Companies Take Action on Climate Change

By Will Hackman

Re-posting my article for the Global Social Enterprise Initiative, part of the Georgetown McDonough School of Business, that was initially published on March 29, 2018: https://bit.ly/2Qylwdp

McDonald’s just became the first major restaurant company to set science-based targets to reduce their global Greenhouse Gas (GHG) emissions — and by a huge amount between now and 2030. In a press release highlighting their new initiative, McDonald’s stated, “this is the equivalent of taking 32 million passenger cars off the road for an entire year or planting 3.8 billion trees and growing them for 10 years. The target will enable McDonald’s to grow as a business without growing its emissions.”

McDonald’s is far from the first company to take climate change seriously and pledge reductions from their operations and supply chains. Nearly 700 companies, representing over $15.7 trillion in market cap, have committed to reduce their emissions by a total of 2.31 gigatons — equivalent to the total annual emissions of Russia. This commitment is part of a pledge created by the We Mean Business coalition that organizes the private sector toward fulfilling global climate goals.

How? Over the course of three days in mid-March, I was fortunate to be sponsored by GSEI to participate in a World Resources Institute (WRI) online training to receive my certificate in GHG accounting and reporting — aka “the GHG Protocol,” aka the “corporate standard.” It was fascinating to learn what goes into a company’s accounting process when determining total emissions from their facilities (and supply chains, and subsidiaries, and indirect facilities like purchased power or contracted delivery services). The private sector is a huge generator of global GHG emissions and the first step in reducing those emissions to meet global climate goals is to understand how much is being produced.

More than 90% of global 500 companies use the corporate standard. The standard, pioneered by WRI, a U.S.-based environmental NGO, and the World Business Council for Sustainable Development (WBCSD), a Geneva-based coalition of 170 international companies, was launched in 1998 with the mission to develop internationally accepted greenhouse gas (GHG) accounting and reporting standards for business and to promote their broad adoption. A step-by-step guide for companies to use in quantifying and reporting their GHG emissions can be found for free here. But basically the point of the training was to show those working in GHG accounting roles for their companies how to prepare their emissions inventories.

Why? One of the main questions for me going into the training was why would a major company with a presumably large carbon footprint volunteer to account for this if there’s no law requiring them to do so. I learned that there are actually quite a few reasons businesses #SeeValue in developing their GHG inventories. As stakeholders, the public, and governments demand increased action on climate change, companies must ensure long-term success in a competitive business environment. They must be prepared and understand their GHG risks so that they can take full advantage of the many programs that will inevitably be created to facilitate global emissions reductions (including carbon trading markets) as well as comply with increased regulations. By accounting for their emissions, companies are then able to design voluntary programs to reduce emissions over time. These steps can help a company stand out and be perceived as committed to sustainability. This early action also enables a company to be recognized, and potentially even credited, when future regulatory programs are initiated.

The five principles. The training contained a lot of complicated scenarios and calculations. But corporate GHG accounting and reporting all boils down to five main principles. I’ve included them here, verbatim from WRI’s website:

1. RELEVANCE: Ensure the GHG inventory appropriately reflects the GHG emissions of the company and serves the decision-making needs of users — both internal and external to the company.
2. COMPLETENESS: Account for and report on all GHG emission sources and activities within the chosen inventory boundary. Disclose and justify any specific exclusions.
3. CONSISTENCY: Use consistent methodologies to allow for meaningful comparisons of emissions over time. Transparently document any changes to the data, inventory boundary, methods, or any other relevant factors in the time series.
4. TRANSPARENCY: Address all relevant issues in a factual and coherent manner, based on a clear audit trail. Disclose any relevant assumptions and make appropriate references to the accounting and calculation methodologies and data sources used.
5. ACCURACY: Ensure that the quantification of GHG emissions is systematically neither over nor under actual emissions, as far as can be judged, and that uncertainties are reduced as far as practicable. Achieve sufficient accuracy to enable users to make decisions with reasonable assurance as to the integrity of the reported information.

Do it. If you’re like me, chances are you want to do something in your career to address some of the many challenges posed by climate change. Whether that road takes you to the public, private, non-profit, or academic sectors, gaining an understanding of how companies are accounting for and reporting their GHG emissions could be really useful. This training will solidify your understanding of direct and indirect emissions, organizational and operational boundaries to reporting, and provide you with the tools to compile your company’s GHG inventory if that’s the role you find yourself in some day. There are real-world actions being taken throughout society right now to reduce emissions and combat climate change. Corporate GHG accounting is one of them — and it could make a huge difference.