To achieve carbon neutrality: Businesses all over the world are searching for ways to reduce their environmental impact as the global temperature rises. Businesses can take many actions to fight climate change, including offset carbon footprint, reducing plastic pollution, and conserving biodiversity. However they all require four essential elements.
Transparency is the first and most important aspect to climate action for business. Transparency is key to proving that companies are committed to reducing their environmental impact. It means using Scope 1, 2, and 3 definitions to calculate carbon emissions and detailing each step taken to reduce them. Recognizing their impact on water, soil and biodiversity is another requirement.
Sustainability reports are a great tool to communicate openly about these impacts. Many countries have increased the requirements for climate reporting, particularly for large companies. In the US, for example, the Securities and Exchange Commission published recently proposed climate disclosure rules that would apply to listed companies. These regulations would require that Scope 1 and Scope 2 emissions be disclosed in annual investor reports.
This is a sign that investors and governments know that there can’t be climate action without transparency. Companies who remain opaque about their effects will soon face problems raising capital as well as possible fines.
Businesses must make their actions to reduce their environmental footprint traceable. If investors, regulators, and consumers can’t track the corporate actions from funding decisions to final impact, they are more likely to be accused greenwashing. This is selling companies as “sustainable” but not being accountable.
ClimateTrade’s marketplace, for instance, allows for the traceability and accessibility of all carbon offsetting transactions through blockchain technology. This makes fraud almost impossible.
This means that investors and companies alike can “follow the money”, linking corporate accounts to specific projects to offset their carbon footprint. Each transaction triggers the emission a carbon offset certificate with project information and a unique Blockchain key. This traceability makes it easier for companies to report on climate actions.
It is important to remember that the lack of standardization on carbon markets means it is difficult for companies set quality benchmarks. Except for the EU Emissions Trading System mandatory markets, there is no regulation currently around the pricing and generation of carbon credits through sustainable projects all over the globe.
Verra and CDM are well-known standards that verify carbon mitigation projects. After an audit by outside auditors, international organizations emit certificates that verify the projects are meeting their stated impacts.
The UN Sustainable Development Goals are another way to ensure that climate action has a uniform impact. Each SDG comes with a lengthy list of actions. It is possible to evaluate a climate change mitigation program against these action items, which can be a great method of measuring their overall impact.
Climate change is a worldwide problem that impacts individuals, companies, and communities of every size. Companies would be negligent to attempt to solve it all on their own. Instead, companies should work with their peers to solve the problem as best they can. Many already collaborate with sector-specific organizations to address issues related to public policy or market trends. So decarbonization is an easy addition to this list.
It is important that companies work with governments in order to influence the course and structure of climate regulation. This will ensure that innovation and competition are not hampered. For example, the SEC is currently seeking feedback from companies on the proposed rules for climate disclosure.
Last but not least, companies need to work with investors and customers to determine their needs and develop creative solutions. Investors insist on transparency and taking action on Environmental, Social and Governance(ESG) issues in order to receive future funding. Additionally, conscious consumers are demanding more information on social and environmental issues. Companies can differentiate themselves from their competitors by listening to them and taking climate action immediately.