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October 31, 2012
Dear Sustainability Watch Reader,  

I am pleased to provide you with your weekly Sustainability Watch newsletter. This week's topic is "Carbon Transparency."
Carbon Transparency and Carbon Reporting 
 
Carbon reporting is currently much more robust in Europe, particularly in the UK, which debuted its CRC Energy Efficiency Scheme (formerly known as the Carbon Reduction Commitment) in November 2011. With mandatory carbon reporting from large organizations in the public and private sectors, it is estimated that the CRC Scheme will reduce carbon emissions by 1.2 million tonnes of carbon per year by 2020. This government backed initiative is in stark contrast  with any carbon labeling initiatives in the US, which are primarily introduced through specific company-based company initiatives.

In the US, government mandates pertaining to carbon reporting are harder to come by. Despite the drafting of several related bills, progress has been slow in both houses. In 2009, The American Clean Energy and Security Act (also known as ACES or the Waxman-Markey Bill) and the Clean Energy Jobs and American Power Act (also known as CEJAP, or the Kerry-Boxer bill) were both introduced, but unfortunately both died in the Senate by 2011.  
 
When Walmart announced in 2009 that it was implementing a sustainability index that would result in a clear, easy to read carbon label on all of its products, the country, carbon reporting advocates and other businesses excitedly awaited what they saw as a model for carbon reporting and transparency. Unfortunately, despite the creation of a Sustainability Consortium with 75 other corporate members, Walmart has not made much progress as of October 2012. It has been difficult to create an easy to consume label that provides the data collected. Focus will continue to be placed on the private sector as businesses and consumers alike aim for better product transparency.
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Executive Summary

 

The era of the environmental free ride seems to be ending for US businesses. While every other industrial country has ratified the Kyoto Protocol and is reducing its greenhouse gas (GHG) emissions accordingly, the US has continued with business-as-usual practices. However, this unregulated era seems to be coming to an end. With cap and trade proposals in both the House and the Senate, and with the EPA planning its own GHG regulation in case Congress doesn't pass legislation, it looks like emission reporting is in this country's future. 


Carbon transparency refers to the trend of businesses disclosing their carbon footprint. From retail (The Gap) to transportation (Amtrak) to mutual funds, many companies voluntarily choose to measure - and then reduce - the amount of carbon dioxide and other greenhouse gases it takes to run their companies. Carbon dioxide (CO2) is the most common greenhouse gas, and it is often used as shorthand for all greenhouse gas emissions. In fact, other greenhouse gases may be described in terms of their strength relative to CO2 (Carbon Dioxide Equivalent, or CO2e). By quantifying their GHG footprint, many companies find ways to cut emissions and also cut costs. More and more companies are looking not only at their own emissions, but at the emissions from their entire supply chain, from raw materials to packaging to shipping to end-of-life. This full lifecycle analysis, while complex, provides valuable insights to where simple reductions may provide big benefits. 


The push for transparency has several foundations, often based on decreasing risk as well as on Corporate Social Responsibility (CSR) and public relations. With climate regulation looming, many companies will have to change their business practices, some in ways that will cost considerably more money. For this reason, stockholders and investors want to know how the company might be impacted by climate legislation. Large GHG emitters are particularly vulnerable to regulation, and this risk must be calculated. Two groups have recently developed guides on how to present sustainability and carbon footprint information in annual reports: The Carbon Disclosure Standards Board, an international climate change group, and PricewaterhouseCoopers, a global consulting firm. Although these guides are currently most relevant to multinational corporations who are already working in a regulated environment, they could provide a design for US-based companies whose reporting may still be voluntary. 


Many company leaders feel that acting prior to legislation will better prepare them when regulation is actually enacted. The most forward-thinking business leaders are those who engage in truly analyzing their practices and cutting their companies' emissions. Other companies, not willing to make such a long-term investment when the regulatory future is still unclear, are hedging their bets by buying carbon offsets. In the absence of regulation, offsets are currently relatively inexpensive. However, since the voluntary offset market is still unregulated, companies should be sure that their offsets are verified.

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