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Nov 29, 2015

Inconsistent carbon reporting prevents investors from comparing companies

Two thirds of companies with emissions reduction targets don’t say how they were set, KPMG survey shows

Carbon reporting from the world’s 250 biggest companies is so inconsistent as to make it virtually impossible for investors to compare one company’s performance with another, according to a study by KPMG.

More than half (53 percent) of companies state carbon reduction targets in their financial and corporate responsibility reports but two thirds of those reporting give no explanation of why they chose the targets, the study says.

While 84 percent of companies report on carbon emissions from their own operations and 79 percent disclose emissions levels from purchased power, this drops to 50 percent reporting on emissions in their supply chains while only 7 percent give any information on emissions from use of their products or services. Around half of the companies that mention carbon emissions in their reports refer readers to information from sources such as the Carbon Disclosure Project. 

‘All stakeholders should be able to access good-quality, comparable information on a company’s carbon performance quickly and easily from the company’s annual financial or corporate responsibility reports. That is simply not the case today,’ says Wim Bartels, KPMG’s global head of sustainability reporting, in a press release. ‘There is a clear need for improvement, and global reporting guidelines on carbon could help to address this problem.’

The study outlines three basic principles that companies should follow when reporting on carbon emissions. First, companies should be clear about whether they consider climate change and carbon emissions as material issues, the study authors write. If they consider them material, they should describe which sources of their emissions they consider most important, provide data with third-party assurance and demonstrate that they monitor emissions regularly.

For the second principle, KPMG says companies should disclose clear carbon reduction targets and measure their performance against them. Emissions reduction targets should cover a period of at least five years to show companies are committed to long-term improvement, the authors write.

The third principle calls on companies to explain clearly how they benefit from reducing emissions. The report also says the information should be set out in financial or integrated reports as well as in stand-alone corporate responsibility or sustainability reports.