you don't have to wait for DECC to release the final details around the carbon reporting legislation before you determine the right approach.  We have already begun helping companies define carbon reporting strategies that range from compliance to competitive advantage, ensuring that they spend resources wisely and helping identify business benefits.

Friday, 2 November 2012

"This Is What Climate Change Looks Like"

Even as America's East Coast continues to recover from the impact of Hurricane/"Superstorm" Sandy, pundits are using it as a teachable moment to talk about climate change. Perhaps the most in-your-face comment along these lines appeared on the cover of Businessweek:

My preference for precision makes me wince a little when I see statements like this.  As I noted in an earlier post, there is a difference between weather and climate. A hurricane - even one as big and destructive as Sandy - is weather.  Weather is what you see when you look out the window on any particular day. Is it sunny? Is it snowing? Are there 70 mph winds and driving rain?  That's weather.

"Climate" is a description of the conditions you can reasonably expect given the location and time of year.  If it's autumn on the U.S. East Coast, you can reasonably expect a handful of hurricanes to strike.  Warmer ocean temperatures provide even more energy to power hurricanes, and we know that the planet is warming as a result of fossil fuel use, deforestation and other practices. As a result of global warming, then, we expect a changing climate with more and stronger hurricanes. But it's very challenging to point to any one storm and say, "Aha! Climate change made that happen!"

Meteorologists believe that increased freshwater as a result of Arctic melting may have contributed to the cold front that steered Sandy onshore. Those who are looking for a teachable moment are saying that all of this proves we are suffering from climate change impacts.  But as with hurricanes in autumn, cold fronts are not unknown in the north Atlantic.  It's an amazing coincidence, and matches very closely what we would expect in a warming world.  But again, if we want to be as accurate as possible, when describing any particular incident we are talking about weather. Our models are not sufficiently fine-grained to allow us to draw the causal link more directly than that.  At least not yet.

The danger with definitively attributing a bad weather event to climate change is that it can cut both ways.  When campaigners claim that a warm, snow-free winter is evidence of climate change, climate deniers can claim that a cold snap and blizzard the following year make the opposite case. Trends and statistics allow a more nuanced debate.

Businessweek quotes Eric Pooley of the Environmental Defense Fund, who uses a sports analogy: “We can’t say that steroids caused any one home run by Barry Bonds, but steroids sure helped him hit more and hit them farther. Now we have weather on steroids.” Steroids and other performance enhancing drugs increase the likelihood that a world class athlete will win games and break records, just as climate change increases the likelihood that we will experience monster hurricanes and other impacts.

This does not mean we can't use Sandy to have a serious conversation about global warming.  Rather than saying, "This is climate change," I might say, "This is what climate change looks like. We'll have to get used to much more of this if we don't drastically cut emissions."

We don't need 100% certainty before we take action.  People who live in relatively dangerous neighborhoods tend to have more locks on their doors than those who live on safer streets, even though the probability of a robbery is far below 100%.  The insurance industry in particular is very sensitive to the probability of a claim, and uses this information to decide who to insure and what premium to charge.  Even a slightly increased probability of devastating storms, droughts, floods, and the like is enough to spur insurers to change their policies.  When it comes to climate change, insurers are the canary in the coal mine.  They don't need to know that a particular storm or drought is due to climate change, just that those impacts match what we would expect in a warming world.

While I won't yet go as far as that Businessweek headline, I do think Sandy helps sound the alarm.

"This is what climate change looks like."

Monday, 29 October 2012

From the Archives: New Fossil Fuel Sources and Climate Change

Over the past few months the debate about new fossil fuel sources has gotten pretty...intense. In the U.S. environmentalists are campaigning in the courts and in farmers fields to halt the Keystone XL pipeline, which will provide easier market access for petroleum from Canada's tar sands.  Here in the U.K. campaigners are working to slow the spread of hydraulic fracturing, which enables drillers to access abundant but otherwise difficult to access shale gas.

This is an important debate, and one I discussed in a blog post over three years ago. Rather than rehash that discussion, I will reprint that March 2009 post below:

Peak Oil: Will We Freeze or Roast? Originally posted 18 March 2009

When I was in graduate school in the early 1990s, M. King Hubbert was a name known only to fellow energy nerds. Now, he's so popular you can get regular news alerts.

