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green@work : Magazine : Back Issues : Mar/Apr 2004 : Special Section

Special Section

What Gets Measured Gets Managed
Collaborative efforts—and a changing political climate—are turning up the heat, encouraging companies to voluntarily disclose and manage their worldwide
emissions.


Special Section

The Global Greenhouse Gas Register, a new globalinitiative to encourage the disclosure and management by companies of their worldwide climate emissions, was launched in January by the World Economic Forum (WEF). Developed in partnership with leading business and environmental organizations, the register is intended to stimulate voluntary corporate climate action around the world by creating a transparent, internationally consistent framework for the disclosure of emissions inventories and reduction targets.

- Who's Committed?
- Uniformity in Accounting
- Using the Sun to Bring Companies to the Web
- BP Takes Action on Climate Change

Ten companies confirmed their commitment to disclose the amount of greenhouse gases their worldwide operations produce. These companies together account for an estimated 800 million tons of CO2-equivalent per year (approximately five percent of global Annex-1 GHG emissions). Participants will calculate both direct and indirect emissions of greenhouse gases. Direct emissions include those from on-site combustion, manufacturing processes and from company-owned transportation fleets. Emissions associated with electricity and steam consumption are the indirect emissions required to be reported; however, participants are also encouraged to report additional indirect emissions.

“Many firms are being asked by their shareholders, governments and communities to take voluntary steps to manage their impact on the climate, but until now there has been no platform for the public disclosure of such information on a comparable, globally consolidated basis,” explained Rick Samans, managing director of the WEF’s Global Institute for Partnership and Governance. “The Global GHG Register is a collaborative effort by the business and environmental communities to create the kind of generally-accepted framework that can spur a broader response by businesses around the world and provide investors with a clearer understanding of the carbon-related risk in their portfolios.”

Why Register?

Beyond considerations of environmental concern and good corporate citizenship, companies conducting inventories can also identify ways to enhance their productivity and energy efficiency; support the development of flexible, market-oriented policies such as emissions trading or technology research; and prepare themselves to deal with future regulatory requirements.

The California Climate Action Registry (CA Registry), which, assisted by CH2M Hill, developed the technical infrastructure for the on-line reporting application and database of the Global GHG Register, cites the following “reasons why” companies should participate in a reporting and registry initiative:

* Emissions monitoring is a powerful tool in the search for inefficiency.

Understanding that emissions indicate waste and inefficiency has led many companies to insights for redesigning business operations and processes, spurring innovation and improving products and services. Efficiency saves money—especially at a time when energy costs have soared—and improving the efficiency of operations helps build a competitive advantage.

* Given the uncertainty about potential regulation of GHGs, taking steps to protect early actions is a wise risk-management strategy.

A majority of Americans believe that we should be taking steps to reduce emissions that could lead to global warming, and recent efforts in Congress focused on proposals designed to lower emissions to 1990 levels. One likely approach, often seen as the most cost-effective option, is emissions trading, where companies buy “credits” generated through excess reductions. Without a credible and transparent measurement, verification and reporting system, emissions trading cannot work.

* Early movers on addressing climate change are in the best position to help influence future policy, and to understand the most cost-effective means of managing and reducing emissions.

Registry participants will have a unique opportunity to influence future policy addressing GHG issues. In addition, early members will also have the potential to influence the development of industry-specific protocols, as well as on the accounting practices associated with GHG emissions reporting. Participants will also gain important information for managing their emissions in a more cost-effective manner.

“The investment community will increasingly be taking into account what kind of carbon-related risks companies are facing and how this may impact on company performance,” Samans noted. “This does not stop at brand reputation and market perception but includes risk ratings, the cost of capital as well as direct cash flows and earnings. From a company perspective, you could say that what gets measured gets managed. For investors, the standardized and consolidated nature of the information will allow better comparative analysis of company actions.”

What’s Involved?

Specific actions that companies participating in the Global GHG Register are asked to undertake include:

* Prepare a corporate-wide inventory of GHG emissions for the six major GHGs,
in accordance with the GHG Protocol Initiative Corporate Accounting and Reporting Standard developed by a multi-stakeholder collaboration led by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). Unit- or region-specific inventories are permitted provided a commitment is made to develop a corporate-wide inventory by a certain date.

“We welcome the new Global GHG Register since it will make corporate accountability for emissions more transparent,” said Janet Ranganathan, director of the GHG Protocol Initiative. “While companies will use the GHG Protocol as the standard to account for their emissions, the Global GHG Registry will provide a central platform where these individual reports can be publicly accessed.”

* Allow the reported information to be made publicly available on a Web-based platform, updating it annually.

* Have their inventories of GHG emissions independently verified. If an inventory is not independently verified at the time of registration, the company commits to having processes in place to ensure that the information provided is verifiable. In such situations, the company is prepared to allow for the possibility of a random third-party spot check organized by the register.

As part of their inventories, companies may report offsets and GHG mitigation projects that could be of interest to potential investors, creating an added incentive for developing country firms to participate.

Starting in January, participating companies were able to enter data into the Web-based register. Once data is vetted and accepted by the forum, it will be displayed on the register’s Web site. The CA Registry’s existing Web-based reporting tool, CARROT (Climate Action Registry Reporting On-line Tool) serves as the basis for the Global GHG Register.

