Corporate Greenhouse Gas

Emissions Reporting
How the FT500 report on their GHG Emissions

Executive Summary
The full report is available at www.ethicalcorp.com/greenhousegas

Ethical Corporation

2008
 CORPORATE GREENHOUSE GAS EMISSIONS REPORTING

Contents

Foreword ..............................................................................................................................................................5
Executive Summary .............................................................................................................................................6
Introduction and Methodology ...........................................................................................................................8
Chapter 1: Measuring and Verifying Absolute Emissions ..................................................................................12
1a – Introduction to GHG Emissions-Reporting Protocols..................................................................................12
1b – Summary of Commonly-Used Emissions-Reporting Guidelines and Protocols...........................................13
1c – Companies’ Views of GHG Emissions Reporting and Verification ..............................................................20
1d – Use of Protocols and Guidelines as Quoted in CDP5 Responses..............................................................25
1e – Overview of Select Industrial Organisations’ GHG Emissions-Reporting Methodologies...........................30
• The Banking and Finance Sector ..............................................................................................................31
• The Retail Sector.......................................................................................................................................31
1f – Verifying GHG Emissions .............................................................................................................................33
Chapter 2: Using Emissions-Intensity Metrics .................................................................................................39
2a – Introduction to Emissions Intensity...........................................................................................................39
2b – Use of Emissions-Intensity Metrics as Quoted in CDP5 Responses..........................................................40
2c – Carbon-Intensity Reporting Among Survey of Respondents......................................................................45
Chapter 3: Stakeholders’ Views on Corporate GHG Emissions Reporting.........................................................46
3a – The NGO View of Corporate GHG Emissions Reporting ............................................................................46
3b – Investors’ Views on Corporate GHG Emissions Reporting ........................................................................48
Chapter 4: Use of Absolute Emissions and Emissions-Intensity Targets Among the FT500 .............................53
4a – Introduction to Absolute Emissions and Emissions-Intensity Targets .......................................................53
4b – How the FT500 Use Absolute Emissions and Emissions-Intensity Targets................................................55
4c – Survey Respondents’ Views on Emissions-Reduction and Emissions-Intensity Targets ............................58
Chapter 5: National Government Policies and Guidelines.................................................................................59
Australia .............................................................................................................................................................59
Canada...............................................................................................................................................................60
China ..................................................................................................................................................................61
India...................................................................................................................................................................62
Japan..................................................................................................................................................................62
South Africa .......................................................................................................................................................63
USA ....................................................................................................................................................................63
European Union .................................................................................................................................................64
France.................................................................................................................................................................65
Germany.............................................................................................................................................................66
Norway ...............................................................................................................................................................67
Sweden ..............................................................................................................................................................67
UK......................................................................................................................................................................68
Conclusion ........................................................................................................................................................70
Appendices ........................................................................................................................................................72
References ........................................................................................................................................................88
CORPORATE GREENHOUSE GAS EMISSIONS REPORTING

Tables and Figures Contents

Introduction and Methodology

Table 1: CDP response status of FT500 companies ............................................................................................8
Figure 1: CDP response status of FT500 companies ..........................................................................................8
Table 2: FT500 companies reporting their GHG emissions to CDP5 by region ..................................................8
Table 3: ECI sectors ............................................................................................................................................9
Table 4: Summary reporting practice of total sample ........................................................................................9
Figure 2: Summary reporting practice of total sample........................................................................................9
Figure 3: Summary reporting practice in the USA and Canada..........................................................................10
Figure 4: Summary reporting practice in Europe ..............................................................................................10
Figure 5: Summary reporting practice in Australia and New Zealand ................................................................10
Figure 6: Summary reporting practice in Emerging markets ..............................................................................10
Figure 7: Summary reporting practice in Rest of the world ..............................................................................10
Figure 8: Number of companies per sector relative to number reporting absolute emissions ........................11
Chapter 1
Table 5: Summary – key characteristics of main GHG emissions-reporting protocols ......................................19
Table 6: Protocols and guidelines used by surveyed companies ....................................................................20
Table 7: Approximate GHG emissions measurement and verification costs ......................................................21
Table 8: Overall frequency of protocols and guidelines as quoted in CDP5 responses, by region ..................25
Figure 9: Frequency of guidelines by region (excluding the GHG Protocol)......................................................26
Figure 10: Frequency of the GHG Protocol, by region ......................................................................................26
Table 9: Frequency of standard protocols and guidelines used – Aerospace and Defence ..............................27
Table 10: Frequency of standard protocols and guidelines used – Automobiles and Parts..............................27
Table 11: Frequency of standard protocols and guidelines used – Banking and Finance ................................27
Table 12: Frequency of standard protocols and guidelines used – Chemicals ..................................................27
Table 13: Frequency of standard protocols and guidelines used – Food and Beverages..................................27
Table 14: Frequency of standard protocols and guidelines used – Health and Pharmaceuticals......................27
Table 15: Frequency of standard protocols and guidelines used – Industrials ................................................28
Table 16: Frequency of standard protocols and guidelines used – Insurance ..................................................28
Table 17: Frequency of standard protocols and guidelines used – Leisure and Media ....................................28
Table 18: Frequency of standard protocols and guidelines used – Mining and Metals ..................................28
Table 19: Frequency of standard protocols and guidelines used – Oil and Gas ..............................................28
Table 20: Frequency of standard protocols and guidelines used – Personal and Household Goods ..............28
Table 21: Frequency of standard protocols and guidelines used – Real Estate................................................28
Table 22: Frequency of standard protocols and guidelines used – Retail ........................................................29
Table 23: Frequency of standard protocols and guidelines used – Support Services ......................................29
Table 24: Frequency of standard protocols and guidelines used – Technology................................................29
Table 25: Frequency of standard protocols and guidelines used – Telecommunications ................................29
Table 26: Frequency of standard protocols and guidelines used – Tobacco ....................................................29
Table 27: Frequency of standard protocols and guidelines used – Transport and Logistics ............................29
Table 28: Frequency of standard protocols and guidelines used – Utilities ....................................................29
Table 29: Summary of verification practice, by region ......................................................................................33
Figure 11: Overall summary of verification practice ..........................................................................................33
Figure 12: Verification practice in USA and Canada ..........................................................................................34
Figure 13: Verification practice in Europe ..........................................................................................................34
Figure 14: Verification practice in Australia and New Zealand ..........................................................................34
Figure 15: Verification practice in Emerging markets ........................................................................................34
Figure 16: Verification practice in the Rest of the world ..................................................................................34
Figure 17: Verification practice – Frequency of external verifiers used, by region ............................................35
 CORPORATE GREENHOUSE GAS EMISSIONS REPORTING

