Why carbon reporting matters

Global climate change is a phenomenon creating unprecedented business challenges, which are being felt from the production floor to the boardroom. Top-line and bottom-line growth can be threatened by new risks while growing interest in corporate eco-efficiency by both consumers and investors is creating new business opportunities. Broad-based interest in the potential impact of global climate change highlights the need for complete, accurate, and comparable data in order to make effective business decisions. The criticality and complexity of the information dictate that a comprehensive information management strategy will be required to address the increasingly critical nature of global climate change.

In response to these challenges, corporate executives are being mobilised to lead organisation-wide initiatives to evaluate how existing and proposed greenhouse gas (GHG) reduction measures ultimately will affect their business operations and the bottom-line. They have discovered that climate change can offer a golden opportunity for organisations to drive down costs and risks by increasing efficiency in product lifecycles and supply chains and create new opportunities for business growth.

In order to meet these objectives, an organisation must be prepared to efficiently capture, organise and communicate greenhouse gas emissions data, including its carbon footprint and measure the data against a myriad of standards, directives and regulations. Equally important, the organisation must also be able to verify the accuracy of its data and the effectiveness of its management systems.

Organisations currently use a wide variety of methods and tools to collect and process data to calculate their carbon footprint, none of which can produce verifiable greenhouse gas estimates required for cap-and-trade legislation, international protocols or investor-driven Corporate Social Responsibility (CSR) reporting requirements.

In today's regulatory environment, only broad-based, integrated information systems provide the capability to monitor and manage GHG emissions at every organisational level and across the enterprise. With operations spread across multi-jurisdictional or multinational enterprises, carbon management plans must be prepared to efficiently comply under a variety of mandatory and voluntary GHG measures. Using manual or legacy-based systems to support your organisation's carbon management plan is a prescription for disaster.

That's why a growing number of organisations are adopting new, holistic environmental, health, and safety (EH&S) software platforms that enable executives and managers to effectively assess current conditions, and develop forward-looking business strategies that transform business challenges into opportunities for a competitive advantage. In order to compete and prosper in this new business environment, organisations need to adopt a comprehensive GHG management strategy that enables efficient emissions monitoring and management. An integrated EH&S software platform is an essential component of that strategy.

There are issues for corporate executives to consider as organisations look at information technology solutions to support GHG inventory management plans. To effectively manage costs and risks associated with GHG management, organisations must:   

• Identify climate change-related reporting objectives.
• Evaluate their GHG inventory management plan and reporting efforts today.
• Determine whether accounting and reporting systems stand up against future requirements, using current financial accounting and reporting standards as a reference.
• Consider implementation of a comprehensive EH&S system to support future needs.

Many national jurisdictions do not currently regulate carbon. However, social and political pressures are prompting legislators worldwide to consider adopting laws that mandate businesses to limit GHG production. Organisations are being driven to develop complete, accurate and comparable accounts of their performance in order to evaluate internal operations and facilitate performance comparisons against their peers.

Many organisations initiate voluntary emissions control measures based on emissions inventories. Typically, inventories are annual measurements of GHG emissions for an organisation; they may be defined based on geographic boundaries, business units or an entire business entity. There are three common objectives for facility related GHG data and the implications for developing a GHG inventory.

• Reporting for Internal Use Only
• CSR Reporting
• Emission Trading or Registries

For more than a generation, concerns about air emissions have been addressed solely as a regulatory matter, with compliance accountability falling to plant or environmental managers. Non-compliance risk to the enterprise was limited to fines levied by government regulators.

Today, environmental reporting standards are much more rigorous. Market-based mechanisms are frequently used to enforce environmental policy that transforms carbon, a measure of equivalency used to report on all greenhouse gases, into a financial asset or liability. Organisations need to produce GHG inventory information that is both accurate and verifiable to operate in this environment. That is why a comprehensive, integrated information technology platform is essential to an effective carbon management program. Companies that fail to effectively manage GHG emissions now face daunting risks such as damage to corporate brand and potentially steep costs associated with purchasing emission credits.

GHG reporting is now regarded as one of several key EH&S measurements that are used by investors and analysts to evaluate an organisation's ability to manage operational risks. In fact, GHG reporting and verification protocols are adopting financial accounting standards and processes and systems. In today's compliance environment, GHG reporting must be verifiable in order to substantiate corporate performance claims.

An information management system provides a platform to improve the consistency, timeliness, quality, completeness and traceability of GHG information. It also supports:

• Centralised implementation of best practices and standardised accounting and reporting protocols;
• Role-based data entry, semi-automated data capture, and system;
• Consistent data capture and analysis along with QA/QC;
• A consolidated information repository with more immediate access to data enabling focus on analysis rather than data collection and processing;
• Structured accounting provides the ability to easily and accurately report updates to historical data to reflect organisational change or evolving regulatory and reporting requirements;
• Documenting the inventory management plan policies and procedures providing evidentiary information required to support third party verification;
• Tasking, alerts, notifications, and auditing based on the documented;
• Key performance indicators, scorecards, and executive roll-ups providing the ability to regularly monitor the performance of the organisation and make corrections at the earliest sign of deviations.

If you would like to read the full report entitled 'The CIO's Guide to Global Climate Change,' please e-mail marketing@ihs.com.