I predict the year 2024 will be a banner year for accelerating corporate climate action. Why am I so bullish? Because regulations requiring companies to disclose their greenhouse gas emissions are becoming the law around the world, including in the United States and Europe.
These new laws will soon cover over half the world’s economy, putting pressure on corporations to calculate how much they’re emitting and to share publicly what they’ve learned. Ensuring that businesses accurately measure and disclose this information is the first step towards slashing the carbon pollution that is rapidly warming our planet.
Many corporations have been voluntarily disclosing their emissions using the Greenhouse Gas Protocol Corporate Standard, which in 2001 created a global, standardised framework for how to accurately measure and report them.
By 2022, nearly 19,000 companies have publicly shared their emissions information through the nonprofit CDP, which helps companies calculate and disclose the environmental impacts of their operations. But even with these gains, fewer than half of publicly listed corporations are reporting.
Mandatory disclosure laws are quickly closing that gap.
For instance, last year California passed a law requiring corporations to publicly disclose their emissions which could end up applying to 75 per cent of public companies in the Fortune 1000. And this spring the U.S. Securities and Exchange Commission is expected to finalise a rule requiring all publicly traded companies to do the same, as well as divulge climate-related risks.
Meanwhile, an EU law recently entered into force requiring companies to disclose emissions information according to the newly adopted European Sustainability Reporting Standards.
Critically, the new laws in the United States and Europe require companies to report emissions across their entire value chains, including their products and services. Known as Scope 3 emissions, they can account for as much as three quarters of companies’ footprint.
Additionally, more than a dozen countries and jurisdictions have adopted new standards that will require companies to disclose their emissions. This step alone will impact between 100,000 and 130,000 companies globally.
Corporations need to adjust to this profound shift by making major investments in greenhouse gas accounting right now.
Mandating companies to disclose their emissions represents a major step forward, but it is just the first one toward the ultimate goal of driving down greenhouse gases. Corporations must also be working harder – and faster – to reduce these emissions.
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Climate change is a whole-of-economy problem and requires the private sector to be part of the solution. With all these new disclosure rules coming online, corporations’ climate efforts will be under more scrutiny than ever before.
To that end, over 4,000 of these companies have voluntarily set, or committed to set, ambitious emission reduction targets in collaboration with the Science Based Targets initiative. But while those numbers are impressive, encouraging voluntary reductions is insufficient to the task at hand.
Governments have a crucial role to play in speeding the process along.
New approaches for doing so are emerging. Last year, for instance, the EU took steps toward enacting a Carbon Border Adjustment Mechanism that will soon begin levying fees on companies importing cement, steel, fertiliser, and other emissions-intensive materials from trading partners.
And the European Commission has already issued a draft proposal requiring member states to reduce greenhouse-gas-producing food waste in processing and manufacturing by 10 per cent, and at retail and consumption levels by 30 per cent. If passed, it will make the EU the first region in the world to adopt legally binding targets to lessen the impact of food waste.
Climate change is a whole-of-economy problem and requires the private sector to be part of the solution. With all these new disclosure rules coming online, corporations’ climate efforts will be under more scrutiny than ever before.
Now is the time for all businesses to not only map out a compliance plan but also sharpen their focus on driving down emissions.
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