Corporations Take the Lead on Climate Change

Corporations Take the Lead on Climate Change

Faced with a political standstill in international climate policy, a number of responsible companies and industries have embarked on a path to proactively attack the worsening global warming crisis. Fortunately, these intrepid corporations have strong partners to guide them in their effort. By Peter Denton

Janet Ranganathan, co-director of the World Resources Institute's (WRI) Greenhouse Gas Protocol Initiative, and her colleagues at both WRI and the World Business Council for Sustainable Development (WBCSD), have worked for the last seven years to develop and implement an international standard for businesses to accurately and transparently account for and report their emissions of carbon dioxide and five other global warming pollutants (methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride). These are commonly referred to as "greenhouse gases (GHGs)".

WRI and WBCSD recently published the revised edition of The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, a product of a broad multi-stakeholder process. With its adoption by a wide range of international businesses, industry associations, and climate programs, the protocol has emerged as a true benchmark for GHG accounting.

"When we first began this initiative in 1998, various companies - including WRI - were attempting to conduct their own individual GHG inventories without any guidance on how to do this," said Ranganathan. "Without a reputable standard to guide them, many of the businesses ran into difficulties regarding the scope and scale of their GHG inventory."

Nearly simultaneously, WRI and WBCSD launched independent efforts to address these problems by creating a common international standard for calculating GHG emissions. The two organizations shared some corporate partners and soon realized the power of collaboration when they combined their networks and capacity.

While WRI and WBSCD were the key conveners of the project, the successful development of the GHG Protocol corporate standard hinged on the close involvement of over 500 businesses, organizations, and governments. Participants did not always agree on how to design the accounting standard, but Ranganathan and her colleagues at WRI and WBCSD worked tirelessly to insure that everyone's perspective was taken into account in the design of the standard, resulting in an accounting framework capable of serving multiple objectives.

In some cases, Ranganathan's team inspired entire industries to shift their perspective on significant issues such as the inclusion of indirect GHG emissions from the purchase of electricity in a company's final tally. "At the time, it was unusual for businesses to account for emissions from sources that they neither owned nor directly controlled," Ranganathan said. "We convinced the end-users that this would be the most complete and transparent means by which to proceed and maximize their opportunities for achieving reductions."

The impact of the first edition of the GHG Protocol, published in 2001, far exceeded WRI's and WBCSD's expectations. In addition to its implementation by numerous businesses, a number of leading climate programs - including the US EPA Climate Leaders Initiative and the World Economic Forum Global GHG Registry - adopted the protocol and added to its international credibility.

Several industry associations, including the American Pulp and Paper Association and the International Aluminum Institute, have also developed sector-specific guidelines based on the GHG Protocol. The protocol has also been adopted by the Chicago Climate Exchange, the first North American emissions trading market.

The wide acceptance of the GHG Protocol has been pivotal in creating greater standardization for corporate GHG accounting and reporting. Rather than relying on the assortment of models that existed prior to the Protocol, participating corporations can confidently point to a legitimate and collaboratively negotiated standard when reporting their GHG emissions and use their inventory to serve multiple business objectives.

"The world is undeniably advancing towards carbon constraints on business, regardless of the official participation by the United States in the Kyoto Protocol," said Jonathan Pershing, director of the climate, energy, and pollution program at WRI. "The public -- and the investment community -- is increasingly demanding that companies understand their environmental impacts and take actions to reduce them."

That a major overhaul of the GHG Protocol was not needed for its revised edition attests to the strength of the original publication. As the protocol was road tested by participating companies, the inclusive approach to the initial development of the standard was applied to the revision process.

"The cumulative experience of these and many other corporations was channeled into the second edition," said Simon Schmitz, from the WBSCD GHG Protocol Team. "We are proud to say that it represents the state of the art in corporate GHG accounting and reporting and provides an invaluable tool for helping companies more effectively manage their GHG emissions."

The revised edition of the protocol improves the consistency of GHG reporting boundaries in relation to those used for financial reporting. As GHG markets such as the Chicago Climate Exchange and the European Union Emissions Trading Scheme fully develop, companies will rely on accounting methodologies, and GHG emissions will be reflected on financial balance sheets along with other assets and liabilities.

Ranganathan and her colleagues at WRI and WBSCD are continuing to provide support to emerging and existing climate programs to help them incorporate the GHG Protocol as the basis of their accounting and reporting systems. The team is also refining the web-based GHG calculation tools and collaborating with several more industries to develop complimentary sector-specific protocols as well as working on a new standard focused on the quantification of GHG mitigation projects.

Peter Denton is the managing editor of WRI Features, an international news features service on environment and development issues. This article was first published in May 2004.