Industry Viewpoints

 

What does business want from a Global Deal?

Perspectives from Paul Dickinson, Chief Executive Officer at the Carbon Disclosure Project

As appeared in the Global Compact International Yearbook

The private sector will be the source of almost all of the funds required for transition to a low-carbon economy, and the creation of radically different new infrastructure and energy systems. The challenge for governments is to realign financial signals so that low carbon solutions are the obvious choice for investment decisions.

There are various means that governments can use to drive investment patterns, ranging from regulation and choice editing through to subsidies and fiscal incentives. Governments can also intervene directly in the market through large-scale public procurement. These actions can be conducted at national level or under international agreements. However none of them can be carried out effectively without consistent, comparable data on the carbon intensity of companies, products and activities.

Governments must prioritise and promote the development of the nuts and bolts that allow this to happen - reporting, accounting and assurance. CDP is working towards greater data comparability between companies and to creating a global reporting standard for carbon, through our work with the Climate Disclosure Standards Board.  We are frequently told by companies and investors that one single standard will be very important in driving effective action on climate change. That message was repeated in a recent piece of CDP research, conducted with AEA, on what global business needs from governments.

This is not simply a question of quantitative emissions reporting, although this is of course vitally important. Financial institutions looking to invest, for example, need to know more than emissions data – they require information about trends, risks, opportunities, strategies, performance and corporate governance. They need to know about the future of an investment prospect, as well as its past and present. They need decision-relevant information using material and comparable data.

We are half way there. Corporate reporting regulations are proliferating all over the world, mostly requiring emissions data but sometimes requesting more qualitative information too (for example the UK’s new Carbon Reduction Commitment). These requirements are not yet joined up or consistent which will create a heavy reporting burden for companies and will also mean that comparability may continue to be an issue for investors. We need to move to the next phase, towards global consistency.

A strong precedent has been set by the development of international financial reporting standards; full international adoption of these has taken many decades, but the world is now well placed to accelerate creation of their climate change reporting equivalent. Important work is being done to enable this to happen, for example by the International Accounting Standards Board, the International Auditing and Assurance Standards Board, and the Climate Disclosure Standards Board.

These efforts are relevant to many aspects of the Global Deal framework now under discussion by governments, for example to MRV (measurable, reportable, verifiable), international capacity-building and sectoral action. They also act as a bridge between the world of government negotiations and the world of the companies and investors who will put the necessary changes into action. It is crucial that these two worlds can find ways to communicate on each others terms in order to better work together to fight climate change.

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