An overview of the risks and benefits of public carbon disclosure.
Just a few years ago, public disclosures of a business’s emission reduction targets were a rarity. Now, with greater pressure from investors, industry bodies, consumers and, increasingly, legislators and governments, businesses without a sustainability statement are falling into the minority.
Expectations around climate transparency have changed. It’s no longer enough to simply say you’re taking climate action – you must prove it.
Publishing your emission reduction targets carries many benefits. Improved sustainability outcomes, better alignment, improved brand reputation – but there are also risks. Reputational damage from missed targets, unintentional consequences of the increased pressure, and accusations of greenwashing are all common concerns.
Below, we guide you through the benefits, risks and best practise around publishing your organisation’s emission reduction targets, highlighting common miss-steps, and exploring what to consider before you publish and the best ways to capitalise on this opportunity.
Let’s dive in.
What are the benefits of publishing your emission reduction targets?
Increasing the chances of sustainability success
Officially announcing and publishing emission reduction targets helps establish the conditions for success. By telling the world about your emission reduction targets, you are forcefully making yourself – and the business as a whole – more accountable.
In turn, this helps with whole-business alignment, giving sustainability efforts the attention they need to have real impact.
Aligning your business with stakeholder priorities
A recent study by Deloitte found that younger consumers (Millennials and Gen Z) are changing their behaviours to better align themselves with positive climate outcomes. They are increasingly mindful of what goods they buy and who they purchase these from.
Meanwhile, McKinsey and NieslenIQ uncovered consumers were choosing to purchase products with ESG-related claims in larger volumes than their non-ESG counterparts. People aren’t just saying they prefer green businesses in surveys; they’re financially supporting them more too.
Investors are also increasingly choosing to place their capital in the hands of businesses with sustainable practices. One piece of research from the European Business Organization Review shows that almost 36% of all professionally managed assets in 2020 were considered “sustainable”, compared to just 22% in 2012.
By publishing your emission reduction targets, you’re clearly and definitively demonstrating to these stakeholders that you’re committing to real, meaningful climate action that’s in line with both their preferences and their behaviour on who they choose to do business with.
Stand out from the competition and build your brand reputation
Building an emissions reduction plan and publishing your goals isn’t just a box-ticking exercise. It can also be a valuable marketing and branding asset.
With publicly disclosed emission reduction targets, any time you hit a major milestone, you can capitalise on it via social media, press releases, events, even media interviews and speaking opportunities. By publishing your goals and ensuring you also publish your progress, you demonstrate to the market that you’re a sustainability leader.
Even if you fall short of your targets, your business can explain where it went wrong, describe what you’re doing to fix it, and what you hope to achieve going forward. This is incredibly valuable in demonstrating authenticity and transparency in your brand, both of which are extremely attractive to modern stakeholders.
If you fail to create these emission reduction targets or don’t publicise them, you miss these opportunities.
What are the risks of publishing your emission reduction targets?
Potential negative impact on reputation if goals are not met
One of the most common concerns around publicly disclosing emission reduction targets is what may happen if those goals are not met.
As an example, Coca-Cola pledged to reduce its use of single-use plastic. However, the following year, it ended up generating 9% more plastic waste than it had the year before, as reported by ocean conservation group Oceana. The major problem? While Coca-Cola had pledged to reduce plastic consumption, its bottlers hadn’t. Increasing use of plastic and associated waste among its suppliers caused Coca-Cola to miss its stated targets and damaged its reputation as a sustainability leader.
In making public disclosure, a business must carefully consider what might happen if targets are not achieved. Be prepared to be transparent about success – or failure.
Pressure to meet goals which may lead to unintended consequences
Ironically, the increased pressure to meet sustainability goals following public commitment can result in actions that attract criticism and accusations of greenwashing.
One example is a recent complaint submitted by Global Witness around Shell’s sustainability reporting. In the complaint, Global Witness accuses Shell of lumping together gas-related investments with its spending on ‘renewable energy’ in a 2021 report, stating that this is misleading and the actual figure of what is typically considered renewable investment (i.e., wind and solar) by the company was far lower than stated.
While Shell has fired back with statements that the report was in line with all necessary reporting requirements and that this grouped categorisation of “Renewables and Energy Solutions” has precedence in previous reports, the reputational damage had been done.
While it’s difficult to know the truth or intent behind this reporting decision, it’s possible that the added pressure of Shell’s public commitment to net-zero by 2050 was an influencing factor in the desire to tell a positive story.
Possibility of being accused of greenwashing if goals are not ambitious enough and linked to a plan of action
‘Greenwashing’, or the accusation of trying to appear greener than you are, is a constant concern for businesses attempting to reduce their carbon footprint. Failing to meet goals is one thing, but what about if your published emission reduction targets aren’t seen as being ambitious enough?
