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April 07, 2010
Measure, Manage, Report: How Companies Can Prepare for a Low-Carbon Economy
    by Robert Kropp

The Environmental Defense Fund publishes a roadmap to help companies navigate the transition to greenhouse gas reductions and meaningful sustainability reporting.

In January, the Securities and Exchange Commission (SEC) issued guidance on disclosure of climate change risks and opportunities at publicly traded companies. Stating that "certain existing disclosure rules…may require a company to disclose the impact that business or legal developments related to climate change may have on its business," the guidance directs companies to evaluate and disclose the physical impacts of climate change on their operations.

The guidance issued by the Commission did not provide a framework for such evaluation and disclosure, and in the absence of one, companies may be tempted to "skip straight to flashy green solutions with a feel-good story," according to the Environmental Defense Fund (EDF). In order to help companies develop meaningful initiatives, the EDF has published A Roadmap to Corporate GHG Programs.

Observing that "Reducing greenhouse gas (GHG) emissions can be one of the most important, and most effective, steps that a company can take to reduce its environmental impact and save money," the five-page roadmap describes four steps for companies to take in order to gain "credible and lasting GHG reductions." An especially helpful feature of the roadmap is its inclusion of organizations with considerable experience in guiding companies on a path toward GHG reductions and reporting.

Without effective measurement, meaningful management of GHG emissions cannot be accomplished, and as a first step the EDF recommends that companies conduct a "comprehensive evaluation of emission sources" in the form of a carbon audit. According to the roadmap, it is important that an audit adhere to recognized accounting standards such as the
Greenhouse Gas Protocol.

When companies complete their measurement of emission sources, they should then proceed to the establishment of "aggressive, yet achievable goals for reducing emissions." The setting of emissions reduction goals will help engage such key stakeholder groups as employees in the effort, and signal to investors that a long-term plan addresses the risks and opportunities presented by the transition to a low-carbon economy.

In order to meet aggressive reduction targets, the roadmap recommends a combination of energy efficiency measures, the use of renewable energy sources, and carbon offsets. Offsets involve investment by companies in emissions reduction projects to balance out emissions they cannot reduce in their own operations.

Finally, companies should issue sustainability reports that support their commitment to transparency. Noting that the SEC already "requires companies to disclose potential climate risks to investors," the roadmap recommends that such reports adhere to guidelines provided by the
Global Reporting Initiative (GRI). The GRI's sustainability reporting framework was used by more than 1,000 companies in 2008.

The roadmap concludes with the recommendation that companies publicly support robust energy and climate policies. One way to accomplish this is through membership in the
US Climate Action Partnership (USCAP) or Business for Innovative Climate & Energy Policy (BICEP), described by the roadmap as "the two most prominent business coalitions that call for national action on climate change."


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