Powering Net Zero Commitments

Climate Impact Measurement and Disclosure Growing Quickly Among Businesses

Many of the world’s biggest organisations have begun to share information concerning their carbon footprint in a new move that embraces transparency as organisations are increasingly seeing value in measuring their impact.

New research is yielding valuable insights into the impact these environmental disclosures have on companies, their investors, and the changing climate. 

Christian Blanco, the assistant professor of operations and business analytics at The Ohio State University Max M. Fisher College of Business, in his paper, “Supply Chain Carbon Footprinting and Climate Change Disclosures of Global Firms,” examines how information gathered by the Carbon Disclosure Project (CDP) over the past 20 years has influenced firms’ action in the face of climate change.

Created in 2000, the non-profit CDP, started off as an index of publicly traded companies for investors who shared an “ambition of transforming capital markets by making environmental reporting and risk management a new business norm.” The CDP has grown from 35 investors and 245 companies in 2002 to more than 525 investors, 8,400 companies and $96 trillion in assets today.

Fuelled by investor demand and curiosity, companies affiliated with the CDP voluntarily submit yearly disclosures about their carbon emissions and environmental footprint.

Professor Blanco’s research, which analyses the text from 10,925 CDP reports filed by 2,003 firms during the years 2007-2016, shows an incremental shift in the quality and impact of these disclosures. This has helped the reports become a lot more detailed and comprehensive.

“As climate change and sustainability initiatives have become a larger focus for the public, investors began to take notice,” Blanco said. “This demand for more information has led companies to pay closer attention to the quality and breadth of information they were submitting as part of the CDP.”

“These improved reports, in turn, began forcing companies to confront, understand and view climate change as a real risk to their supply chains—be it physical risks such as weather-related supply chain disruptions or risks as manifested by new or increased climate regulations.”

The analysis also highlighted a realisation amongst CDP-affiliated organisations that their environmental and supply change impacts, created by them—were a lot larger than they initially realised. Whereas disclosures were immediately made following the creation and operation of the CDP back in the 2000s concentrated on emissions directly created at a company’s headquarters, recent disclosures now account for all the emissions created in a company’s supply chain.

“What we’re seeing in these disclosures are companies are more willing to invest the time and resources to measure the environmental impact of assets like their warehouses, delivery trucks, air cargo planes and data facilities,” Blanco said. “It’s a much wider—and accurate—view of their total carbon output. It’s also much more difficult.”

What does this all mean? Blanco states that it is easy to concentrate on what the large organisations aren’t doing to battle climate change. However, his analysis shows positive, albeit incremental change influenced by money.

“It is encouraging to see companies beginning to broaden the scope of their disclosures and actions,” Blanco said. “This wider view of operations throughout their entire supply chains provides companies more visibility as to potential climate change-related risks and/or opportunities.”

As initially reported by: Phys.org

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