Figure 18: Number of companies employing the GHG protocol that use an external verifier ..........................35
Table 30: Relative importance of factors in determining the cost of emissions audits, according to auditors ........37
Table 31: Approximate range of time in weeks required to verify a client’s annual GHG emissions
figures, according to auditors ............................................................................................................................37
Chapter 2
Table 32: Companies reporting emissions intensity relative to those reporting absolute emissions, by region....40
Figure 19: Total number of companies reporting emissions intensity relative to those reporting
absolute emissions ............................................................................................................................................41
Table 33: Percentage of companies reporting emissions intensity, by sector ..................................................42
Table 34: Frequency of emissions-intensity indicators used, by sector ............................................................43
Figure 20: Overall frequency of emissions-intensity indicators ........................................................................44
Chapter 3
Table 35: Ranking investment criteria for non-carbon-intensive companies ....................................................49
Table 36: Ranking investment criteria for carbon-intensive companies............................................................49
Chapter 4
Figure 21: Total frequency of absolute emissions and emissions-intensity targets ..........................................55
Figure 22: Summary of target use ....................................................................................................................55
Figure 23: Summary of target use, by region ....................................................................................................55
Figure 24: Timeframes for absolute-emissions-reduction targets......................................................................56
Figure 25: Timeframes for emissions-intensity-reduction targets ......................................................................57
Appendices
Emissions-reporting guidelines and protocols quoted and abbreviation used in this report ..........................74
Verification agencies mentioned in FT500 companies’ responses to the CDP5 questionnaire ........................75
Emissions intensity indicators used, by sector, including additional detail noted in CDP5 responses............76
Absolute emissions and emissions-intensity targets set across industry ........................................................80
CORPORATE GREENHOUSE GAS EMISSIONS REPORTING
Executive Summary
lthough there are a number of governmental and
A non-governmental bodies striving to advance the
current state of corporate greenhouse gas (GHG)
emissions reporting, there is still a great deal of
inconsistency and therefore a lack of comparability
between corporations' reports on their GHG
emissions and emissions-reduction targets.
There are a number of highly-developed protocols
and guidelines for reporting emissions available to
corporations (we note a total of 34 in the responses of
FT500 companies to the 5th Carbon Disclosure
Project request (CDP5), of which the most widely
used is the WBCSD/WRI GHG Protocol. But it seems
that some such voluntary standards can put a ‘certi-
fication stamp’ on companies’ emissions-reporting
processes, even though some companies may not
follow the guidelines/protocols to the same extent as
others.
Most of the guidelines quoted by companies in
their CDP responses are voluntary, and although
seven of the nine protocols assessed in detail in this
report include verification standards, external verifi-
cation is required only for three of them (one being
the EU ETS Monitoring, Reporting and Verification
guidelines).
Costs of adhering to the various standards
Estimated costs of collecting data and calculating
GHG Protocol Scope 1 GHG emissions varied between
€75,000, for a chemical company, and €800,000, for
an anonymous food and beverages company.
How much of their reported emissions figures
companies veri and the cost of their doing so both
vary significantly. The lowest and highest verification
costs – €50,000 and €500,000, respectively – both
fall within the pharmaceuticals sector. However, it is
dicult to determine how much overlap exists
between payments to external agencies for collecting
data and payments for their services in veriing data.
Of the companies that responded to our survey
questions concerning GHG emissions-reporting costs,
61.5% found them "high but acceptable", while 15%
found them "too high".
Standards used and frequency of verification
As anticipated, the GHG Protocol is by far the guide-
line most commonly-used by companies in
measuring their emissions, followed by the US-EPA as
the second-most common, and by the guidelines
recommended by the UK government department
Dea as the third-most common.
Just over half of the companies using standards
veri them, and less than half of the companies
using the GHG Protocol have their emissions data
externally verified. However, companies headquar-
tered in Europe are more likely to veri their
emissions than companies headquartered in the US.
The region in which a company is headquartered
is the strongest influence on selection of the guide-
lines used to measure GHG emissions, with many
companies using national, government-advocated
standards. There is no correlation between the use of
general, cross-industry reporting guidelines (e.g. the
GHG Protocol and the IPCC guidelines) and industry
sectors, but some industries – notably banking and
finance, and oil and gas – have developed one or
more of their own GHG emissions-reporting
standards, and these are widely adopted.
Reporting emissions intensity
The majority of the companies in our sample report
both emissions intensity and absolute emissions.
Higher-emitting companies are more likely to report
GHG emissions-intensity data, but it is dicult to
ascertain whether this is because higher-emitters are
under a greater obligation to report to the CDP, or
because there is no consistent place for lighter-
emitting companies to report such information in
their CDP response.
It is interesting to note that, of the four aerospace
and defence companies in the sample, only two report
their GHG emissions. Three even specifically note that
they do not report their emissions intensity (although
it should also be noted that United Technologies
Corporation uses an energy-eciency indicator). In
this case, all four companies are based in the US, but
since aviation is considered a significant contributor to
climate change and will soon be integrated into the
EU ETS, it could be expected that there would be
greater pressure on aerospace and defence companies
to report their emissions intensity.
There is a great deal of variation in the nature of
emissions-intensity indicators used by companies.
While in some sectors (e.g. utilities) there is a strong
tendency for companies to use the same emissions-
intensity indicators, there are industry sectors (e.g.
telecommunications) in which there is definitely
scope for harmonising the indicators used.
Stakeholder views on GHG emissions reporting
We were disappointed by the diculty of finding
NGOs willing to share their views on corporate GHG
emissions reporting. Only two of the 16 NGOs
approached proved willing to give feedback. WWF

