While the term greenhouse gas emissions easily rolls off the tongue these days and there has been a ballooning of net zero GHG commitments by government and non-state actors alike, this is all still a very new idea and in point of fact, as of April 2023, few U.S. businesses have actually calculated their GHG emissions.
At a time when matters of GHG emissions are not just trending, but dominating the news cycle, we decided to survey our clients, friends, and others to see what was really going on in the marketplace.
Our goal with this survey was modest in seeking to report on the current business acceptance and adoption of calculating GHG emissions such that our clients and other stakeholders can utilize these results to guide their company plans for GHG emission measurement, disclosure, and reduction in 2023.
Setting the stage, ESG is uncharted territory with few authoritative sources of information, including no scholarly treatises and few if any peer reviewed published papers, so blogs like this one are the best source of reliable information. Concomitantly, readers of this blog are a target rich environment from whom we can solicit timely ESG information, including seeking current data on the ESG subset of GHG emission activity (which activity is the single most dominant ESG factor in the U.S. today). Our readers have proven to be a group ripe for surveying.
The survey is not a truly scientific survey in that, after piloting a questionnaire, we curated the survey methodology, sample design, and data collection with the aim of providing essential benchmarks that will on a timely basis offer predictive accuracy, in the emergent and fast growing and still very new idea of GHG emission reductions, on how a company can adapt for the future. And it should not be lost on the reader that this survey was in the field in the first quarter 2023, a period of increased economic uncertainty.
Not one to bury the lead, statistically, the most compelling result of our polling of business stakeholders is that 84% of respondents believe there will be mandatory ESG disclosure requirements including specifically required GHG disclosure regulation within the next 12 months, but only 14% reported their company today calculates GHG emission data.
That overarching result recognizes the dichotomy between people’s environmental aspirations of being good stewards of the planet versus the day to day reality of simply trying to comply with all environmental laws, which is now being complicated with the ESG umbrella covering such a broad spectrum of subjects, not just environmental matters. We undertook this survey as a deep dive into matters of GHG alone, and not the larger subject of ESG, such that our clients and friends can use these results for practical company business planning in GHG emission measurement and reduction in 2023.
As attorneys assisting businesses with law and non law professional services including providing GHG calculation services ourselves, our work is about balance. We push the science of GHG measurement whilst assisting clients in turning a profit. This poll has buttressed our belief that the market for ESG work, particularly GHG is hugely strong with a growth rate in double digits.
Here are the meaningful insights we can report from our survey:
- When asked about the ESG initiatives that are most important to their company, 72% reported GHG emissions followed by 59% who said advancing gender and racially diverse talent (.. no other ESG initiative polled over 50%).
- In a compelling result, over 67% of our poll respondents said that in the last 12 months, they have become aware of a demand on their company to report GHG data.
- 84% of respondents believe there will be mandatory GHG disclosures required of businesses within the next 12 months, including that 79% of respondents are concerned about financial penalties arising from noncompliance with those new GHG regulatory requirements while 70% are concerned about energy prices (.. driving an aim to reduce energy use with the resultant reduction in emissions).
- As noted above, maybe not surprisingly only 14% reported their company today calculates GHG emission data. However, 68% of the public companies that responded to the poll calculate GHG emissions, although more than 60% of those public companies have not publicly disclosed emission data (.. green hushing is alive and well) which makes clear that the vast majority of poll respondents were small and midsize businesses.
- And while the same 14% of companies report they measure Scope 1 emissions or direct emissions, similarly 11% measure Scope 2 only, but only 3% measure Scope 3 GHG emissions (which is problematic where the vast majority of GHG emissions are Scope 3).
- In response to the query, does your company have the expertise or other ability in house to calculate GHG emissions, less than 16% replied yes.
- Asking the question again differently did not change the result, when only 13% of companies answered affirmatively that they had ever measured GHG emissions, even as a pilot, part of an energy model during construction, or otherwise.
- Only 9% of respondents have disclosed GHG emission data or information.
- Maybe surprisingly, 19% of replying companies have made a public GHG commitment (e.g., Net Zero by 2040 or the like).
- 28% of those who replied believe other companies (.. not their company) will achieve their stated GHG reduction commitments.
- 61% believe companies frequently overstate or exaggerate their GHG emission reduction progress when making disclosures.
- 79% believe companies will face increasing litigation or government action as a result of not reporting accurately or not achieving their stated GHG commitments.
- 53% are concerned about the potential impact GHG matters, including failure to disclose, may have on brand perception or brand value.
- 47% said they lack funding to add the task of calculating GHG emissions.
- 77% said they lack funding to reduce GHG emissions 20% or more in their business.
- Only 31% expect most companies will establish and communicate a Net Zero plan in the next 12 months, but 58% believe “many” companies will.
- 55% responded that they expect investors and lenders will reward companies that have communicated Net Zero plans with an increased valuation.
- 57% would pay a premium for real estate with an on site renewable energy system and 49% for a green building certification, but interestingly 76% would pay a premium for a building with features that reduce energy consumption.
- 38% favor mandatory GHG disclosures and more GHG regulation within the next 12 months.
- 61% believe law firms should be doing more to support companies with GHG matters.
- Only 8% said the law firm their company principally uses offers GHG capabilities to its clients.
- 42% reported their company engages outside consultants for compliance with GHG matters.
- Of the companies that calculate GHG emission data, only 26% are confident their company owns 100% of its GHG emission data, including own all of the supporting utility data and the like, while over 70% said they do not know with certainty.
- 66% are concerned, including 100% of public companies, about issues of proprietary data privacy of their GHG emission data.
While highly informative, again be aware this poll is not a truly statistically pure survey. Including in an effort to keep true to our sample design but allow all who are interested to participate via survey monkey, we permitted self selected stakeholders to respond to 10 key questions and to be 10% of the sample size.
In conclusion, these results can assist companies as they strategize to adapt and create value through their GHG emission reduction activities in 2023. In the highest numeric response, respondents believe there will be mandatory ESG disclosures including required GHG emission regulation this year and the respondents are concerned about financial penalties arising from noncompliance with those GHG laws. But, today less than 15% of respondents have ever calculated their GHG emissions. And not to be lost among this poll data, a nearly similar number of respondents are concerned about the potential impact GHG matters may have on their brand perception or brand value.
Maybe the best summation of our poll results is about adapting to change, “we cannot direct the wind, but we can adjust the sails,” quoting our favorite philosopher, Dolly Parton.
In the accelerating regulatory environment of 2023 when a broad breadth of stakeholders want to repair the world and make a profit, our poll results make clear businesses need to accelerate their GHG measurement efforts now.
A live webinar “Strategies Gleaned from our GHG Emission Poll” 30 talking points in 30 minutes, Wednesday, April 26 at 9 am EST presented by Stuart Kaplow and Nancy Hudes on behalf of ESG Legal Solutions, LLC. The webinar is complimentary, but you must register here.