Climate reporting standards are insufficient and must be expanded, study finds

The research comes after a period of fierce public debate about climate standards and offers possible solutions for those seeking to improve both integrity and impact of corporate climate action.

We need a way to compare and reward companies that are changing the world, not just their operations.

Kaya Axelsson, Smith School of Enterprise and the Environment

Incentivising climate action and innovation in the corporate world is essential says co-author Dr Matilda Becker (Smith School of Enterprise and the Environment): ‘Of the 2000 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.’

The authors discuss actions that companies can take to accelerate the global transition to net zero across three spheres of influence: product power, purchasing power, and political power, and propose an additional reporting track to capture their impact in these areas. This track would demonstrate a company’s wider contribution to global net zero, and examples could include lobbying for cleaner energy systems or signalling financial support for new net zero technologies.

To date, corporate climate standards have been created primarily to guide companies in setting targets (e.g. through the Science Based Targets initiative) and to help them track their own emissions resulting from their activities (e.g. using the Greenhouse Gas Protocol). While these standards have been essential for reducing the emissions of individual companies, say the authors, they fail to incentivise broader climate action and can even discourage it.

Summary infographic of the three spheres of influence by which companies can act to accelerate the global transition to net zero. Credit: Liliana Resende.

‘It is essential that companies report and reduce emissions across their value chains,’ says co-author Claire Wigg, Head of Climate Performance Practice at the 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.’

Lead author Kaya Axelsson, Research Fellow and Head of Policy and Partnerships at the Smith School, added: ‘The way standards are currently set up, a high-growth renewable energy company might fare poorly because of the emissions generated in making turbines and solar panels, despite the fact these products can help to reduce emissions globally. We need a way to compare and reward companies that are changing the world, not just their operations.’

The paper ‘Is impact out of scope? A call for innovation in climate standards to inspire action across companies’ spheres of influence’ has been published in Carbon Management.