The British government's recent announcement that it will mandate carbon reporting from the nation's largest corporations is being greeted with enthusiasm by supporters of sustainable corporate growth. But skeptics say the required carbon reporting will add new economic burdens to affected companies.
"Now [a] firm has the cost of measuring the emissions, the tax it has to pay, and the potential costs if it changes production methods to reduce emissions," said Mac Clouse, a professor of finance at the University of Denver's Daniels College of Business. "Overall, its costs have increased."
He also questions a statement by a top UK official that reducing carbon emissions would help with long-term management of a company's energy costs. "If the production method with the least emissions was the most efficient and lowest cost, firms would choose to use that method," Clouse wrote in an email. "The fact that they aren’t and the fact that legislation and regulation are necessary to force firms to change to less emissions refutes [British deputy prime minister Nick] Clegg’s claims."
Clouse wonders if U.S. firms would be willing accept what he thinks would be seen as "even more government regulation, in a period when the size and activities of the government are big election issues."
But some multinational companies, including those with high level stakes in the British market, already have long-term commitments to sustainabilty.
Global snack food giant Kraft Foods Inc. (NYSE: KFT) is one company that's been very public about its green efforts. "We’ve been a part of the Carbon Disclosure Project (CDP) since 2005." said Michael Mitchell, Kraft's vice president of corporate external communications. "From the beginning of our participation, we have formally reported Scope 1 and Scope 2 emissions. In 2009, we began reporting on a portion of Scope 3."
Mitchell notes British confectionary company Cadbury, acquired by Kraft in 2010, has also reported to the CDP since 2005 -- and that Kraft submitted a combined report to the CDP in 2010 "that included emission data from both legacy Cadbury and Kraft Foods."
Next page: Pressure to falsify results?
Late last year, Kraft also announced the results of a survey mapping the company's total environmental footprint
-- looking at what the food industry likes to call its "farm to fork" impact. The project was done in partnership with Quantis Inc. and reviewed and analyzed by World Wildlife Fund, as well as academics at the University of Minnesota Institute on the Environment.
"This is a first-of-its-kind project for our industry," said Mitchell. "We’ve been working since 2009 to measure, understand and manage our total environmental footprint -- not just carbon footprint for climate change (air), but land and water use, too."
"Earlier this year, we built on this multi-year footprinting project by using lifecycle thinking to help uncover ways to eliminate waste in manufacturing. This can reduce the amount of raw materials, such as agricultural commodities, used at the beginning of the supply chain. Lifecycle Assessment also can help measure how product and packaging innovations improve on previous designs, and provide a common system to measure and explain those benefits."
In the meantime, Clouse believes the growing corporate acceptance of sustainability measurements, accounting and audits will gain momentum. But he doubts the UK mandates will have a smooth path, especially once financial penalties are imposed for anti-green practices and behavior. The challenge, he says, "will be the measurement of compliance and non-compliance. As soon as you impose significant penalties for non-compliance, there is a motive to falsify the measurements of the bad behavior/results."