One interesting example is the reaction to Nestle’s 2018 statement of aiming for 100% recyclable or reusable packaging by 2025. While 100% seems ambitious, Greenpeace responded that the reality was more “ambiguous”:
“Nestlé’s statement on plastic packaging includes more of the same greenwashing baby steps to tackle a crisis it helped to create,” said Greenpeace Oceans Campaigner Graham Forbes.
“It will not actually move the needle toward the reduction of single-use plastics in a meaningful way, and sets an incredibly low standard as the largest food and beverage company in the world. The statement is full of ambiguous or non-existent targets, relies on ‘ambitions’ to do better, and puts the responsibility on consumers rather than the company to clean up its own plastic pollution.”
In addition, best practise is to not only talk about your targets and goals, but also how you are working to achieve those goals. Alongside your goals should sit the thinking that underpins the specific target: what are the focus areas going forward, or better yet, what projects have been identified and the anticipated outcomes.
It’s integral to set emission reduction targets that are both ambitious, defined in unambiguous language, and have a clear pathway to success. Clear strategies towards clear targets are key.
3 considerations before publicly releasing your emission reduction targets
While publishing emission reduction targets comes with risks, we believe that the potential benefits massively outweigh them – if a business takes steps to mitigate those risks with careful planning and forethought.
Here are a few things to consider on whether you should publicly release your carbon goals and how you can prepare your business to do so.
1. How mature is your company’s sustainability programme?
Many businesses, even large ones, are only just beginning with comprehensive carbon reporting In New Zealand. The trickle-down effects of the mandatory climate-related financial disclosures is pushing even non-mandated businesses to start investing in the processes and tools required to effectively set and report on progress towards carbon goals.
However, businesses shouldn’t immediately set targets. It’s important to first capture your emissions baseline by collecting available data and getting a sense for overall accuracy. Without this initial carbon footprint, any reduction goal is simply a guess. Goals set prematurely are often unachievable or not meaningful.
Thankfully, as ESG (Environmental, Social, Governance) has become more important in the modern day, there are now many options for creating a first or more accurate carbon footprint. Carbon QuickStart is ESP’s solution, offering a simple, straight-forward first step in your journey towards sustainability – including setting achievable, meaningful and (appropriately) ambitious emission reduction targets.
2. Can your company track progress towards its goals?
Once you set a carbon reduction goal, you must have a method to regularly track and report on progress. “Regularly” here meaning more than just once a year. Frequent check-ins ensure you can proactively respond to headwinds and adjust. It’s never pleasant to find out your organisation has missed its target on the last day of the year.
It’s tempting to rely on what’s already available, such as an existing data warehouse or spreadsheets. However, larger businesses with complex emissions profiles often find that these tools simply aren’t up to the task of managing business emissions. The files and calculations become increasingly complex as new data is added, which in turn adds to the overhead of managing this system. Valuable sustainability professionals must spend more time on data administration, which eats into their capacity to deliver on emissions reduction projects, which puts goals at risk.
Instead, many businesses invest in specialised emissions management software. Few businesses rely purely on Excel for their financial reporting, so why would they do so for carbon accounting? The most advanced software (including ESP’s enterprise carbon accounting solution) can ingest, aggregate, analyse, and report carbon data, often automatically, requiring little resource and offering insights into new opportunities as well as confidence in the accuracy of the carbon reports.
3. What are the industry expectations around emission reduction target disclosure?
If you plan to join industry groups like the Climate Leaders Coalition (CLC), the choice to disclose emission reduction targets is simple. It must be done to meet your obligations as a member of this group.
However, if you don’t have a requirement or a mandate guiding your actions, it can still be worthwhile publicising your emission reduction targets. If your competitors or other members of your industry are disclosing their goals, then the expectations around it may have already been set for consumers, investors, and other stakeholders. Failing to keep up could mean you miss the benefits of carbon reporting.
On the other hand, if your industry is not yet driven to setting emission reduction targets, then you may have a chance to snatch a first-movers advantage. The reality is that carbon reporting (and thus carbon goals) is affecting every aspect of business, both in New Zealand and around the world. A lack of action among your peers spells a strong opportunity for you to get ahead of the curve.
More businesses are choosing to publicly disclose their emission reduction targets to demonstrate their commitment to sustainability in a meaningful way. Like all decisions, this comes with both benefits and risks to the business and the brand.
Benefits of emission target disclosure
- Increased chances of meeting stated sustainability goals.
- Meet the growing demands of consumers, investors, boards, and legislators.
- Stand out from the competition and grow your brand reputation.
Risks of emission target disclosure
- Reputational impacts if goals are missed.
- The pressure to meet goals can have unintended consequences.
- Risk of greenwashing accusations if goals aren’t sufficiently ambitious and aren’t supported by a plan of action.
Businesses intending to publish their emission reduction targets must first thoroughly understand their baseline emissions, set reasonable but still ambitious targets, and invest in tools and expertise to track and report on progress towards these goals.