What lessons are we learning from Covid-19 on greenhouse gas reporting?

Coronavirus is set to cause the largest ever annual fall in greenhouse gas (GHG) emissions. However, to meet the 1.5?C global warming limit we would need to replicate this reduction every year for the next decade. What does all this mean for GHG reporting and what lessons are we learning? WSP's Environment and Sustainability team explains...

The GHG impact of the largest economic shut down in history

COVID-19 will likely result in the largest annual fall in GHG emissions ever recorded. Carbon Brief estimates a 5.5% reduction globally compared to 2019 whilst the International Energy Agency (IEA) goes further, suggesting an 8% fall (around 2.6 GtCO2) - six times more than the 2008 financial crisis or twice the combined reductions since 1945.

IEA analysis shows countries in full lockdown are experiencing an average 25% decline in energy demand per week compared with 18% for countries in partial lockdown. China’s lockdown saw GHG emissions down by around 250 MtCO2, equivalent to roughly half of the UK’s annual emissions. Across the EU, reductions could be as high as 400 MtCO2 due to declining energy demands, a drop in manufacturing and much less transport, representing around 9% of the EU’s cumulative 2020 emissions target. In April, the UK broke its record and went 18 days, six hours and 15 minutes without burning coal to generate electricity – mainly due to a 20% reduction in demand and, at the time of writing, the UK is at 25 days and counting. These numbers are staggering.

But what is more staggering is that this is exactly the level of reductions the world would need to maintain each year for the next decade to keep below the 1.5°C goal of the Paris Agreement. This is based on UN Environment Programme’s target of 7.6% annual reduction in global GHG emissions between 2020 and 2030.

Historical precedent points towards a rebound in GHG emissions post crises, as was evident in the wake of 2008 with global emissions reaching all-time high of 9.1 billion tonnes of GHG emissions in 2010. The increase was attributed to the quick growth of the global economy, an increase in energy intensity and the carbon intensity of energy sources.

With such a mammoth task ahead of us, the world cannot afford a rebound in global emissions. In fact, we must move faster than ever and implement changes based on the lessons learnt.

GHG reporting – a key step in defining the ‘new normal'

As the UK’s lockdown looks set to be lifted a little, we’re hearing much about what a ‘new normal’ might look like. Polling companies such as IPSOS Mori show that the majority of survey respondents do not want to return to life as before and wish to see climate action prioritised as part of the economic recovery. This is great news.

One impact of the lockdown has been to provide a glimpse of the future – for instance cleaner air and clearer skies. To guarantee these in a return to growth context, companies, cities, local authorities and countries will need to move quickly to capture tangible and meaningful GHG emission reductions.

With over 11,500 companies required to report GHGs in the UK alone, in addition to city and country level reporting as part of Nationally Determined Contributions (NDCs) reports, many organisations will be asking how they should capture and report their 2020 emissions. The simple answer is that the reduction in emissions are real world reductions and should be measured and reported as such, in line with annual 2020 GHG reporting requirements.

Most entities will see a significant reduction in 2020 figures as a result of office and site closures, reduced business travel and the economic downturn. A clear benefit in accurately quantifying these savings is the provision of a clear picture of where – and via which actions – GHG emissions savings occurred during the longest economic shutdown in history. This understanding will be key to companies planning their next steps in carbon footprint reduction. Whilst there may be some small upturn, for example in domestic energy use from the upsurge in home working, most sectors will see a large net reduction, reflecting the IEA’s global analysis.

WSP has compiled some simple do’s and don’ts for companies to follow when reporting in 2020:

• Don’t treat 2020 as an anomaly and apply historical or estimated data to align it with previous years data
• Do report all your business activity (e.g. office/site energy consumption, business travel, commuting etc)
• Do try to measure (e.g. through staff surveys) the additional energy consumption from your home workers during the lockdown. This should be reported in Scope 3 emissions for now but might in the future be captured in Scopes 1 and 2 if Government guidance is provided on expensing a proportion of employee home working costs (something similar to claiming mileage for business travel)
• Do provide additional narrative and justification to help explain reductions compared to previous years
• Do identify your material reductions and flag them in your annual report as priority areas to apply lessons learnt
• Do continue to report in line with methodologies such as GHG Protocol, ISO 14064-1 and regulations such as the UK SECR.
• Do take more time to analyse your Scope 3 emissions as there will be a significant impact on GHG emissions embodied in your value chain, both up and downstream
• Do revisit your Net Zero strategy and targets in light of 2020 data analysis

How can business learn from COVID-19 and prevent the Climate Emergency?

Following the 2008 global recession, GHG emissions soared by a record 6% in one year, in part because many of the investment programmes that were meant to stimulate the economy went to carbon-intensive industries.

The COVID-19 crisis has the potential to change working practises forever and provide an insight into the level of behavioural change required to reduce emissions within the 1.5°C global warming trajectory.

However, without any structural change, the decline in emissions may have very little impact on the level of GHG emissions in the long run. Measuring and reporting GHG emissions’ footprints will allow organisations to better analyse their data and make more informed decisions as they plan actions towards a net zero emissions future.

Some lessons are already evident and we expect to see many more as more data emerges:

• Business travel: The acceleration of video conferencing technology, and confidence in its use, has reduced the need for business travel – most notably for air travel especially for domestic air travel.
• Commuting: More people can work from home, particularly in professional services companies, reducing commuting emissions, decreasing congestion (both improving air quality) and alleviating pressure on public transport systems. This will likely accelerate a permanent transition towards more flexible working.
• Accelerated digitisation: Business has accelerated the transition to digital working with wide uptake of collaborative platforms like Microsoft Teams and Slack. This has led to a reduced need for printing reports and note books, translating in a reduction in paper and waste associated with workers’ daily consumables and the space to store them. Further to this, collaboration in a single shared document avoids the need for multiple versions, thus reducing data centre storage requirements with beneficial emissions impact.
• Circular Economy is key to resilience: With global supply chains impacted by the lockdown, the fragility of some of our business models became apparent. A move to a more circular economy – one that reduces the need for internationally sourced raw materials and keeps value in the local economy – will be key. Manufacturing businesses have an essential role to play in this transition and 2020 will provide great insights. 

This pandemic has shown that societal changes can be achieved quickly and that businesses have a significant role to play as we restart our economic engines. However, it has also highlighted that:

• Global collaboration and leadership are key as we will not achieve the 1.5?C goal without fast and effective action from countries like China, US and India. Unlike governments, corporations can transcend borders when it comes to sustainability action and therefore can and should lead the global recovery.
• Government investment to restart economies must be directed towards a green economic recovery if we are to have a hope of achieving the global 7.6% year-on-year reduction needed; a stimulus with an impact equivalent to shutting the current global economy for three months of each year. This could take the form of sustainability linked loans; for example, WSP recently signed an amendment to its existing credit facility to include financing terms that reduce or increase the borrowing costs on the lending facility as sustainability targets are met or missed.
• Government action can be fast and effective in an emergency – businesses and individuals alike complied across the world with strict government guidelines to stop the spread of the virus and will do the same as we come out of lockdown. The pandemic shows us that we have the capacity for widespread systematic change – what’s required now is global collaboration on what a common framework might look like.

The transition to net zero is key and COVID-19 has shown us the mountain we still have to climb to successfully undertake this necessary transition. We have the tools we need to measure, analyse and report where this systematic shutdown worked with regards to mitigating GHG emissions, but we must now use 2020 as the blueprint to help us solve the climate crisis and our transition to net zero. 

Published on WSP website; 6th May 2020

https://www.wsp.com/en-GB/insights/impact-on-ghg-reporting-and-the-journey-to-net-zero