Hubbert developed a mathematical model describing how production from an oil well or entire oil producing region tends to increase at a predictable rate, until it hits a - predictable - peak and then declines. Hubbert used his model to predict the year of peak oil output for the United States, and it has been used more or less successfully for other oil producing regions since then.

In addition to forecasting output growth for particular regions, the Hubbert Curve and peak oil theory can be applied to oil production for the world as a whole. But as recently as 2005, the International Energy Agency (IEA) dismissed the concept. Mainstream energy agencies tended to assume that oil production could increase indefinitely as new investment and technology are brought to bear. If a peak exists, they argued, we are nowhere near it.

This matters because when the world's leading climate scientists prepared their 2007 report on global warming trends and impacts, they turned to the IEA for their best estimates of fossil fuel consumption. The IPCC works by consensus, and its reports tend to refer only to the most authoritative sources. The IEA estimates showed that conventional fossil fuel use would continue to grow without end, and this prediction is reflected in all the pessimistic warnings about global temperature increases and climate change.

Times have changed. The IEA is now predicting that we will reach global peak oil between 2020 and 2030 (more pessimistic scenarios argue that we reached the global peak last year). So oil production will top out much earlier than anticipated.

Less petroleum production means fewer petroleum-related greenhouse gas emissions. In fact, manyindependent models suggest that, once peak oil (and coal) is factored in, we simply can't burn enough traditional fossil fuels to reach the worst-case global warming levels.

Let me repeat that: Most climate models that incorporate peak oil theory predict a temperature rise of less than 2 degrees Centigrade. A major change to be sure, but far less than the IPCC's "business as usual" scenario for global warming.

So, this is good news, isn't it? Climate change is solved because fossil fuel production will decline sooner than predicted, right?

Not so fast. What are we going to use for our vehicles when the oil starts to run out? Shall we simply switch off the lights and freeze?

In 2006, Alex Farrell and Adam Brandt, researchers at the University of California at Berkeley's Energy and Resources Group, published a paper that examined the cost, availability and climate change implications of substitutes for conventional petroleum. These are liquid fuels derived from heavy, difficult to process resources like tar sands, oil shale, and coal.

The Berkeley team found that it would be commercially viable to produce synthetic petroleum from these heavy fuels at oil prices of less than US $50 per barrel. What's more these resources are so abundant that they would keep pump prices relatively low.

In other words, peak oil means less petroleum, but not an end to fossil fuels. For those who worry that peak oil means society will collapse into "Mad Max" - style anarchy, that's good news.

The bad news is that these fuels have a much greater climate change impact than conventional oil. Using tar sands and heavy oil results in about 50% more CO2 per unit of energy than regular petroleum. Synthetic fuels made from coal nearly doubles the greenhouse gas emissions, and using oil shale could result in up to 3X the emissions per unit of energy. To quote the authors:

"Overall...the oil transition is not a shift from abundance to scarcity: fossil fuel resources abound. Rather, the oil transition is a shift from high quality resources to lower quality resources that have increased risks of environmental damage, as well as other risks."

Sadly, peak oil is not the solution to climate change. If anything, a poorly planned response to peak oil could accelerate global greenhouse gas emissions growth.

There is an alternative. We have the technical know-how to produce energy from low- or zero-emission sources. Solar, hydropower, wave and tidal, wind, and geothermal energy are clean sources of hydrogen and electricity, and carefully chosen biofuels can provide high energy-density liquid fuels.

Scaling up these clean energy technologies at the rate required to compensate for peak oil and limite climate change is a challenge. But as discussed in an earlier article, the required investments by governments, corporations and communities are no larger than other causes on which we have spent billions. The need is arguably as great, if not greater, because poorly planned energy investments made today will have a huge impact for decades to come.

Friday, 12 October 2012

Which FTSE 100 Company Has The Best Carbon Reporting?

(This is a guest post by Carbon Clear CEO Mark Chadwick, and was originally published via the 2Degrees Network.)

"Best" is clearly a subjective term... At Carbon Clear we have developed criteria for what we believe represents best practice in carbon management, and we score company reports to assess their carbon management maturity.

