21 Nov 2023

Most companies under-reporting climate emissions - study

7:13 pm on 21 November 2023
A view of a tree and smoke rising from stacks at a factory in Lille, on January 17, 2013. AFP PHOTO / PHILIPPE HUGUEN (Photo by Philippe HUGUEN / AFP)

Last year, a United Nations expert panel said governments couldn't reach net zero emissions without action by businesses. Photo: AFP

Most companies are not reporting their full climate impacts, including many of those who claim to be 'green', according to a study by researchers at Griffith and Otago universities.

Last year, a United Nations expert panel said governments couldn't reach net zero emissions without action by businesses, and urged companies to disclose and reduce their full range of climate impacts.

But new research just released shows this still is not happening.

Businesses' greenhouse gases are divided into direct climate pollution and emissions from electricity use - known as Scope 1 and 2 emissions respectively - along with wider impacts such as shipping, flying, manufacturing emissions from suppliers, and impacts of customers using their products. Those wider impacts are known as Scope 3 emissions.

Griffith University's Professor Ivan Diaz-Rainey said firms were being strategic in their Scope 3 reporting, and this could underpin greenwashing.

For example, it was easier to make it look like greenhouse gases were falling if you only looked at a company's offices and electricity, rather than the fossil fuels used to make their products by manufacturing suppliers, or the impacts of customers enabled by the company's products. The latter category might include fuel company customers burning petrol in their cars, or bank customers mining coal using a bank loan.

"Scope 3 emissions account for the highest proportion of total emissions, and it's the least likely scope to be reported on," Diaz-Rainey said.

Professor Ivan Diaz-Rainey.

Professor Ivan Diaz-Rainey. Photo: Supplied / Griffith University

"Companies have a great incentive to better their scope 1 and 2 emissions because direct energy efficiency leads to financial savings."

Scope 3 is often harder to address and report on, because it was outside a company's direct control. But it was critical, he said.

"If an oil and gas firm only reports on Scope 1 and 2, we are missing most of the story. If a bank gives a huge loan to a coal or a gas project their Scope 3 emissions would be very high."

The researchers tried using machine learning to fill gaps in company disclosures. Diaz-Rainey said they were able to improve their estimates by about 25 percent - enough to improve matters, but no replacement for accurate corporate reporting.

He said companies were improving what they disclose, but there would always be some who obscured their true impacts if the rules allowed it.

Gaps in legislation

Several jurisdictions, including New Zealand, were bringing in mandatory climate disclosures, but these typically did not cover all large companies.

This month's global climate summit in Dubai will host a bumper contingent of New Zealand businesses.

Sustainable Business Council head of climate and nature Antonia Burbidge said this year the Ministry of Foreign Affairs and Trade had expanded access to the summit, allowing more civil society groups and businesses to attend.

New Zealand transparency was crucial to having a credible presence there and avoiding accusations of greenwashing, she said.

But she said disclosure could be a huge burden for small companies, if they were asked by a large customer to supply full data on greenhouse gas emissions in addition to other compliance and business needs.

Some large companies worked with their smaller suppliers to make this easier.

The climate summit starts on 30 November.

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