Summary

What is the emissions gap?

The global effort to combat climate change and reduce greenhouse gas (GHG) emissions has brought carbon footprinting to the forefront of discussions in both policy and business spheres. Carbon footprinting, which quantifies the amount of GHG emissions associated with a product, business, organisation, or activity, plays a crucial role in understanding and managing climate impact. 

The term “carbon footprint” only entered mainstream vocabulary in the early 2000s, after oil giant BP popularised it through an ad campaign. At the time, it offered a catch-all term for individuals to assess how their daily activities were impacting the environment and contributing to climate change. Nowadays though, it is commonly recognised that the impact of individual consumption is minimal in comparison to corporate emissions.

However, despite growing awareness, a significant gap remains between current carbon footprinting practices and the urgent need to limit global warming. The “emissions gap” refers to the difference between current projections for emissions in 2030, and where emissions levels need to be in order to limit global temperature rise to 1.5°C. 

As of 2021, the IPCC estimated that total global emissions needed to be kept under 400 billion tonnes of CO2 in order to achieve this goal (IPCC AR6 WG1, 2021). To put that figure into perspective, a high-emitting country like the UK will run out of its share of emissions in just two years, while a country that produces average emissions will take eight years to reach its limit.

Recalibrating our climate goal to allow a 1.6°C rise would give us a further 150 billion tonnes of leeway—but at current emission levels, this would only last us an additional four years. 

The only way to keep track of our progress and develop a clear picture of current climate scenarios is through standardised carbon footprinting and reporting. This article explores the opportunities and obstacles involved in addressing the emissions gap through improved footprinting, with a focus on recent developments in policy and technology.

Navigating carbon footprinting regulations: mandatory and voluntary reporting

Despite being a relatively new practice, carbon footprinting has already evolved significantly to keep pace with changing regulations. This constant development looks set to continue, given that there is still a long way to go until a comprehensive global disclosure framework is established. 

In recent years, carbon disclosure policies have evolved rapidly to encourage much-needed transparency and accountability. Some regulations are mandatory, requiring certain organisations to disclose their carbon footprints. Others are voluntary, providing incentives for organisations to self-report on their emissions. These regulations aim to create a standardised framework for carbon footprinting, enabling stakeholders to make informed decisions and drive the transition to a low-carbon economy.

Below are some of the most important reporting frameworks and regulations currently in use worldwide. It is important to note that the specific regulations applicable to your business may vary based on several factors, including your location, sector, and company size.

Mandatory Greenhouse Gas Reporting: Approximately 40 countries, including the United States, United Kingdom, and Japan, have established mandatory reporting programs that require certain organisations to disclose their GHG emissions. Examples include the U.S. Environmental Protection Agency’s Mandatory Reporting of Greenhouse Gases Rule and the UK Government’s Streamlined Energy and Carbon Reporting (SECR) framework.

EU Emissions Trading System (EU ETS): The EU ETS is a mandatory carbon emissions trading scheme covering various industries within the European Union. It sets a cap on emissions and requires companies to surrender emission allowances equal to their emissions. Participants must report their emissions and undergo independent verification.

Carbon Offsetting Standards: Carbon offsetting programs, such as the Verified Carbon Standard (VCS) and Gold Standard, have established compliance requirements for projects that generate carbon offsets. These standards ensure that offset projects meet specific criteria and contribute to real emissions reductions.

Task Force on Climate-related Financial Disclosures (TCFD): The TCFD is a framework developed by the international Financial Stability Board that provides best-practice recommendations for organisations to disclose climate-related financial risks and opportunities.

While the TFCD is not legally enforced by any international body, some governments—notably the UK—have included it in their mandatory reporting requirements, and many others are looking to incorporate its recommendations into their ESG policies. 

Sustainability Reporting Standards: Global frameworks, such as the Global Reporting Initiative (GRI) and the Sustainability Accounting Standards Board (SASB), provide guidelines for organisations to report on their ESG performance.

CDP (formerly Carbon Disclosure Project): CDP is a global disclosure system that enables companies, cities, and regions to measure and manage their environmental impacts. It requests information on carbon emissions, climate risks, and reduction strategies, and provides a platform for organisations to disclose their carbon footprint voluntarily.

Energy Efficiency Directives: Many countries have implemented energy efficiency directives that require certain organisations to measure and report their energy consumption and associated emissions. For example, the EU Energy Efficiency Directive sets obligations for large companies to conduct energy audits and report on energy-saving measures.

National Climate Action Plans: In line with international agreements, many countries have developed national climate action plans that outline targets and strategies for reducing greenhouse gas emissions. These plans often include reporting and monitoring requirements to track progress towards these targets.

Besides ensuring compliance with these existing regulations, companies must also stay informed of upcoming developments relevant to their sectors. Some key regulations that will be implemented over the next few years include the EU Commission’s Carbon Border Adjustment Mechanism (CBAM), which aims to reduce “carbon leakage” from GHG emissions embedded in imported goods, and the US-based Climate Disclosure Rule, soon to be announced by the Securities and Exchange Commission. 

Proactive efforts to stay up to date and comply with new regulations like these can help businesses save costs, avoid penalties and demonstrate a meaningful commitment to achieving global sustainability goals. 

Leveraging AI and blockchain technology to scale carbon footprinting 

Carbon footprinting requires robust data collection and calculation systems, which can be complex and resource-intensive. However, new technologies such as machine learning algorithms have the capacity to accelerate and troubleshoot the process. 

In particular, the current artificial intelligence (AI) boom holds huge potential for streamlining footprinting workflows. While the use of AI in the carbon space is still in its early stages, one promising opportunity lies in identifying emissions hotspots through real-time data measurements. Currently, AI is employed in short-term forecasting for energy prices, but there is potential for these systems to be adapted for use in forecasting emissions for footprinting. However, challenges persist, including data gaps and a lack of efficient systems. Although the financial costs of introducing AI are not relatively low, larger companies may struggle more to overhaul existing systems and hierarchies. 

Blockchain technologies offer another avenue for organisations to improve their carbon disclosure practices. Carbon offset project developers have already integrated blockchain to ensure secure and transparent data management, and solidify buyers’ trust.

Assessing the carbon footprint of a business can be a daunting task, requiring numerous decisions to be made regarding the assessment’s scope, for instance. Nevertheless, it is imperative that a start is made, no matter how modest. Some action is better than no action when it comes to climate change. And action is needed now. 

Conclusion

In order to bridge the emissions gap, businesses and regulators must work towards standardising carbon footprint methodologies and data collection practices. This will enable accurate and consistent reporting, facilitating meaningful comparisons and the identification of emission reduction hotspots. Ultimately, transparent and easily understandable carbon footprint information empowers consumers to make sustainable choices and motivates organisations to prioritise emissions reductions.

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