On Wednesday 17th October at 08:30am we will be announcing the results of our 2012 research and will reveal the top 20 companies from the FTSE 100. Our maturity model looks for more than just measurement and disclosure. We also look for broader signs of carbon management maturity, including reduction performance, engagement and strategy.

Last year's top 10 were the following:
  1. BSkyB
  2. M&S
  3. Aviva
  4. Pearson
  5. RSA
  6. GSK
  7. Hammerson
  8. Kingfisher
  9. Sainsbury
  10. Tesco
This year's results contain some surprises, some new entrants and some that have fallen in the rankings.

The event will be held at Carbon Clear's office near King's Cross, London and will run from 8:30 to 10:30 on Wednesday October 17th. See our website for more information.

If you’re from a FTSE 100 company, or are interested in improving your carbon management performance please contact Rachel Hunter (rhunter [at] carbon-clear [dot] com) or on 0203 589 9423 to request a place at the briefing.

Thursday, 4 October 2012

Mandatory Carbon Reporting: Lessons from the CRC

The UK's Mandatory Carbon Reporting requirement is expected to become law on 6th April 2013. As I mentioned previously, there are still a number of questions surrounding this proposed legislation. What is more, the final consultation is still open, meaning some details may yet change.

Carbon Clear conducted a survey last month on corporate attitudes to Mandatory Carbon Reporting. Worryingly, we found that the lack of specifics has led nearly 3/4 of respondents to adopt a "wait and see" approach to the legislation.

We've been here before, with the Carbon Reduction Commitment Energy Efficiency Scheme (CRC). When the first consultation was launched in 2006 for what was then called the "Energy Performance Commitment", most corporates ignored it.  By 2008, with the first qualification year underway, most companies with whom my team spoke were still in denial. "It will never pass into law," they claimed, "We're in the middle of an economic crisis!"

In March 2009, the full CRC consultation commenced and it became clear that the Labour Government wasn't going to back down.  And still many firms decided to wait and see.  At that point, the claim became, "The Tories are more business-friendly; they will cancel the scheme once they come into power."

Fast forward to October 2012, and as we all know the CRC hasn't been cancelled - at least not yet.  However, it has changed considerably since 2008. The timings have shifted repeatedly, the rules for purchasing allowances were only finalised in 2010, the league table has been amended, and the specifics of the reporting requirements have been updated.

Most notably, the CRC has changed from a type of cap-and-trade scheme into something that looks suspiciously like a carbon tax. While the £12/tonne CO2 payment represents only a small portion of most companies' energy spend, it will bring billions to a cash-strapped Treasury.

What is most interesting and relevant for businesses potentially affected by Mandatory Carbon Reporting, is that it is the outputs remain a work in progress: the inputs have remained remarkably consistent.  If your company is captured in the CRC, you must:
  • Define the organisation
  • Identify your locations
  • Locate supplies
  • Identify meters and suppliers, and
  • Prepare your evidence pack.
The consistency in the CRC's input requirements matters because the rest of the CRC rules were not finalised and did not come into force until March 2010 - only a month before the first compliance year started!Carbon Clear clients who started preparing for the CRC in 2008 and 2009 were generally well-prepared to meet the legislative requirements in April 2010. Some companies were even able to take reasonable steps in 2008 to ensure they did not quality for the CRC.

Those who took a "wait and see" approach until March 2010 (or later) found CRC compliance to be a significantly more stressful process.

Something similar seems to be happening with Mandatory Carbon Reporting.  The majority of companies so far have taken no steps to prepare, beyond setting up a watching brief.

I believe this is a missed opportunity. If history is any guide, the final Mandatory Carbon Reporting rules will only be released at the last minute. Companies that wait too long before taking action may be setting themselves up for unnecessary hardship.

While some uncertainty remains around the specifics, we already know what goes into Mandatory Carbon Reporting: firms must measure all their Scope 1 and 2 emissions for all Kyoto greenhouse gases. For some large and complex businesses, this will be easier said than done.

As I've stated previously, companies that already report their emissions to the Carbon Disclosure Project or other schemes will have a head start, even though the specific reporting outputs may differ.  Once you are collecting your data in a robust and consistent manner, it is a relatively simply matter to produce a range of different reports.

