One might say that the oil sands are shifting. Two fossil fuel companies that, over a decade ago, declared their emissions from end-use products are now silent on the matter. Campaigners say they struggle to build a comprehensive picture of their carbon exposures as a result. The companies are BP and Shell and the analysts are from Carbon Tracker.  

“BP and Shell demonstrated such reporting was possible years ago, taking a leadership approach, but then took a backward step, not continuing to provide data on emissions relating to their products,” points out Carbon Tracker founder Mark Campanale. Continued wavering, he suggests, confuses stakeholders and investors.

These types of inconsistencies create obstacles for any carbon analyst assessing individual companies or industries. Sustainability reports usually contain emissions numbers, but these vary according to company. Tenant emissions may be omitted in one property company report, but included in another. End-user emissions (included within Scope 3 of the widely-used Greenhouse Gas (GHG) Protocols developed by World Resources Institute and World Business Council on Sustainable Development) are often lacking in industries with high consumer impacts, such as information technology. 

Among the unresolved problems affecting comparisons is a sheaf of differing reporting standards and a labyrinth of reporting regulations. The Climate Disclosure Standard Board (CDSB), a consortium of global business and environmental NGOs aiming for consistency, has identified no less than 400 different emissions reporting rules across the world, ranging from provisions in stock exchange rules to environmental reporting regulations and climate change legislation. Rules are being introduced each year, such as the Singapore Stock Exchange’s new mandatory sustainability reporting requirement for all listed companies. 

As CDSB executive director Lois Guthrie points out, the fragmented nature of the different policies is an obstacle to meaningful assessment and peer group comparison: “While ownership of who is in charge of developing non-financial reporting is dispersed, it’s quite difficult to get a language on how to codify standards,” she says.  


Institutions responsible for setting rules vary in individual countries. In the US, listed companies respond to SEC guidelines. But Guthrie suggests this is not clear enough. “SEC guidance is extremely variable,” she says. “Guidance encourages companies to report but very few standards set out what are the requirements for compliance.” 

In Australia, climate risk is the responsibility of corporate governance, while in the UK it comes under the Companies Act. In France, a sustainability law has been amended specifically to cover these disclosures, known as the Grenelle Act. “We like the French approach, it’s sophisticated,” says Guthrie. “They made amendments to an existing law and inserted new provisions. The legislation originates from one law and one body and that is very effective.”

CDSB would like a globally governed set of requirements. The end goal is an international system akin to the International Financial Reporting Standards (IFRS). “We are always looking for that analogy in financial reporting to be applied [to sustainability reports],” Guthrie says.

But the IFRS took decades to develop, and adjustments to them take years to agree. By implication, an international non-financial reporting system might not be in place until at least the 2020s. Financial reporting implementation requirements have had time to develop a consistency of narrative to be more transparent.  

The same level of detail is lacking in non-financial reporting, which causes concern among some sustainability experts, such as Leon Kamhi, head of responsibility at Hermes and executive director at Hermes EOS. “I don’t know what the material impact of different methodologies is but if it is a large difference, we’d be looking for a single methodology,” he says. 

The GHG Protocols have become a popular standard.

“It has all the hallmarks of an appropriate and rigorous standard, but the way it is applied can vary,” Guthrie observes, noting, for instance, that very different approaches are taken in the area of exclusions from reporting, the details of which are not always stated.

Other standards include the Global Reporting Initiative (GRI), the Climate Registry’s Oil & Gas Production Protocol, ISO 14064-1 – and dozens more.

They differ in a number of areas. Some, like the GRI, cover ESG reporting overall, while others focus on particular concerns like climate change. Some cover a wide range of stakeholders, others only shareholders. They state different objectives: for instance, requirements and interpretations vary as to what extent reporting should include activities of a parent company, subsidiaries, joint ventures, associates, suppliers and end users.


Despite the confusion, however, voluntary reporting is progressing, both in numbers and quality. 

“Data is getting better in terms of breadth of coverage. You can compare more; data is improving,” comments Leon Kamhi. In most of the EU, more than 90% of firms with revenues greater than €1bn are now revealing some carbon emissions data. And while businesses are still going through an era of development in global non-financial standards and regulation, this opens a window of opportunity for NGOs and other campaigners to set the terms for such disclosures. 

Carbon Tracker is one that currently finds deficiencies in existing industrial and economic data and, along with other disclosure cheerleaders such as the Institutional Investors Group on Climate Change (IIGCC), demands individual corporate data to match the gaps. Campanale acknowledges the work on previous-year and cumulative reporting carried out by organisations like the Carbon Disclosure Project (CDP). However, “future emissions are of more significance,” he says. 

Campaigners are widening their demands and applying more pressure. One concern is figures on indirect, Scope 3 emissions, which originate in the oil and gas sector but are emitted by end products like cars that burn the fuels. Carbon Tracker and its allies also identify gaps in reporting of greenhouse gas emissions along the value chain, carbon intensity of production by hydrocarbon type, and net asset exposure to extreme weather events, to give just a few examples. 

Campanale suggests better and more detailed numbers like these would allow policy makers and financial regulators to take “a more prudent view as to whether markets as a whole are incorporating climate risks [and] upper limits of emissions”. They would also facilitate more accurate risk-adjusted assessments of portfolios. 


Other organisations in the field play a different role. The CDP reporting database, founded on voluntary disclosures, is probably the largest individual source of data. Major accountancy firms typically produce or audit non-financial reports for clients and provide advice. Many environmental consultancies also verify data. Companies like Trucost and Bloomberg provide data comparisons across different industries. 

Trucost also provides case studies on different companies and is a pioneer specialising in ‘natural capital valuation’ – accounting for the value and depletion of resources like forests, healthy soil and clean air and water, helping clients understand environmental risk in business terms. In doing so, it considers all environmental impacts, including greenhouse gas emissions. 

The fact that, for example, MSCI has launched a family of low carbon indices and that pension funds are increasing their engagement in this area, could help increase the pressure on companies to alter the course of reporting. 

Among changes on the horizon are a possible international agreement on emissions in Paris later this year, following on from the November 2014 agreement between the US and China, which includes new targets for carbon emissions reductions by the US and the first commitment by China to stop its emissions from growing by 2030; and revisions to the European Accounting Directives requiring disclosure by certain companies of non-financial and diversity information, including environmental information, rules that will apply from January 2017. 

David Metcalfe, CEO of sustainability-analysis firm Verdantix, considers the EU directive on non-financial reporting an important development. “[It] will turn the screws on compliance,” he says. 

 “The EU Directive is welcome because it recognises the importance of co-ordinating national provisions on non financial disclosure,” says Guthrie. 

Given the complexity and confusion of existing reporting protocols, this would represent an important step in the direction of standardisation and simplicity.