By Rob Starr, Big4.com Content Manager
Katherine Blue, National Sustainability Network leader at KPMG LLP, answered some questions about the recently released KPMG Survey of Corporate Responsibility Reporting.
- Why are the business benefits of emissions reductions under explained in the US among the largest companies?
It is hard to generalize why many companies do not emphasize the business benefits of emissions reductions from carbon, from our review of corporate responsibility (CR) reports and annual financial reports in the KPMG Survey of Corporate Responsibility Reporting 2015. Many companies may be reporting more detailed information on carbon reductions to other specialist reporting organizations such as CDP, which is certainly important. Many US companies may be focused on reporting only what is required by regulations in their CR and annual financial reports, given a strong regulatory reporting focus in the US through the EPA Mandatory GHG Reporting Rule for larger emitters. We have come to discover that our clients – especially those in energy intensive industries – generally realize the business benefits of carbon reduction, but based on the CR reports and annual financial reports we reviewed, their appears to be a gap in the actual reporting of these benefits. The reporting could also be improved so that benefits beyond cost are communicated such as increased innovation through R&D. When we looked at the U.S. companies in the G250 that report on carbon, we found that 25% were discussing the costs, 20% increased efficiency and only 9% were discussing increased innovation, when reporting how emissions reductions benefits the business. Particularly in light of COP21, we could see more companies more actively discussing
their carbon reduction plans and the business benefits of such reductions more frequently in their CR reporting or annual financial reports.
- What’s the problem with downstream emissions reporting?
In discussions with our clients, there is a keen understanding of the need to evolve carbon reporting practices, and each year companies naturally evolve this process to ensure more accurate data is generated, more scope is included, and that targets and reductions are reevaluated. Carbon reporting and disclosure to investors will continue to advance as the issue continues to mature and advance on the corporate and board room agenda. Downstream emissions reporting is a more advanced form of reporting and admittedly where many companies struggle with the assumptions and estimations along their supply chain, in addition to obtaining the raw data in the most cost effective manner. Companies are also challenged by their larger supply chains and/or in identifying the full downstream impacts of their products and services.
- How important is the missing regulatory driver in the US?
The missing regulatory driver is certainly one component; but some of the companies in the US are among the largest in the world and operate in multiple jurisdictions both regulated and unregulated in terms of carbon emissions. We have found that some of our clients are just naturally evolving the scope and maturity of their carbon reporting regardless of a regulatory requirement to reduce emissions in the US. And, some companies are adopting internal carbon pricing as one way to emulate a more global carbon market and make more informed internal decisions on the value of emissions reductions across their operational footprint.
- What are the additional key findings? (findings that you find particularly interesting or important in addition to those highlighted in the press release)
We found the target setting findings quite interesting. We found that only 55% of US companies that set carbon reduction targets report sufficient information for their progress to be easily tracked. Of these, 61% are meeting or ahead of their targets. The conclusion we can draw is that only one third of the companies that report targets are publishing enough information to track them and can be seen to be meeting or exceeding targets, so improvement may be necessary there. Given that many target timeframes are either 2015 or 2020, it’s not surprising that many targets have already been met in 2015. For many clients, we have observed that it can be more difficult to make progress against carbon reduction as they get closer to the end-date as it can be more challenging to make further carbon reductions once initial investments have been made. The challenge now will be for companies to set meaningful and longer-term yet achievable targets that align with international climate science, particularly in light of the COP21 outcome.
- What needs to be done going forward?
If climate is a material issue, all stakeholders should be able to access good quality, comparable information on a company’s carbon performance quickly and easily from companies’ annual financial and/or corporate responsibility (CR) (or integrated reports). It allows stakeholders to understand key issues on climate, carbon and energy in the same context as other material issues and improves disclosure and transparency. We understand carbon reporting will be influenced by key factors such as regulation and industry sector and geography; however, we identified basic principles that were hallmarks of best practice carbon reporting which we outline in the survey report – around materiality and data, targets, and performance and communication. Regardless of the recent COP21 outcome, we expect to see an advancement in the quality of carbon reporting with our clients and a move towards the additional disclosure of the business benefits of reductions in their key CR reports and annual financial reports.