Countless companies have set ambitious emissions reduction and net zero goals, and say they’re taking action on climate change. What’s less clear is how much of an impact they’re making. Now, the U.S. Securities and Exchange Commission (SEC) appears on the verge of issuing a rule that, for the first time, forces publicly-traded companies to measure and disclose greenhouse gas emissions in a standardized way.
The new rules will likely be based on a framework from the International Sustainability Standards Board (ISSB), which was announced at COP26 in November and, according to experts, “will do for sustainability reporting what the International Accounting Standards Board (IASB) does for financial reporting — develop standards for companies to report their performance to investors.”
Eighty percent of the world’s top companies already issue reports on their sustainability progress and initiatives but, in the U.S., those reports haven’t been mandated or regulated in the way that financial reporting is. This voluntary, unregulated disclosure process not only holds organizations less accountable, it does not give investors and other stakeholders the transparency they need to understand how a company manages climate risk – or how sustainability efforts impact its financial performance.
Other regions like the E.U. and countries, including the U.K. and Australia already mandate sustainability reporting.
“The world is no longer debating the need for global mandated standards for sustainability reporting,” Robert Eccles, author of several books on integrated reporting and the role of business in society, wrote in a column earlier this year. “The debate is now about what exactly is meant by this term, what role the relevant organizations should play, and what is the best path for developing these standards as quickly as possible.”
How Salesforce can help you prepare
Mandated sustainability reporting in the U.S. looks imminent, so organizations will need to get a handle on their carbon footprint, from a historical perspective and relative to their industry.
Salesforce is uniquely qualified to help organizations do just that. You may ask yourself what an enterprise tech company knows about tracking emissions. It turns out, quite a lot. In 2017, as part of a move to streamline the tracking of our own emissions we developed Net Zero Cloud, a carbon accounting tool that enables businesses to quickly track, analyze, and report reliable environmental data to help reduce their emissions, including scope-3 emissions.
Scope-3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that have an impact on its overall footprint. Examples include employee travel and commuting, production of purchased materials, and use of its products and services. They account for the majority of emissions for large businesses.
“Everything we’ve seen signals that [sustainability reporting mandates] are coming, and quickly,” said Anuraag Jhawar, senior analyst for global ESG reporting at Salesforce. “The question is how prescriptive the rules are going to be. Will they extend to scope-3 emissions? Will regulations build upon the voluntary standards and frameworks already in place, or will they blaze their own trail?”
Here’s how Salesforce can help companies get a grip on their carbon footprint.
Net Zero Cloud tracks and manages all carbon emissions data, which flows into one platform to give stakeholders an accurate picture of their scope 1, 2 and 3 emissions. This is enormously important. Scope-3, which encompasses emissions generated outside of an organization’s owned and operated assets — for example, everything generated by partners, suppliers and customers — accounts for the majority of a typical company’s greenhouse gas emissions.
“If you don’t [measure scope 3 emissions] you cannot say that you are a leader,” said Ofer Ben Dov, sustainability practice lead at Traction on Demand, North America’s largest dedicated Salesforce consulting and application development firm. “That’s a big change. The other big change … is in the mentality and the actual requirements coming in from the financial sector, because this is a game changer.”
After you have clarity into emissions, the next step is setting targets for where you need to be, enacting a climate action plan for getting there, and fully integrating the plan into the business strategy.
“Salesforce helps manage analytics and reporting, and Tableau creates visualizations that climate practitioners can share with the C-suite to impart information that is meaningful and digestible,” said Jhawar.
He added that Salesforce has open sourced a lot of its sustainability strategy, with white papers, playbooks, sustainability-at-home guides, and a sustainability exhibit that has been added to all supplier procurement contracts. The exhibit, which has been shared as a blueprint that other organizations can adopt, is a commitment that’s integrated into supply chain contracts to help suppliers reduce their carbon emissions. Most recently, the company released a climate action plan detailing six priorities: emissions reduction, carbon removal, ecosystem restoration, education and mobilization, innovation, and regulation and policy.
Collaboration and transparency
To affect meaningful change, organizations need to collaborate with partners, suppliers, and customers. To that end, Salesforce is already working with customers to help them calculate their carbon footprint as it relates to their use of Salesforce.
“Our customers are asking us for sustainability information,” said Jhawar. “They want to know about the emissions associated with their use of Salesforce. In the past they may have only extrapolated that information but now we can say with a higher degree of certainty what that figure is.”
The latest iteration of Net Zero Cloud measures carbon emissions, drives target-setting and advises on next steps including benchmarking and progress tracking. It also integrates with Slack, which enables companies to collaborate quickly and securely with suppliers.
Many companies have been measuring emissions and touting their environmental cred for years. But without universally-accepted standards, mandates or audits, the impact has been muted. “During this same 20-year period of increased reporting and sustainable investing, carbon emissions have continued to rise, and environmental damage has accelerated,” wrote Kenneth Pucker, senior lecturer at the Fletcher School at Tufts University, in the Harvard Business Review.
Businesses have a huge role to play in controlling global emissions and reversing at least some of the impact of climate change. Federal regulators are inching closer to formalizing sustainability reporting, for the good of investors, employees, society, and the planet. The big four accounting firms are gearing up, beefing up their auditing ranks with ESG experts in anticipation of new disclosure rules.
Businesses will for the first time be held accountable for their sustainability claims, while stakeholders will get the transparency and accuracy they have long demanded.
Will you be ready?