Without much fanfare we have just seen asmall change in UK law that will catalyse a global change in business behaviour. New regulations will make the directors of some of the world’s largest companies legally responsible to report on more than just financial performance and business strategy.
As of October 2013, all UK-based companies on the main market of the London Stock Exchange must report their global greenhouse gas emissions annually.
The UK is the first country in the world to introduce mandatory carbon reporting and the global reach of this disclosure sets this apart from myriad national schemes. Although current regulations will only apply to around 1,100 listed companies there are plans to consider extending it in 2016 to as many as 24,000 large companies.
This means boardrooms and shareholders will have to pay a lot more attention to the carbon footprint of their businesses. It will provide a new comparative metric across all companies on the market, allowing investors to assess company performance, efficiency and exposure to risk.
Of course, lots of companies already report emissions on a voluntary basis through their annual reports or with the Carbon Disclosure Project. There are a number of well-established methodologies for doing this, allowing for comparability. The most widely adopted around the world is the Greenhouse Gas Protocol Corporate Standard.
But by making emissions reporting compulsory, the UK government is pushing those businesses lagging at the moment to get ahead of the global curve. Climate change and resource scarcity are threats to the way that we do business and the way we live. A new economic world order is asserting itself, where only the sustainable will survive.
This is a huge opportunity for companies that can see beyond the burden of compliance. Measuring is the critical first step in setting meaningful targets for managing and reducing energy costs and carbon emissions, as well as helping to identify efficiencies, improve reputation and drive innovation.
And in major global economic centres it is becoming increasingly important to accurately measure emissions with the emergence of regional cap and trade schemes. The EU set up the world’s first large emissions trading scheme in 2005. Since then there have been schemes established in Australia, New Zealand, Mexico, South Korea, the state of California and the city of Tokyo. China has just set up its first pilot in Shenzen, one of seven schemes planned in the country over the next two years. And in 2015, the Australian and EU schemes will begin to link, the start of a global carbon market.
Bringing sustainability inside organisations, the environmental impact of products and services will shape the transformation that businesses will undergo if they are to survive through to the middle of the century. As resource and energy demand will continue to increase, the companies that will survive and thrive are those that understand their environmental impact and how to minimise it.
Consumers, particularly in younger demographics and emerging economies, respond favourably to responsible brands. And businesses have started taking far more care in selecting suppliers that share their environmental values and are able to demonstrate it.
It’s an opportunity - reporting emissions shouldn’t be seen as compliance issue, it is an essential part of building a resilient, sustainable and successful business in the twenty-first century.
- Image: Flickr/ArtsieAspie