Does EPA Reporting Rule Dull Companies' Competitive Edge?

Does EPA Reporting Rule Dull Companies' Competitive Edge?

Image CC licensed by Flickr user Flowizm

As the political landscape shifts and the likelihood of seeing some form of cap-and-trade system emerge from the Clean Energy and Security Act in the near future diminishes, another debate has emerged from the U.S. Environmental Protection Agency's (EPA) greenhouse gas reporting rule.

In 2009, the EPA announced it would require some carbon intensive companies to report their Scope 1, or direct emissions. This would create a mandatory reporting system and give far greater visibility to government, investors and other stakeholders, in terms of a company's exposure to carbon emissions, energy security risks and opportunities.

In July, the EPA published proposed amendments, based on the confidentiality provisions of the Clean Air Act, to clarify which information submitted under the rule will be publicly available. The EPA is receiving comments around the proposed confidentiality clause rules until September. This has sparked some interesting debate.

Some companies and trade groups have expressed concern about the commercial sensitivities of some of their data, fearing that putting this type of data into the public domain would reveal a roadmap of their operations.

Companies, however, have reported emissions data through the Carbon Disclosure Project (CDP) for eight years, on an annual basis. Fifty-two percent of U.S.-based S&P 500 companies reported their emissions data through the CDP in 2009. Many companies, such as Exxon, Chevron and UPS break down emissions on a regional or country-by-country basis and report this data publicly.

On top of this data, companies also report energy usage. Some companies have begun to report investments into low carbon solutions and emissions reductions. They see the benefits of public disclosure, in terms of transparency and in raising confidence in the data.

The EPA ruling will require reporting at the installation level. This isn't new. We have seen companies reporting emissions at the installation level through the European Emissions Trading Scheme since 2005, and in Australia since the NGERS Act of 2007; their competitive edge has not been removed.

Indeed, the process of measuring emissions for mandatory or voluntary reporting can be extremely beneficial in terms of identifying inefficiencies, which can cause waste. Once those inefficiencies have been identified, they can then be removed to drive carbon and cost efficiencies.

EMC has been reporting through CDP for several years. "You can't figure out where you're going if you don't know where you are," says Kathrin Winkler, EMC's senior director of corporate sustainability.

As regulatory systems increase, EMC recognizes how valuable the reporting experience has been in preparing for new regulation.

"It's a learning process," Winkler said, "and you won't get it right the first time. Better to get started when not under the gun."

Disclosure and transparency around climate change issues has now become the business norm for the majority of U.S. companies. The EPA's greenhouse gas reporting rule is taking an important step in legislating around actions many companies are already undertaking on a voluntary basis.

Zoe Tcholak-Antitch is vice president and head of Investor CDP.

Image CC licensed by Flickr user Flowizm.