Achieving consistency in carbon reporting for companies

Investors are using information on companies' carbon dioxide emissions to manage their portfolios. So says the Carbon Disclosure Project (CDP), backed by hundreds of institutional investors. The CDP survey asks the world's biggest companies to report their greenhouse gas emissions.

This year, almost two-thirds of the 385 institutional investors behind the project said they used the survey to identify companies not adequately addressing climate change. The survey also found British companies perceive climate change as a major driver of new business opportunities. In addition, there is increasing investment in measuring and reducing the impact of emissions in company supply chains, as well as those related to product use and disposal.

However respondees to the survey also highlighted the lack of clarity on future disclosure obligations, and the urgent need for an agreed standard. During the Climate Change Bill’s passage through Parliament, an amendment was agreed that companies required to produce a business review should be required to disclose their greenhouse gas emissions. However at its committee stage it was removed because there wasn't an agreed methodology for measuring emissions.

So the UK Government is on the hook to develop guidance on how companies should report on greenhouse gas emissions and to help create a common standard. The challenge is – which standard?

There is a multiplicity of potential candidates:

• The Carbon Disclosure Project - often criticised because respondees can choose the level of information they wish to disclose.

• The Global Reporting Initiative - most widely used sustainability reporting framework.

• The Global Framework for Climate Risk Disclosure reporting standard for investors’ expectations but private sector take up is very limited to date.

• The GHG Protocol Corporate Accounting and Reporting Standard - widely used international accounting tool for companies however, tricky to achieve consistency and comparability.

• And last but not least, the Climate Disclosure Standards Board (CDSB) aims to develop an international accounting standard on carbon reporting, with an initial draft by September 2009.

So many standards, so little time. Watching whether HMG chooses one or something else entirely will be interesting!