Why is ESG reporting important for companies?
ESG (Environmental, Social, and Governance) reporting is crucial. It fosters corporate transparency and accountability. ESG reporting helps companies see their resource efficiency. It shows areas for improvement and cost-cutting opportunities. It enables stakeholders to make informed decisions by identifying sustainability risks and enhancing brand loyalty and reputation.
ESG ratings hold increasing importance for investors, instilling confidence in sustainable investments. Decision-makers must integrate ESG factors into their strategies. This will let them assess risks and the impact of environmental, social, and governance issues. Companies use ESG ratings to evaluate operational risks, investment opportunities, and performance relative to peers. Often, we distinguish between ratings using a double materiality perspective (assessing risks for and impacts on the company). Another approach entails a single materiality perspective (assessing only risks, or only impacts).
Carbon accounting as a component of ESG reporting
The environmental component of ESG reporting includes GHG emissions in addition to issues such as waste and water resources management. ESG reporting encompasses both content-related requirements and metrics used to assess ESG data. The GHG Protocol is a widely recognised standard for climate change metrics, helping calculate corporate footprints, energy consumption, and supply chain emissions. As an international standard for corporate accounting and reporting emissions, the Protocol categorises greenhouse gases into Scope 1, 2, and 3 based on the source. On a corporate level, it gives guidance for the preparation of a GHG emissions inventory. On a product level, it requires an understanding of the lifecycle emissions of certain products. So, the sum of the lifecycle emissions of each of the company’s products (scope 1 and 2) combined with scope 3 categories should approximate the company’s GHG emissions.
Scope 1 emissions represent direct emissions from company activities, such as transportation. Scope 2 emissions stem from energy usage controlled by the company, with accounting methods including market-based and location-based approaches. To achieve zero Scope 2 emissions, companies may purchase renewable energy or guarantees of origin, enabling a more accurate assessment of their carbon footprint.
The main differences between carbon credits and guarantees of origin are:
| Въглеродни кредити | Гаранции за произход |
| Reduce or “offset” an organis ation’s scope 1 or 3 emissions, as a net adjustment | It lowers an organis ation’s scope 2 emissions from purchased electricity |
| Can claim to have reduced or avoided GHG emissions outside their organis ation’s operations | Can claim to use renewable electricity from a low or zero-emissions source |
| Comes from different sorts of projects, including renewable energy generation | Originate only from Renewable Energy projects |
Carbon accounting enables businesses to measure their carbon footprint and climate impact, aiding in both mandatory and voluntary reporting. It provides essential data for offsetting and reducing environmental footprints, empowering companies to fulfill CSR obligations and enhance consumer trust.
Greenwashing
Greenwashing occurs when a company or an organisation spends money marketing itself as sustainable rather than minimising its environmental impact.Claims of carbon neutrality based on purchasing carbon credits or offsetting carbon emissions outside the production’s supply chain can be pointed out as examples of greenwashing. In contrast, claiming zero Scope 2 emissions by buying guarantees of origin is not greenwashing but proof that the company has consumed electricity from renewable sources!
How could a carbon-offsetting partner help?
ESG reporting is integral to modern corporate strategy, driving transparency, accountability, and sustainability. By providing offsetting solutions, we enable our clients to take a holistic approach to reducing their Scope 2 carbon emissions.
Source link – SeeNext ESG Report 2024