What is more, we consistently find that firms who measure their carbon emissions begin to look at their operations in a different light and identify valuable efficiency and cost saving measures that strengthen their bottom line. Indeed, a sound carbon monitoring and reporting system sets the stage for a well-designed carbon management programme and transforming your company into a climate change leader.

There are scores of detailed policy lessons we can learn from the CRC.  But the main lesson that we and our customers have learned is that uncertainty is no excuse for inaction. Indeed, early action is good for business.

Friday, 21 September 2012

Mandatory Carbon Reporting: What's the Big Deal?

There are just 26 days left before the 17 October  close of Defra's Mandatory Carbon Reporting consultation.

As I mentioned in a previous blog post, the formal requirements are not particularly detailed. Many of the biggest companies are already reporting their greenhouse gas emissions via the Carbon Disclosure Project and what is more, Mandatory Carbon Reporting, unlike the EU ETS and CRC, does not attempt to put a price on carbon or mandate reductions.

So why would Defra go through all the trouble?

In a phrase, climate change. The British Government made history with its 5-year carbon budgets, which established a path to an 80% emissions reduction target by 2050.

The most powerful tool in the Government's current arsenal is the EU Emissions Trading Scheme. Participating installations are responsible for approximately 48% of the country's emissions, but the low carbon price reduces incentives to invest in longer term reduction measures.  Similarly, the Carbon Reduction Commitment Energy Efficiency Scheme (CRC-EE) targets firms responsible for 10% of the country's emissions but energy represents on average 3% of these company's costs.  For these companies, the £12 carbon price in the CRC is rarely enough to justify massive energy reduction investments.

Note that the EU ETS and CRC schemes combined do not cover 58% of the UK footprint due to double counting. Most of the large companies covered by the CRC purchase energy from ETS compliant utilities. The ETS works to drive supply side reductions while the CRC drives demand side reductions.  The problem is that those reductions aren't coming fast enough.

Mandatory Carbon Reporting gives the Government a third arrow for its quiver. According to the latest CDP report, the subset of FTSE 350 companies that voluntarily report their emissions had a combined Scope 1 and 2 footprint of over 487 million tonnes CO2e for their worldwide operations. This is remarkably close to the UK's national carbon footprint total of 470 million tonnes CO2e.  Broadening this to the 1,000 or more firms covered under Mandatory Carbon Reporting would give a combined footprint considerably larger than the entire country. The emissions covered under Mandatory Carbon Reporting, then, are potentially several times larger than any other carbon reporting measure in the Government's arsenal.

Here's where it gets interesting. Defra's Impact Assessment for the draft Mandatory Carbon Reporting consultation estimates that firms will achieve a 4% emissions reduction simply by improving their footprint reporting.  In other words, they assume that forcing the Board and investors to pay attention to the company's footprint will lead to carbon savings, without requiring carbon caps, taxes, or mandated technology measures.  Of course, not all of those global emission reductions can be counted against the UK's carbon budget, but with so many of the largest emitters covered under Mandatory Carbon Reporting, these "easy" reductions will make a material contribution to Government carbon saving efforts.

In addition, the current reporting proposal is only the first step. In 2015 Defra will review the programme with an eye to broadening it to cover every large company in the UK, public and private.
 And should the need arise for a cap and trade system or carbon tax covering these companies at some point in the future, Defra will already have their emissions data at the ready.

Even though Mandatory Carbon Reporting looks like business as usual at first blush, its wide net makes it a very big deal indeed.

Tuesday, 18 September 2012

Carbon Clear's Autumn Breakfast Briefings: Telling the Story

There are only two days to go before the launch of Carbon Clear's autumn Breakfast Briefing series. A good deal of thought went into these sessions, and I like to think they come together to tell a compelling story.  Here's how they fit together.

The first session, on 20 September, will cover the UK Government's new Mandatory Carbon Reporting legislation, which I blogged about a few weeks ago.  I'll be joined at that session by my colleague Vincent Reulet and by Mardi McBrien, MD of the Carbon Disclosure Standards Board.

