Corporate emission reduction claims are under scrutiny: uncovering flawed logic.

As a climate specialist, it is essential to examine corporate emission reduction claims with a critical eye. While companies may tout their efforts to cut greenhouse gas emissions, the reality is often quite different. In fact, many of these claims are not genuinely significant reductions, as they are not reducing emissions below a business-as-usual baseline in the short term. Furthermore, many companies might be taking credit for emission reductions that will not have any real climate impact for years. The issue of?additionality?- whether or not a climate action delivers genuine emission reductions beyond what would have happened regardless - is a pervasive concern in the decarbonisation space and not limited to carbon offsets alone.?

OceanBlocks aims to be vigilant in our examination of companies' environmental claims and hold them accountable for tangible, meaningful progress. Our aim is to provide the support and guide rails that help progress and perfect carbon strategies to mitigate the risks of greenwashing and litigation. In a world where social media and digital connectedness allow for almost instantaneous interaction between consumers and businesses, reputational risk is more pronounced than ever. Therefore, it pays to bolster areas where there is a risk of reputational damage, strengthen corporate branding, and build a base of trust where proof mechanisms speak louder than expressed words.

OceanBlocks has been building trust in the market with gradual, steady steps; as our motto explains, we operate via the mantra of proof: Do not trust, verify. It was never OceanBlock's intention to be the first carbon trading platform. Rather, we set out to become the trusted global platform that delivers a verifiable, end-to-end carbon solution that improves environmental and social outcomes while supporting an economically viable transition to a low-carbon future.

At OceanBlocks, we understand that achieving climate change goals requires a strong foundation of science-based facts. We fully endorse the Science Based Targets Initiative (SBTi), which enables organisations to set ambitious emissions reduction targets based on rigorous scientific standards. Following the SBTi guidelines can drive meaningful climate action in the private sector and bridge the voids in the public sector.?

Understanding Scope One Emissions

"Scope 1"?emissions refer to direct emissions that result from sources owned or controlled by a reporting company. These emissions can be easily identified through a simple shorthand term, "burn", which encompasses everything your business burns, such as fuel to heat or power buildings, vehicles, and other equipment. In addition, Scope 1 includes accidental or fugitive emissions like chemical and refrigerant leaks and spills, which also contribute to the total emissions produced by a company (Rade 2023).?

Understanding Scope Two Emissions

Consider the "indirect" emissions an organisation has to account for, which come from the energy an organisation purchases. These emissions are tied to purchased electricity, steam, heating, or cooling generated off-site by utilities or other suppliers (Deloitte 2022). It is essential to distinguish this from on-site heat and cooling generated by boilers or AC units. The type of energy your supplier uses also affects?Scope 2?emissions, with fossil fuels resulting in higher emissions than biomass or renewable sources, as expressed by Alyssa Rade from Sustain Life.

By opting for renewable sources, like solar panels or electrifying heat demand, companies can drastically reduce their Scope 2 emissions. To calculate your?Scope 2?emissions, refer to your energy bill.

The Complexities of Scope Three Emissions

Considering the lack of "additionality" in emission reduction efforts is crucial, which extends to actions in the?scope 3?category, which covers the upstream/downstream value chain. For instance, a company that replaces virgin raw materials with recycled materials may not necessarily reduce their overall emissions if they increase the amount of recycled materials purchased. The logic explained is that other buyers will use more virgin materials in their products, and all materials have already been produced, resulting in no actual reduction in emissions (Heller & Seiger 2021).

Similarly, reducing business travel or promoting plant-based options in on-site cafeterias will not necessarily reduce emissions if air travel or meat production does not decrease overall. The primary effect of a single company changing its purchasing choices is the reallocation of emissions amongst market participants. However, if multiple purchasers act together to reduce emissions, suppliers may respond and thus begin to reduce emissions in response to market demand. Nevertheless, this requires significant market alignment amongst many participants, which is still not evident. As academics, we must acknowledge these complex realities and strive to build a more sustainable future by working together.

Core Concerns

There are fundamental issues that must be addressed with current carbon accounting practices. The standard, set by GHG Protocol, uses the attributional model to allocate global emissions to companies rather than the more complex consequential model, which simplifies calculations but assumes that total global emissions remain unchanged, failing to account for long-term changes. Thus, companies using the Science Based Targets initiative are raising doubts about whether their reported reductions are indeed reducing emissions. This method must be revised to differentiate between immediate and additional emission reductions, such as scope 1 and 2 efficiencies and electrification, and potential long-term reductions, like scope 3.?

While SBTi is recognising issues with?scope 2?reporting, there has been no acknowledgement of?scope 3?reporting problems. The solution is to make targeted changes to accounting rules so that companies can only take credit for reductions reasonably shown to decrease global emissions within the reporting year. Other contributions towards long-term reductions can still be recognised, maintaining credibility in the accounting process (Climate Partner GmbH 2023). Although changing the established GHG Protocol standard may be challenging, a more nuanced approach to reporting a company's actions is necessary. Without it, emission reduction claims will remain questionable.

Conclusion

If you are not a climate professional, you may not know that accurately calculating and reporting greenhouse gas emissions is crucial to addressing climate change. While the GHG Protocol requires companies to report Scope 1 and 2 emissions, they have flexibility in accounting for Scope 3 emissions, which can be challenging, especially when it comes to emissions in the value chain that may be out of your control.?Fortunately, an experienced partner like OceanBlocks, can help. We can conduct an initial baseline assessment to identify where emissions occur in your value chain and where to focus reduction efforts. Additionally, we can assist in developing a comprehensive greenhouse gas emissions inventory, covering Scope 1, Scope 2, and Scope 3 emissions.?

By working with us or a partner affiliate, you can also receive guidance on reducing your carbon footprint and minimising your impact on the climate. Together, we can transition to a Net Zero Economy and significantly impact the fight against climate change.

Co-Authored by Ryan Babbage & Lachlan Mee?

References

Climate Partner GmbH 2023,?scope-1-2-3 Complete Guide, ClimatePartner, viewed 15 May 2023, <https://www.climatepartner.com/en/scope-1-2-3-complete-guide >.

Deloitte 2022,?Explained: What Are Scopes 1, 2 and 3, Deloitte United Kingdom, viewed 15 May 2023, <https://www2.deloitte.com/uk/en/focus/climate-change/zero-in-on-scope-1-2-and-3-emissions.html >.

Heller, T & Seiger, A (2021).?Settling Climate Accounts Navigating the Road to Net Zero, Springer International Publishing : Imprint: Palgrave Macmillan, Cham.

Read, S 2022,?What Is the Difference between Scope 1, 2 and 3 emissions, and What Are Companies Doing to Cut All three??World Economic Forum, viewed 15 May 2023, <https://www.weforum.org/agenda/2022/09/scope-emissions-climate-greenhouse-business/ >.

Science Based Targets 2023,?About Us, Science Based Targets, https://sciencebasedtargets.org, viewed 15 May 2023, <https://sciencebasedtargets.org/about-us >.

Venkat, K (2023).?The Shaky Logic of Corporate Emission Reduction Claims, ECGI.global, The Ecgi Blog, viewed 15 May 2023, <https://www.ecgi.global/blog/shaky-logic-corporate-emission-reduction-claims >.