Following on from the newsletter sent earlier this week, the articles in the two urls below also both tackle the issue of greenwashing, but in different ways. The first article looks at the role of carbon offsets in allowing firms with polluting operations to present a much more favorable carbon image, while the second article looks at how firms are increasingly setting aggressive sustainability targets, but failing to begin the hard work of delivering on their promises.
The key to the first article about carbon offsets is twofold – first, firms may be committing to offsets, but then not being transparent in terms of whether they are actually bought (or achieve the reduction in carbon promised) and, second, using the offsets to cloak the fact that nothing has changed in their underlying business model/operations. And, given that the goal is to get to zero emissions, rather than net zero emissions, such businesses are avoiding the harder task of changing their operations to produce less emissions. This emphasis on carbon reduction techniques (rather than carbon offsets) will become even more essential as the price of offsets rises in line with anticipated increases in demand:
"Companies face rising costs of carbon dioxide emissions. European Union credit costs reached a record high of nearly €40 a metric ton, or about $48, this month. Levies of over $100 are expected in many countries by 2030. Given the very limited information available about companies' carbon footprints and cleanup plans, analyzing how they use CO2 reduction techniques can be a helpful shortcut to identify risky businesses."
While all industries, ultimately, will be affected, there are some that are more likely to struggle:
"Oil and coal producers face existential questions. The challenge is also particularly acute in so-called hard-to-abate industries: airlines, cement, long-haul trucking, plastics, shipping and steel. Many investors would like to distinguish the leaders from the laggards."
For now, however, we are where we are due to the challenge of measurement and financial reporting requirements, which still allow companies to select what information they release and when:
"In an ideal world, detailed, comparable carbon exposure data would be published alongside financial information to help investors assess risks. That should be available eventually. Until then, a company's use of carbon offsets provides a helpful shortcut to divine some insight."
The key to the second article is the disconnect between what companies are proclaiming and what they are actually doing:
"Household names like Costco and Netflix have not provided emissions reduction targets despite saying they want to reduce their impact on climate change. Others, like the agricultural giant Cargill and the clothing company Levi Strauss, have made commitments but have struggled to cut emissions. Technology companies like Google and Microsoft, which run power-hungry data centers, have slashed emissions, but even they are finding that the technology often doesn't yet exist to carry out their 'moonshot' objectives."
Again, transparency and reporting requirements are allowing companies to get away with symbolic behavior:
"… determining how hard companies are really trying can be very difficult when there are no regulatory standards that require uniform disclosures of important information like emissions."
In contrast, those companies that stick to measurable targets tend to be a lot more effective in achieving substantive change:
"For example, Walmart discloses its targets for emissions reductions and the progress it has made to the CDP, including a goal for emissions from its suppliers, and its plan has been vetted by Science Based Targets. But Costco doesn't expect to have commitments to reduce emissions until the end of next year. Costco executives declined to comment."
The conclusion is that, ultimately due to the variance in corporate attitudes to real change, regulation is most likely to move the needle:
"'If we are going to achieve a net-zero carbon economy for real, we will need everyone to act,' said Lucas Joppa, Microsoft's chief environmental officer. 'And that means action can't be voluntary. We need requirements and standards that everyone is expected to meet.'"
An example of the challenges that remain, however, is the extent of creative accounting that characterizes carbon offsetting. The most devious form of this is where firms claim for avoiding carbon emissions that would otherwise have happened. For example, they could support the production of renewable energy and claim that, by doing so, they have avoided the emissions that would have occurred if they had used regular fossil fuels, instead. Clearly, however, no carbon was removed from the atmosphere. In other words, such a trick is not even net zero, it is net positive emissions (overall), even though firms are using such claims to 'reduce' their total carbon account.
Take care
David
David Chandler
© Sage Publications, 2020
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Investors, Research Green Ambitions
By Rochelle Toplensky
February 23, 2021
The Wall Street Journal
Late Edition – Final
B11
The Climate Talk vs. the Walk
By Peter Eavis and Clifford Krauss
February 23, 2021
The New York Times
Late Edition – Final
B1, B5
