The COVID-19 outbreak has been estimated to have reduced carbon emissions by a quarter in some areas. But will this last once the pandemic is over? Caroline Bartlett, Head of Carbon Accounting at Emitwise
The impact COVID-19 has had on our lives and on the planet is unprecedented, but one notable by-product has been that global carbon emissions are plummeting. Pictures of fish returning to Venetian canals and satellite imagery of clear skies over industrial cities across China have flooded the internet. But the question remains: will this new low-carbon world remain once we emerge from this crisis?
Many countries, including the UK, are now making carbon reporting mandatory, not only for listed companies but other large businesses too. Whether it’s through additional legislation, punitive carbon tax regimes or simply a recognition that a sustainable, low-carbon business is a profitable one, the ‘carbon correction’, as some analysts have called it, is coming. The first step in the new, lower-carbon world is carbon accounting, the calculation and monitoring of a firm’s carbon emissions, essentially bookkeeping for greenhouse gas production. These numbers are often given in carbon dioxide equivalent (CO2e). The challenge can come with knowing where to source the data and understanding the terminology and calculations. Companies produce emissions in a variety of ways – directly from their own activities; indirectly through their energy consumption; and through other indirect activities such as business travel and creation of plastic packaging.
THE BUSINESS BENEFITS OF CARBON ACCOUNTING
A form of carbon accounting has been mandatory for some time for listed and other large businesses. The Streamlined Energy and Reporting (SECR) legislation which has just come into force is the latest iteration bringing the benefits to a wider number of businesses. But beyond the obvious benefits of meeting legislation, carbon accounting has numerous advantages.
Cost saving: There are direct advantages for organisations in measuring environmental performance and taking steps to improve on it, as they will benefit from lower energy and resource costs. Simply put, understanding where your carbon emissions are generated is the first step to reducing them and saving money in the medium- to long-term. Savings could come from reduced energy bills and lower purchasing costs thanks to a reduced requirement for goods as a result of increased efficiency, or using recycled goods.
Point of difference: Detailed carbon reporting can create market differentiation by setting an organisation apart from its competitors. But it’s not just potential customers who are attracted by this approach. Investors and other stakeholders are increasingly demanding more detailed environmental information in annual reports and accounts. Organisations which demonstrate leadership in this area are more likely to have a pipeline of investment in their businesses.
Access to new markets: A growing number of governments have tied organisations’ carbon performance to their public procurement processes, meaning that only those businesses which are proven to be low-carbon can bid for work.
PR opportunity: Companies that step forward and voluntarily display their emissions in an attempt to reduce them will benefit from a stronger public perception. They will be seen as organisations which genuinely care.
Talent recruitment and retention tool: In an era often depicted as being a war for talent, using carbon accounting as a tool to demonstrate your environmental credentials can help to attract – and retain – the best recruits. High staff churn is expensive.
Business benchmark: Any form of measurement, such as carbon accounting, encourages an outside-in view of an organisation. It’s an opportunity to sit back and ask why things are done in a certain way and think constructively about areas for improvement. It also provides an opportunity to compare an organisation with its competitors.
Futureproofing: Carbon reporting helps businesses to better understand – and therefore mitigate – the risks of climate change to their own organisation and people. Those risks could be physical as a result of climate change, or business-related thanks to volatile energy and commodity prices or the unpredictable supply of raw materials. By bringing carbon emissions higher up the corporate agenda, businesses can shine a light on areas which have had little scrutiny to date and become more operationally resilient. At the same time, carbon accounting, and the associated reductions in emissions, helps businesses to become ever more resource efficient and lean, and enables them to prepare for, and ride out, more challenging market conditions.
Carbon taxes: All businesses in the UK are impacted. Whether your supply chain is paying carbon taxes, or your customers are, the more reliant an organisation is on carbon intensive industries such as energy provided by fossil fuel providers, the greater the cost to the business in the future. Carbon taxes matter, even if you’re not paying them now.
Access to green funding and capital: With a carbon correction may come a shift in the availability of capital. Investors could well start to penalise polluting companies with a higher cost of capital and reward greener ones making it easier for green firms to access funding.
Contributing to carbon reduction: While the business focus of carbon accounting is often on financial metrics, the substantial reduction in carbon emissions has a clear environmental benefit in helping businesses to contribute substantially towards the Government’s net zero carbon target by 2050.
Benefits for small businesses: Although the SECR legislation only currently applies to large organisations, there is substantial evidence that small and medium-sized businesses can gain similar business benefits by following its principles.
The COVID-19 pandemic has shown us that changes can make an immediate difference to climate change. Until now, the discourse around carbon accounting has largely been about doing the right thing for the planet to help to mitigate the climate crisis. While that remains true – action from individuals, businesses and governments is needed urgently – the business benefits of carbon accounting make this a clear business imperative, whatever the size of your organisation.