Climate change: Companies that make big promises on cutting carbon emissions must be open to scrutiny – Omar Shaikh

The business community needs to get comfortable with its environmental affairs being scrutinised out in the open.

It's not just fossil fuel companies that need to change in the fight against climate change (Picture: David McNew/Getty Images)

Companies can’t make big showy commitments to climate action and then balk at the prospect of people checking to see if they’re following through on those commitments.

We recently saw two major multinationals – Microsoft and Alphabet – resist calls to disclose their progress against environmental, social and governance (ESG) targets in regulatory filings. The technology firms argue that the requirement would leave them vulnerable legally, because the data is subject to much uncertainty.

In doing so, they potentially undermine the environmental goals they’ve been eager to align themselves with. Now is not the time to demote or shy away from ESG filings. If anything, companies should be going further than ever to demonstrate their progress.

This retreat has sadly showcased the very short-term thinking that is still all too present in major organisations with major promises to keep.

If we’re serious about making environmentally responsible behaviour a basic expectation for companies of all shapes and sizes, it needs to be transparently reported.

Just like accounting standards, there need to be measures we can recognise, believe and use to track performance.

Markets function best when stakeholders have access to all the information available and that applies to climate accounting as much as to other serious risk areas.

We know that climate change will have a real impact on every business and how it operates. It will inevitably disrupt supply chains, could pressure budgets or force the relocation of operations.

Regulators are pinning targets on environmental efficiency, and ethical investors are now much more consumed with selecting sustainable and responsible products.

The carbon footprint of an organisation is now a material risk to its employees and its investors, so the manner and extent to which it is reported in regulatory disclosures must be more of a priority. This is so much more than a tick-box exercise.

Ultimately, if emissions action isn’t reported, it doesn’t have a hope of success. Without disclosure we are unable to judge, and the power of that scrutiny is what holds multinationals to account.

Yes, there are still challenges on data and how we measure and report this progress consistently around the world, but this isn’t business that can be conducted behind closed doors.

The Global Ethical Finance Initiative held its annual summit in Edinburgh this month and credible climate reporting was uppermost in the minds of many of the world-leading financial experts who participated.

For sustainable finance to become the norm, we will need to measure individual and collective contributions in a systematic way.

But we need to start now. We can’t allow perfection to be the enemy of the good. Some measurements may be blunt at the moment but it’s a foundation from which to build. We can hone our methods of evaluation as science progresses but the climate and nature can’t wait for us to perfect all the tools.

Companies that have made grand carbon promises can’t shy away from proving that they’ll meet them. This is a serious business and we all deserve to see the evidence of change.

Omar Shaikh is director and co-founder of the Global Ethical Finance Initiative

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