Corporate ESG Confidence Crisis: Only 1 in 4 Companies Certain of Meeting Reporting Standards, Says KPMG Survey
In a week that saw both corporate and governmental actors make significant strides in environmental, social, and governance (ESG) initiatives, the global landscape for sustainable development is becoming increasingly complex, here's a roundup of the week's most impactful ESG policy developments.
Microsoft Buys Biochar Carbon Removal Credits:
Microsoft has inked a deal to purchase biochar carbon removal credits, marking a novel approach to offsetting emissions.
The tech giant aims to be carbon-negative by 2030, and this move adds another layer to its comprehensive sustainability strategy.
KPMG Survey Reveals ESG Reporting Gaps
Only 1 in 4 companies are "very confident" in meeting ESG reporting requirements, according to a KPMG survey.
The findings underscore the need for standardized reporting frameworks to enhance corporate transparency.
UK's Climate Goals Face Backlash
Businesses and investors are pushing back against the UK's "watered-down" climate goals.
Critics argue that the government's current plans are insufficient to meet the 2050 net-zero emissions target.
California to Enforce Climate Disclosure Laws
California Governor Gavin Newsom commits to signing bills that will mandate climate-related disclosures for large companies.
The laws will require companies to report on their full value chain emissions and financial risks related to climate change.
Institutional Investors Advocate for Net-Zero Policies
A coalition of institutional investors is urging governments to remove policy barriers to clean energy investment.
The group, managing over $11 trillion in assets, highlights the potential for up to $275 trillion in climate investment opportunities by 2050.
The week's developments indicate a growing urgency among both private and public sectors to address ESG challenges. While companies like Microsoft are taking innovative steps to meet sustainability goals, the need for robust governmental policies remains a critical factor. The pushback against the UK's climate goals and the call for clearer policies by institutional investors underscores the necessity for aligned action across all sectors.
Pioneering Carbon Neutrality: Microsoft's Biochar Bet
Microsoft has inked a deal with Carbon Streaming to purchase up to 10,000 tonnes of carbon dioxide removal credits annually. The credits will be sourced from the Waverly Biochar project in Virginia, a venture that aims to sequester carbon dioxide through biochar, a form of biological charcoal.
Biochar Production: The Waverly Biochar project, managed by Restoration Bioproducts LLC, will produce biochar by heating biomass like forest residue and crop waste in an oxygen-free environment.
Carbon Sequestration: The project is expected to remove over 262,000 tCO2e of emissions during its 25-year lifespan. Carbon Streaming will hold a royalty on the biochar produced and sold.
Microsoft's Carbon Goals: This deal is part of Microsoft's broader initiative to become carbon-negative by 2030 and to eliminate all its historical emissions by 2050.
Financing Model: Carbon Streaming will provide project-level finance, allowing Microsoft to focus on procuring carbon removal from high-quality projects.
Microsoft's biochar investment is a significant step in the tech giant's ambitious carbon-negative strategy. By partnering with Carbon Streaming, Microsoft not only diversifies its carbon removal portfolio but also sends a strong demand signal to the market. This could catalyze the scaling of biochar and other carbon removal technologies, offering a viable pathway to combat climate change.
Corporate ESG Confidence Crisis: Only 1 in 4 Meet Reporting Standards, Says KPMG
A new KPMG survey reveals a startling lack of confidence among companies in meeting ESG reporting requirements. The survey, which included over 200 business leaders from companies with revenues exceeding $1 billion, paints a complex picture of the challenges and opportunities facing corporations today.
Only about 25% of surveyed companies are confident in meeting ESG reporting requirements across multiple jurisdictions.
While 92% of respondents were from North American companies, 67% said they would be required to report on ESG in 3 or 4 different jurisdictions.
Pressure for increased ESG transparency is highest from supply chain partners at 88%, surpassing regulators at 80%.
Major challenges include timely environmental reporting data for 10K filings (50%) and the cost of resources and talent for reporting (46%).
The survey underscores a pivotal moment for corporations navigating the intricate web of ESG reporting requirements. While companies recognize the financial value of ESG, the lack of confidence in meeting reporting standards reveals a significant gap that could jeopardize both reputation and market competitiveness. As ESG becomes a cornerstone for business strategy, the urgency for companies to align their reporting with these strategies has never been higher. The results serve as a clarion call for immediate action, lest companies find themselves left behind in the rapidly evolving ESG landscape.