We'll be talking about why the Government is pushing for mandatory carbon reporting, how this new requirement fits in with other carbon reporting efforts like the EU ETS, the Carbon Disclosure Project and the Carbon Reduction Commitment Energy Efficiency Scheme (CRC), and how companies can both comply with this legislation and use it to gain competitive advantage.  Should be an informative and dynamic event.

A few weeks later, on 2 October, we will be talking about what I sometimes refer to as Carbon Offsetting 2.0.  After the first wave of carbon offsetting in the mid- to late-2000s, there was a lull.  Now, a new crop of companies, from Microsoft to Marks & Spencer, are announcing carbon neutrality programmes.  We'll be discussing how this new round of carbon offsetting differs from the first, and how other companies can benefit.

Then, on 17 October we will be unveiling our Carbon Maturity whitepaper.  Our crack team of consultants has pooled decades of accumulated experience working with over a hundred companies to develop a model of corporate carbon maturity.  We've found that companies at each stage of the maturity curve share certain characteristics and encounter similar obstacles before moving on to the next level.  This applies to both their internal carbon management activities and their carbon offsetting initiatives.  Delegates at this briefing will learn how the carbon maturity model works, and how to benchmark their companies' performance against other businesses.

The breakfast briefing series, then, tells a story.  We start with carbon footprinting and show how it can go from being a burden to a source of competitive advantage.  We then move on to carbon offsetting and show how it has evolved to become a source of real business value for the largest companies.  And then we describe how companies around the world are developing increasingly sophisticated carbon management programmes that deliver benefits for management, employees, investors and the wider community.

I think that's a story that every company should hear. Join us, and help tell the story.

Thursday, 13 September 2012

Who's Afraid of Low Carbon Prices? Part 3: Not Australia

Last week I attended a briefing at the Australian High Commission in London.  The Victorian Government (the Australian state, not the 19th century ruler) hosted a session for carbon market participants to present the latest updates to the country's ambitious greenhouse gas cap-and-trade scheme.

The Australian carbon pricing initiative begins as a straightforward carbon tax, set at A$23 (€19), indexed to inflation and payable by the largest 500 or so industrial polluters.  European carbon allowances, by contrast, were trading below €8 yesterday. That price difference initially attracted howls of protest from industry lobbyists.

From July 2015, however, Australia switches from a carbon tax to a cap-and-trade scheme linked to the EU-ETS.  That means Australian companies will be able to buy European credits (EUAs), and to an extent UN-issued CERs to comply with up to 50% of their carbon reduction obligations.  Similarly, Europeans will be able to buy Australian Allowances to satisfy EU abatement requirements.

The EU-Australia linkup is not a marriage of equals, however.  The EU is directly responsible for 11% of global greenhouse gas emissions, while Australia emits just 1.5% of the global total - about the same as the United Kingdom.  The additional supply of relatively cheap EU allowances is expected to dwarf the additional demand for allowances generated by Australia's emissions-intensive firms.  If the business-as-usual EUA price remained at €8 in 2015 and all else being equal, we should expect the carbon price for the linked systems to equalise much closer to the EUA price - somewhere around €9.30.

This analysis indicates that linking the two carbon trading schemes might cut the Australian carbon price in half.  In reality, the EU expects the carbon price to rise by 2015, but still much lower than the Australian carbon tax level.  Isn't that bad news for Australia? Surely we need high carbon prices to drive emission reductions?

That might be true if the Australians had magically built a dome over their country and were the only people affected by the carbon emissions.  The reality is that Australia's greenhouse gas emissions contribute to climate change across the planet.  Similarly, the CO2 from a Polish or American power station adds to the global atmospheric buildup contributing to droughts and flooding in Australia.

Global atmospheric circulation means that an emission reduction anywhere helps the climate everywhere and vice versa.  If we need to save 1 million or 1 billion tonnes of CO2, it doesn't matter too much where that savings happens.  What is important for climate change is that this savings happens sooner rather than later.

As I discussed in an earlier blog post, the emissions trading scheme is a price discovery mechanism that helps us identify the most cost effective emissions reduction opportunities across the entire scheme.  So a relatively low carbon price for a combined Australia-EU trading systems means there are significant opportunities to reduce green house gas emissions with minimal economic impact.  It means the Australian Government can make its contribution to curbing global climate change even cheaper and faster than before. The market can work, and that's a good news story.

