Existing corporate climate standards must be expanded to include a company’s efforts to reduce wider emissions beyond their value chain, such as carbon credits purchased, according to a new paper from the University of Oxford.
The paper, Is impact out of scope? A call for innovation in climate standards to inspire action across companies’ spheres of influence, comes after a period of fierce public debate about climate standards and how they should treat carbon offsets.
In the paper, the researchers argue for the need for an additional reporting track to capture the impact of key actions that companies can take to accelerate the global transition to net zero, identifying three “spheres of influence” – product power, purchasing power and political power.
This additional track would demonstrate a company’s wider contribution to global net zero, such as lobbying for cleaner energy systems or signalling financial support for new net-zero technologies, such as direct air capture or other forms of carbon removal with geological storage.
Until now, corporate climate standards have been created primarily to guide companies in setting targets, through the Science Based Targets initiative (SBTi), for example, as well as help them to track the emissions resulting from their activities, using the Greenhouse Gas protocol.
The authors of the paper argued that while these standards have been essential for reducing the emissions of individual companies, they fail to incentivise broader climate action.
“It is essential that companies report and reduce emissions across their value chains,” said co-author Claire Wigg, head of climate performance practice at the NGO Exponential Roadmap Initiative.
“But it is also essential that they drive, and are rewarded for driving, systemic change via the products they produce, the purchases they make and the policies they lobby for or against.”
In the paper, the authors said that data presented in a “beyond value chain reporting track” could help investors assess the degree to which a company could be regarded as a provider of climate solutions, “offering a critical set of metrics as to why a company might receive preferential treatment”.
Kaya Axelsson, lead author and research fellow and head of policy and partnerships at Oxford’s Smith School of Enterprise and the Environment, said: “We need a way to compare and reward companies that are changing the world, not just their operations.”
Carbon-offsetting debate
Earlier this year SBTi, the leading climate target certification organisation, caused a stir when it posted about allowing corporates to count carbon offsets towards their climate pledges.
It led to SBTi employees demanding the resignation of chief executive officer, Luiz Amaral, who has since stepped down, citing personal reasons for his exit.
The SBTi has since appeared to have backtracked on this stance, publishing reports on Scope 3 target setting and the use of carbon credits that support the position that credits would not be allowed to be used for target fulfilment.
Properly incentivising climate action and innovation among corporations is vital to deliver net zero, according to Matilda Becker, co-author of the paper calling for a new reporting track: “Of the 2,000 largest companies, close to half still do not yet have a net-zero target, while some are going further without reward. We need to incentivise companies’ efforts beyond their boundaries.”
In another Smith School paper recently published in the Journal of Carbon Management, researchers set out a proposal for a carbon removal budget, saying that carbon dioxide removal was a necessary complement to emissions reductions to achieve a state of global net-zero emissions and stabilise future warming but that it was poorly understood.
The latest digital edition of IPE’s magazine is now available
No comments yet