“The CA Registry’s CARROT was the ideal foundation for our GHG Register—a clear, usable, dynamic platform,” commented Samans. “It’s a solid registry application already used successfully by major businesses to track and report their GHG emissions.”

Companies interested in participating in or learning more about the Global GHG Register can e-mail the register secretariat at: ghg.register@weforum.org.

A Changing Political Climate
On October 30, 2003, in a surprisingly strong vote, 43 senators voted for the McCain-Lieberman Climate Stewardship Act
(S. 139), a bipartisan solution to the dangers of global warming. The nonprofit Environmental Defense calls the bill “historic” and lauds Senators John McCain (R-AZ) and Joseph Lieberman (D-CT) for having “broken the logjam of federal inaction on global warming.” The bill, says Environmental Defense, “is the first real blueprint for a comprehensive national policy for cutting greenhouse gas emissions in the U.S.”

Although a loss, the 43-to-55 vote was much closer than expected—thus sending a message to corporate America that mandatory reductions could be a reality sooner rather than later. In fact, says Environmental Defense, the bill achieved a key goal: it sent a clear message that the days of denial about global warming are over and that support is growing in Congress for sensible, effective solutions to reduce greenhouse gas pollution nationwide.

This possibility might make participation in voluntary programs, such as WEF’s Global GHG Register, even more appealing: companies who start now will be ahead of the game when regulations kick in.

“Mandatory reduction targets combined with market mechanisms will not only ensure real reductions in greenhouse gas emissions, but will harness the power of the U.S. economy to find the cheapest and most innovative ways of achieving those reductions, thus saving the planet’s climate and life,” says the group on its Web site.

The Natural Resources Defense Council, in a statement it issued the day of the vote, agrees.

“The strong, bi-partisan support for the McCain-Lieberman bill shows the growing number of senators who reject a voluntary, do-nothing approach,” commented David Hawkins, director, NRDC Climate Center. “The bill combines sensible standards with a proven, market-based system that fosters maximum technological innovation at minimum cost. It is a serious and balanced approach that has strong support from both business and the environmental community. The opposition to the bill is based on pessimism that is alien to the American spirit. We don’t cover our eyes in the face of a challenge; the American way is that when we see a problem, we fix it.”

Environmental Defense has analyzed specific elements of the bill as follows:

* Sets mandatory greenhouse gas pollution reductions.

In order to achieve meaningful greenhouse gas emissions, all 11 major sectors of the U.S. economy would limit greenhouse gas pollution to year 2000 levels by 2010. While believed to be important, voluntary efforts are important, but not enough to keep us from losing ground, according to Environmental Defense.

* Makes the U.S. economy more energy efficient.

Real greenhouse gas pollution cuts cannot be made without an effective plan for making the U.S. economy more energy efficient. This bill would have encouraged companies to make new investments in energy-efficient technologies and renewable energy.

* Uses free-market incentives to lower costs, grow the economy and promote innovation.
The bill takes an approach first developed by Environmental Defense for the federal acid rain program, which helped achieve larger acid rain reductions than required at far lower costs than ever imagined. By taking this same approach, the McCain-Lieberman bill will reduce greenhouse gas pollution while stimulating innovation in the service of environmental protection.

* Breaks the logjam of U.S. inaction to fight global warming.
For years, the federal government has resisted taking action to tackle global warming. The McCain-Lieberman bill might be the best chance for creating a legitimate U.S. climate policy.

A recent MIT study estimated that McCain-Lieberman would cost approximately $20 per household, and analysts predict that the impact on U.S. GNP would be no more than .01 percent. A second study by the Tellus Institute predicted that McCain-Lieberman would save Americans $48 billion in net savings by 2020 due to reduced energy demand. The legislation had the support of a bipartisan group of 155 mayors across the country, the National Farmers Union, 23 senior climate economists and the ski industry. The leading insurance underwriter in North America and an industry coalition that includes corporations such as Maytag and the American Gas Association has expressed their support for the bill as well.

American consumers have also logged in their opinion regarding a do-nothing philosophy: According to a recent Zogby poll, 75 percent of 1,200 citizens polled supported requiring major industries to reduce their greenhouse gas emissions, with more than 70 percent support in each region of the nation.

The Congressional vote, says Environmental Defense, marked a turning point in the campaign to “undo” global warming; for the first time ever, senators are now on record as “for” or “against” what it describes as “a common-sense, cost-effective approach to this potentially devastating environmental threat.”

Senators McCain and Lieberman have promised to bring the Climate Stewardship Act back to Congress for a new vote. “We’ve lost a battle today, but we’ll win over time because climate change is real,” said McCain in the press announcement he issued in October. “And we will overcome the influence of the special interests over time. You can only win by marshaling public opinion.”

These efforts will help shape the debate over climate policy for years to come, focusing attention in the near-term on global warming.

“Political leaders in both parties are realizing the real threat that global warming poses to our health, to our economy and to our environment,” commented NRDC’s Hawkins, “They also know we have the technology to start fixing the problem today.”


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