It also means that there are still major carbon reduction opportunities that we (including Australia) are not pursuing.  And that's bad news.  One analysis says that global greenhouse gas emissions need to peak by 2015 and then decline year on year if we are to limit average global temperature increases to a damaging but not wholly catastrophic 2 degrees.  A low carbon price means we continue to fight this battle with one arm tied behind our collective back.  It means governments are still failing to set sufficiently ambitious targets to set us on a path towards a low-carbon future.

Monday, 13 August 2012

What Defra's Greenhouse Gas Reporting Consultation Won't Tell You

In late July I tweeted the news that the UK Department for Food, Environment and Rural Affairs (DEFRA) has released the final consultation on its proposed mandatory carbon reporting legislation.

If you went to Defra's website and download the consultation documents following that announcement, you might have felt somewhat confused and more than a little disappointed.  It all feels rather vague.

The draft consultation document from late last year, and Defra's ensuing feedback document released this spring each ran to dozens of pages focusing on the technical minutiae of setting organisational footprint boundaries based on operational versus financial control, whether or not to include Scope 3 emissions in the footprint, and the pros and cons of reporting all six Kyoto categories of greenhouse gases.  In the end, Defra expressed strong views on how these and other points should be addressed, and went to some length to justify those decisions.

The final consultation document totals just six pages and lacks specificity on most of these important points.  Required reporting standard? Not specified. Financial versus operational control? Not clearly specified. Penalties for non-compliance? Silence. What is more, the final consultation document appears to change the inclusion criteria that determine which companies are covered under the proposed legislation, narrowing them in one regard and substantially broadening them in others. You can find Defra's greenhouse gas reporting consultation page here - as I said, it's a relatively quick read.

When Nick Clegg announced the introduction of mandatory carbon reporting at the Rio+20 summit, it was touted as proof that the UK was leading the world in its response to climate change.  So why the sudden absence of detail?  I have three theories.

The first is political. The initial consultation documents clearly were written by technical specialists, who were focused on getting things right.  The final legislation needs to be read into the House of Commons and debated by politicians.  The more detail is included, the more likely the legislation will get delayed due to time pressure or tripped up by a Member of Parliament who objects to one or more provisions.  Seen from this perspective, short and sweet is the way to go.  Perhaps Defra will choose to issue clarifications containing the detail once the legislation is passed.

The second potential reason for this approach is to maximise the number of companies who report.  I call this the "boiled frog" approach.  By refusing to define rigidly what companies must report and how they must report it, Defra might be making it easier to comply.  Given the choice between companies submitting poor quality or incomparable data versus no data at all, my preference would be to get poor quality data. After all, we know the footprint isn't zero, and this flawed initial number gives us something with which to start.  Defra can then issue additional guidance as time goes on to improve the quality of data that companies submit and ensure that it becomes easier to make  comparisons between companies or industry sectors.  The responding companies, meanwhile, can gradually begin to implement better data collection and quality assurance systems - perhaps with less internal resistance than if they tried to jump from no carbon reporting to industry best practice all at once.

And the third potential reason Defra may have chosen to keep it simple, is that many of the largest companies already report their carbon footprints in a reasonably consistent way via the Carbon Disclosure Project.  CDP respondents report their greenhouse gas emissions using ISO 14064 or the GHG Protocol and answer the same standard questions about their carbon footprints.  Carbon Clear is a CDP accredited Consultancy Partner, and while respondents' footprints are not directly comparable, they do tend to take a similar approach.  I expect UK listed firms that already report their emissions to comprise the bulk of the total footprint covered under the Government's mandatory carbon reporting scheme.  As a result, Defra may have decided they did not need to reinvent the wheel.

The real reason is likely to include some of each of these, and perhaps some others that never see the light of day.  Whatever the reason, the result in the short term is confusion for firms that don't yet know whether they will be included, nor what they need to report.  Based on our previous conversations with Defra and the CDP, our team at Carbon Clear is able to tease some extra detail out of the current legislative draft, and will aim to give our clients a head start in preparing for the advent of mandatory carbon reporting in the UK.