Aldersgate Group - Carbon Costs: Corporate Carbon Accounting and Reporting

A clear, common, transparent set of rules for the accounting and disclosure of carbon dioxide emissions is necessary in order to make progress against climate change. Without such rules, the government and public cannot be sure whether carbon reduction targets are being achieved and there will not be accurate information from which to reward the compliant and challenge the negligent. Comparable reporting systems must be used by all emitters so that accounting is fair and accurate and that consumers and investors can make meaningful comparisons between companies on the basis of emissions reductions. Existing drivers for corporate carbon disclosures are legislation, compliance with reporting standards, voluntary measures, and investor pressure. A 2006 survey found that only 37% of companies made quantified disclosures of their energy use or contribution to climate change, and many of these disclosures were not comparable. The statutory framework for corporate reporting is not keeping up with demand, whether company law, company accounting standards, audit standards, financial regulation and enforcement, or the EU ETS. The Aldersgate Group says, “We need a common reporting standard, which is driven by Government and delivered by business.” The government should integrate a “clear, consistent, comparable definition of carbon disclosure” into corporate reporting guidance, advocate and promote this standard, adopt this standard itself, use regulatory bodies to audit reporting and penalize companies for non-disclosure, and support international efforts to settle on one standard. Businesses should disclose absolute and relative total annual emissions, financial value of their emissions allowances, and an assessment of the climate change risk in their fields of operation. These disclosures should be easily accessible to shareholders and analysts.