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.