UK's Climate Retreat Sparks Corporate Outrage
UK Prime Minister Rishi Sunak has announced a rollback of several key climate initiatives, igniting a wave of criticism from companies and investors alike.
Ford's Rebuttal: Automotive giant Ford, which has invested £430 million in the UK for green technologies, lambasted the government's decision to delay the ban on petrol and diesel cars from 2030 to 2035. Ford UK Chair Lisa Brankin emphasized that the industry needs "ambition, commitment, and consistency" from the government.
Policy Reversals: Sunak's announcement includes not just the five-year delay on fossil fuel car bans but also relaxations on transitioning from oil and gas boilers to heat pumps, and the removal of home energy efficiency requirements.
Investor Concerns: The Institutional Investors Group on Climate Change warned that the UK risks losing significant climate transition investments due to policy uncertainty. CEO Stephanie Pfeifer stated that "clear and consistent policymaking" is crucial for long-term investment decisions.
The recent policy shifts not only undermine the UK's climate commitments but also risk alienating businesses and investors crucial for the country's green transition. The move sends a concerning signal about the UK's resolve in combating climate change, potentially jeopardizing its role as a global leader in sustainability.
California's Climate Disclosure Mandate: A New Era of Transparency
California Governor Gavin Newsom has committed to signing two pivotal climate disclosure bills into law. These bills will mandate large companies to disclose their full value chain emissions and climate-related financial risks, setting a new standard in corporate transparency.
Two Bills, One Goal: The bills, SB 253 and SB-261, aim to increase corporate accountability by requiring companies to disclose their full value chain emissions and climate-related financial risks. SB 253 focuses on companies with revenues exceeding $1 billion, while SB-261 targets those with revenues over $500 million.
Broad Scope: SB 253 will apply to more than 5,300 businesses, including global giants like Apple and Salesforce, who have already expressed their support. The bill covers Scope 1, 2, and 3 emissions, encompassing everything from direct emissions to those associated with supply chains and business travel.
Stringent Reporting: Companies will have to adhere to Greenhouse Gas Protocol standards for emissions reporting, starting in 2026 for Scope 1 and 2 emissions and 2027 for Scope 3. Third-party assurance will be mandatory, escalating in stringency by 2030.
Global Implications: The California law could potentially go further than the SEC's proposed rules, applying to all large companies and not just public ones. It also complements the EU’s Corporate Sustainability Reporting Directive, affecting U.S. companies doing business in Europe.
Governor Newsom's commitment to these bills reaffirms California's role as a global leader in climate policy. By mandating comprehensive climate disclosures, the state is not only increasing corporate accountability but also providing businesses, investors, and consumers with the tools to accelerate decarbonization efforts. This could serve as a blueprint for other jurisdictions, catalyzing a global shift towards greater transparency and sustainable business practices.
Unleashing Trillions: Institutional Investors Demand Policy Shift for Net-Zero Transition
A coalition of heavyweight institutional investors, managing over $11 trillion in assets, is urging for the removal of policy barriers that stymie investment in clean energy. The Net-Zero Asset Owner Alliance (NZAOA) has laid out its stance in a newly published discussion paper, emphasizing the urgency of facilitating a low-carbon economic transition.
NZAOA's Call to Action: The alliance, which includes financial giants like Allianz SE and Axa SA, is pressing governments to implement robust policies that can catalyze the transition to a low-carbon economy.
Economic Opportunity & Risks: The discussion paper highlights a potential $275 trillion in climate investment opportunities by 2050. Conversely, failure to transition could result in annual GDP losses of up to $4-6 trillion by the same year.
Technological Maturity: The paper underscores that key decarbonization technologies are already mature and cost-effective, indicating that the demand for fossil fuels is set to peak this decade.
Political Barriers: Lack of public and private investment in infrastructure, such as grid upgrades and electric vehicle chargers, are cited as significant obstacles. The alliance advocates for financial support in the form of subsidies, grants, and tax credits to overcome these barriers.
The NZAOA's call is not just a plea but a pragmatic roadmap for governments. The alliance's collective financial clout could be a game-changer in accelerating the global transition to net zero. However, the onus is now on policymakers to act decisively and unlock the trillions of dollars waiting to be invested in a sustainable future. The clock is ticking, and the economic and environmental stakes have never been higher.