How to prepare your business for a climate reporting future

Increasing prescriptive legislation and stakeholder pressure prompt businesses to act on climate reporting, regardless of current regulations. For enterprises new to carbon reporting, determining the starting point and required preparations can be challenging.

This guide highlights the significance of carbon reporting for businesses and offers insights on how to begin, maximizing benefits and minimizing risks. We’ll discuss roles and responsibilities, essential technology, and key strategic considerations.

The Growing Importance of Carbon Reporting for Businesses

While some businesses face mandatory carbon emissions reporting, many voluntarily report their progress towards carbon reduction goals Nearly 70% of business leaders in a 2022 Verdantix survey prioritized voluntary sustainability reporting. This trend is driven by the strategic benefits of emissions measurement, monitoring, and reporting, which include:

• Attracting and retaining talent
• Increasing efficiency and ROI
• Building trust with stakeholders
• Enhancing brand reputation
• Supporting premium pricing for products
• Reducing risk

Research indicates that businesses with clear ESG claims outperform competitors lacking such claims. Consequently, sustainability and carbon reporting are becoming indicators of strong performance, even for non-mandated businesses.

Preparing for Carbon Reporting: The Time is Now

With the growth of voluntary carbon reporting comes an increase in mandated reporting. Jurisdictions worldwide now require businesses to adhere to specific standards for regular, accurate sustainability reporting. New Zealand, for example, led the way with mandatory climate-related financial disclosures in legislation, and the EU, Australia, UK, India, and others have followed suit or are in the process of doing so.

While current New Zealand legislation affects a limited sector, businesses should proactively adopt carbon reporting practices to stay ahead of expected expansion. In addition, businesses can be indirect effected as organization are required to report on emission generated through their upstream and downstream value chain. Where a bank in New Zealand, for example, now needs to report on the emissions generated through financial activities, they will be asking borrowers to supply emissions data. Increasingly, org which are unable to measure and report emission will find it hard to source new capital, compete for large contracts, or get insurance.

This urgency is reflected in the fact that 62% of surveyed businesses are preparing or are already prepared for increase reporting requirements, and half plan to invest in carbon reporting tools within 12 months.

Carbon reporting is rapidly evolving, and establishing mechanisms takes time. Preparing now allows businesses to reduce risks and future-proof their compliance. Here are the key aspects to consider.

Carbon Reporting Roles and Responsibilities

Effective carbon reporting requires the collaboration and communication of various stakeholders, including the sustainability team, finance team, and executive leadership. Each group plays a vital role:

• Sustainability team: Collects and analyses greenhouse gas emissions data
• Finance team: Tracks financial data related to sustainability initiatives
• Executive team: Sets goals and targets, ensuring alignment with overall strategy

Deloitte research reveals that 42% of businesses have GHG efforts led by the Chief Sustainability Officer (CSO), followed by the Chief Financial Officer (37%), executive leadership team (31%), and Chief Strategy Officer (29%). In the absence of a dedicated CSO, the CFO often assumes the role of sustainability executive, overseeing data collection and reporting.

Creating a cross-functional sustainability working group or “Green Team” with representatives from the executive, sustainability, finance, operations, and supply chain teams can enhance communication, goal-setting, and reporting expectations.

Carbon Reporting Technology Requirements

Carbon reporting necessitates advanced technology solutions for managing and analyzing vast amounts of data. Essential components of a carbon reporting strategy include data management systems, reporting tools, and analytics software.

Selecting the best carbon reporting tool for your business depends on:

• Carbon data volume
• Carbon data complexity
• Business complexity
• Reporting standards

For instance, small businesses with limited emissions sources/suppliers and straightforward hierarchy might opt for the free Climate Action Toolbox. In contrast, larger businesses with numerous emissions sources, suppliers, and sites require more robust, audit-ready software like ESP’s CSR software for accuracy, scalability, and ease-of-use.

It’s vital to consider future needs as well. As mandates expand and businesses grow, investing in software that accommodates both current and future requirements ensures a streamlined procurement process.

Building and Implementing a Carbon Reporting and Reduction Strategy

Developing a thorough, robust, and forward-looking carbon reduction strategy is essential for effective carbon reporting. Your strategy should include:

• A carbon baseline, or carbon footprint, as a starting point
• Measurement and monitoring tools for regular reporting and progress tracking
• A stakeholder engagement process to secure Scope 3 emissions within your reporting
• A reporting framework, such as the GHG Protocol, with key decisions made regarding inclusion and scope
• Long-term and short-term emission reduction goals
• Prioritized reduction projects based on areas of least cost and highest improvement
• A communication strategy to involve staff, customers, investors, and industry in your sustainability journey

Starting early is crucial to a successful carbon reporting strategy, especially if your business is not yet mandated to report to a specific standard. Each of the steps mentioned above requires time to develop and may not be as well-tuned as initially desired.

Processes, plans, emission reduction goals, and strategies can be streamlined and improved over time, but they must begin somewhere. We often recommend Carbon QuickStart, our “first step” carbon footprinting service, to businesses just starting their sustainability journey. It provides a fast, collaboratively built foundation for future success.

Carbon Reporting: Preparing for a Sustainable Future

Carbon reporting is here to stay, and even businesses not yet mandated to report are feeling the pressure. Starting early not only offers a first-mover advantage but also allows your business to develop its sustainability capabilities without legislative threats looming overhead.

To properly prepare, consider the following:

• Roles and Responsibilities: Who is responsible for carbon reporting and leading sustainability efforts? CFOs are a common choice, but buy-in and collaboration across the business are also essential. Consider developing a cross-departmental Green Team dedicated to sustainability success.
• Technology: How will carbon data be gathered, managed, analysed, and reported? Carbon accounting software helps teams efficiently and accurately produce carbon reports, but the specific technology choice depends on the complexity of a business’s reporting requirements and emissions profile.
• Strategy: What is your sustainability strategy? Carbon reporting isn’t just an annual document; it must be part of the broader business strategy, including emission reduction goals, measurement methods, planned projects and activities, and a carbon baseline to work from.

Finding the right answers to these questions takes time. Businesses not under a mandate have a unique opportunity to develop, implement, and refine their carbon reporting processes before facing increased pressure. Start now to mitigate future risks and discover the methods that work best for you and your team.

Ready to begin? Schedule a meeting with one of our specialists today to explore your carbon accounting options or take the next step in your sustainability strategy with Carbon QuickStart.