noted that the current state of corporate GHG
emissions reporting is inadequate, and suggested the
need for increased standardisation among industry
sectors.
The investor representatives who answered our
survey ranked the ISO 14064 standard below the GHG
Protocol as an effective reporting protocol, although
all investors surveyed suggested that the current
standards available to companies are inadequate.
Suggestions given as to what would improve corpo-
rate emissions-reporting standards included
increased consistency in reporting and a greater link
between carbon-performance reporting and finan-
cials.
Reporting targets
Excluding the companies setting a target of carbon
neutrality, twice as many companies report having set
an absolute emissions reduction target as report
setting an emissions intensity reduction target. Only
27 (10%) out of the pool of 266 companies reporting on
their GHG emissions report targets for both emissions
intensity and absolute emissions reductions.
There is considerable inconsistency in the way in
which companies report their targets. In general,
timeames for absolute emissions reductions are set
for 5-20 years. Only five companies set reduction
timeames over 20 years. The most notable of these
is National Grid, which reported a target to reduce
GHG emissions by 60% below 2000 levels by 2050
(and this target was subsequently revised to an 80%
reduction by 2050).
Country analysis
Australia, Canada, and the UK are the only countries
in which it is or will soon be mandatory for compa-
nies with emissions levels over a certain threshold
(or meeting other specific criteria) to report on their
emissions. However, many of the countries surveyed
either offer their own guidelines for voluntary
CORPORATE GREENHOUSE GAS EMISSIONS REPORTING
emissions reporting or employ an external agency to
carry out this responsibility. Despite not having a
national emissions cap, Japan has had guidelines in
place for reporting GHG emissions since 2000.
Although these are not enforced, the level of
reporting among Japanese companies suggests that
they are reasonably effective.
China, India, and South Aica do not currently
have central schemes encouraging companies to
report on their emissions, but the State Environ-
mental Protection Administration of China (SEPA) last
year launched a "green securities" scheme asking
listed companies, regardless of industry sector, to
expand their environmental reporting.
The conclusions of this report include that:
• National governments appear to have an influence
on how companies report on their GHG emissions,
even when reporting is not mandatory. There is
thus greater scope for collaboration between
national governments and government agencies to
standardise reporting internationally;
• There is a need for increased scrutiny and
standardisation of the extent to which companies
comply with specific protocols and guidelines.
Currently a company may adopt only certain
elements of a given reporting protocol and need
not speci exactly which these elements are;
• There is a lack of benchmarks for assessing
individual corporations’ targets and their perform-
ance in meeting them. Industry associations and
investors could play an active role in harmonising
the ways in which companies within given sectors
report on their emissions intensity and set their
emissions-reduction targets. Emissions-intensity
benchmarks for specific industrial sectors will
inevitably require constant revision to take account
of technology advances, but as this report shows,
the statistical basis for such benchmarks is not yet
established.
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