Most companies fail to measure all their emissions correctly

03 November 2021 Consultancy.uk 4 min. read

Nine-in-ten companies are currently failing to comprehensively measure their total greenhouse gas emissions, according to a new global report. Even while a growing number of companies tout “science-based” net-zero targets for the coming decades, as many as half of companies estimate an error rate of close to 40%.

As consumers increasingly demand more from businesses in terms of sustainability, the business case for greening a company has never been clearer. More than one-third of consumers would spend more on products that were sustainably produced – at an average of a 25% premium.

While consumers are increasingly keen to do what they can with their wallets to battle climate change, companies have been committing to a PR assault – joining a growing clamour to prove their green credentials to current or potential customers.

Companies are not measuring their emissions accurately

However, a mounting body of evidence suggests that many businesses are failing to walk the talk, particularly when it comes to net-zero targets. For example, one piece of research earlier in the autumn estimated that just one in every 20 of Europe’s biggest listed companies would achieve their net-zero pledges, unless they speed up emissions cuts dramatically over the next decade. Now, a new report from Boston Consulting Group (BCG) has further highlighted these shortcomings – but on a global basis.

According to BCG, companies are making mistakes in the measurement of their emissions, or obscuring the data all together – in a startling set of findings presented in concurrence with the ongoing COP26 conference.

BCG is the official Consultancy Partner of the event. For this particular study, the firm collected and analysed responses from executives at 1,290 organisations across nine sectors, who have full or partial decision-making responsibility for tracking and reducing their emissions.

Companies are not measuring their emissions exhaustively

A majority of 53% complained that they had “difficulty in tracking decisions” due to infrequent measurements. This seems to have had a major impact in how accurately they believe they report their emissions, as more than half of the companies surveyed reported a huge margin of error.

With respondents estimating an average error rate of between 30% and 40%, it might appear to some as though companies will not take the situation seriously in the current environment of laissez-faire regulations on climate reporting. 

“If you were off by 40% on your financials, you would be put in jail,” said Mike Lyons, BCG Managing Director and Partner. “If you’re so far off, that will catch the eye of shareholders and board members. You will get people fired and activists will say that you are not credible.”

When looking for the areas where companies believe they can improve their reporting, 66% of respondents said they wanted to update their reporting yearly, or more often – but that this would require investing in new artificial intelligence solutions to make it feasible and accurate.

For example, 48% said they needed “automated footprint calculation” technology to get their sustainability to the “next level,” while 45% said “simulation tools” would be key for this. For all the technology in the world, however, these advances will not help firms overhaul the old truism of computer science: garbage in, garbage out. 

Proponents of that concept have always insisted that flawed, or nonsense input data produces nonsense output. In the case of companies asserting AI will help them hit “the next level” of sustainability, it is hard to see how when so many of them currently avoid addressing certain inconvenient strands of data all together. 

BCG’s researchers looked at all types of emissions. These are emissions produced by a company’s own activities; known as scope one (direct emissions from company facilities and vehicles) and scope two (indirect emissions such as purchased energy); and external emissions produced along a company’s value chain such as purchased goods, transportation and distribution (known as scope three).

Alarmingly, the researchers found that 81% of respondents omitted some of their internal scope one emissions in their reporting, while a further majority of 66% said they did not report any of their external emissions, such as those related to the company's value chain.