Promoting Global Greenhouse Gas Accounting to Drive Corporate Climate Actions and Asian Practices

No.2024-10(June) pborileicfy KeyPoints •Promotingsustainabilityandclimateinformationdisclosureisbecomingacrucialcorporatestrategy.Standardizationofdisclosureisprogressing,withmandatorydisclosureandlegislationinsomeregions. •Themostemphasizedaspectismeasuringgreenhousegas(GHG)emissionsbasedontheGHGProtocol.Emissionsdatahelpinvestorsassesscompanies’capacitytocopewithclimatechangerisksandopportunities. •Scope3emissions(fromsuppliersandusers)accountforover70%ofacompany’stotalGHGemissions.MeasuringScope3ischallengingbutessentialtounderstandwhererisksconcentrate. •MandatingdisclosureonlyforScope1andScope2mighttemptcompaniestooutsourceemissions,creatinganillusionofreduction. •GHGestimationsneedimprovementbyincorporatingcountry-specificemissionparameters.Compilingdetailedactivity-baseddataonemissionfactorsisessentialbutchallenging. •Developingcountry-specificemissionfactorsimprovesGHGaccountingquality,contributestosettingreductiongoals,andpotentiallyattractsprivateinvestmentindecarbonizationprojects. ©2024AsianDevelopmentBankInstitute ISSN2411-6734 DOI:https://doi.org/10.56506/DMHO1958 ThisworkislicensedunderaCreativeCommonsAttribution-NonCommercial-ShareAlike4.0InternationalLicense. PromotingGlobalGreenhouseGasAccountingtoDriveCorporateClimateActionsandAsianPractices SayuriShirai,AdvisorforSustainablePolicies,AsianDevelopmentBankInstitute;Professor,FacultyofPolicyManagement,KeioUniversity LeNgocDang,ResearchAssociate,AsianDevelopmentBankInstitute 1.Introduction Disclosureofclimate-relatedinformationisrapidlyadvancingworldwide,especiallyamonglargepubliclylistedcompanies.Itisbecomingincreasinglyimportantforcompaniestocommunicatetheircommitmenttoanddetailedstrategiesforachievingnetzerogreenhousegas(GHG)emissions(orcarbonneutrality)fromtheirproductionandoperationalactivities.Thesestrategiesemphasize,amongotherelements,thatcompaniesshouldconsistentlycalculateactualGHGemissionsdataandtheiroutlook,usingaunifiedmethod,anddemonstrateprogresstowardtheiremissionreductiontargets. Theworldhasenteredanerawheneffortstoaddressclimatechangearenolongerrecognizedsimplyasbrandingormarketingtacticsusingwordssuchas“eco,”“environmentallyfriendly,”and“natural.”Unlesscorporateactionsaretrulyconsideredbeneficialtotheenvironment,companiesriskfacingcriticismofgreenwashingandlitigation,whichcouldleadtodamagetoreputationandpotentiallossofbusinesspartnersandinvestors.Therefore,itisessentialforcompaniestoenhancedisclosureofinformationandengageindialoguewithawiderangeofstakeholders,includingshareholders,investorsandfinancialinstitutions,suppliers,andcivilsocietygroups.Suchdialogues,knownasengagement,notonlyprovideanopportunityforstakeholderstodeepentheirunderstandingofacompany’sdecarbonizationeffortsbutalsoserveasvaluableplatformsforgatheringinformationonglobaltrendsandtheactionsofothercompanies.Amongglobalcompanies,chiefexecutiveofficersandotherboardmembersareincreasinglytakingtheleadinengagingwithinvestors. Toincreaseinvestors’trustandscaleupclimatefinance,itisimportantforcompaniestodiscloseclimate-relatedinformationbasedontheglobalstandards,particularlythosedevelopedbytheInternationalSustainabilityStandardsBoard(ISSB),whichwasestablishedbytheIFRSFoundationin2021.InJune2023,ISSBissuedtwoimportantstandards:GeneralRequirementsforDisclosureofSustainability-relatedFinancialInformation(IFRSS1)andClimate-relatedDisclosure(IFRSS2)(ISSB2023a,2023b).IFRSS2includesdetaileddescriptionsofclimate-relateddisclosurebasedonfourpillars:governance,strategy,riskmanagement,andmetricsand targets.Thestandardsalsoincludesevencross-industrymetricsincludingGHGemissionsdata.Asthesedataareessentialformeasuringandassessingclimatechangemitigationactionsandassociatedclimatefinance,promotingcompanies’disclosureofGHGemissionsdataisthefirststepforgovernmentsandfinancialsupervisorsacrosstheglobe. ThispolicybriefispartoftheADBI–ADBAsianClimateFinanceDialogue,aninitiativeoftheAsianDevelopmentBankInstitute(ADBI)incollaborationwiththeAsianDevelopmentBank(ADB),topromoteinformationexchangeandawarenessofgovernments,financialregulators,andcentralbanksinAsiaandthePacificaboutclimaterisksandopportunities.Itisalsoimportantforthemtodeepenunderstandingontheimportanceofpromotingcompaniesandfinancialinstitutionstodiscloseclimate-relatedinformationbasedontheglobalstandards.Understandingeacheconomy’sdisclosureandrelatedfinancialpolicieswithintheregionwillalsohelppreventafragmentationofapproachesandthusjointlyscaleupclimatefinancewhileensuringfinancialstability. SinceitslaunchinNovember2023,theAsianClimateFinanceDialogueorganizedtheSecondRoundtableinFebruary2024with12financialsupervisorsinAsiaparticipatinginanintensiveexchangeofinformationanddiscussionsonpromotingcorporateclimate-relateddisclosureandchallengesinestimatingGHGemissionsdata,particularlyScope3emissionsdata.1Moreover,acapacitybuildingworkshopwasheldinApril2024forstaffofgovernments,financialsupervisoryauthorities,andcentralbanksinmorethan20countriesintheAsiaandPacificregiontosharedetailedinformationaboutclimate-relatedconceptsinclu