How carbon accounting methodology could resonate with climate policies
Professor Marwa Elnahass explores carbon accounting in her co-authored study, "A dynamic framework to align company climate reporting and action with global climate targets".
1 March 2024
Companies and organisations are making significant efforts to reduce their emissions and manage the effects of climate change, yet many organisations are not efficiently contributing to global climate targets due to disparities between national ambitions, government guidance and available abatement options.
Professor Marwa Elnahass, Professor of Accounting and Finance at Newcastle University Business School was co-author in a study which collaborated with Northumbrian Water to explore and align processes and policies around the topic.
‘Plan, Do, Check, Act’ process
This is the first study to give comprehensive analysis, capturing research and industry perspectives and insights. The study suggests introducing a carbon measurement and management process alongside a dynamic framework following a ‘Plan, Do, Check, Act’ process. This would align climate targets, climate actions, monitoring and reporting.
Balancing climate action with the needs of customers and stakeholders
The English water sector is a leader in Net Zero with the first sector-wide NetZero commitment, however, the researchers found that this commitment is not fully aligned with government policy or the economic regulation for the sector.
The study utilised data from Northumbrian Water Limited (NWL) which already manages and reports its emissions in line with industry best practice and international standards. The research will inform the development of a new emissions inventory and reduction framework that is suitable for a regulated utility – balancing the urgency of climate action with needs of customers and stakeholders.
Professor Marwa Elnahass said: “Following the conclusion of the COP28 summit, it is crucial to address climate change policy. The study integrates innovative insights related to the carbon accounting methodology of Northumbrian Water Limited (NWL) and offers valuable findings that resonate not only within the English water sector but also carry broader implications for climate policy. This includes recent regulatory changes by the International Sustainability Standards Board (ISSB) concerning global sustainability and climate disclosure standards.”
The researchers are calling on government agencies to put in place regulations and guidelines that ensure companies can make robust assessments of their climate impact and implement abatement technologies that materially reduce emissions rather than relying on offsets and offshoring.
Currently, over 4,000 companies worldwide are setting climate targets using, for example, the Science Based Target initiative to ensure they are in line with the United Nations Greenhouse Gas (GHG) Protocol. However, this study reveals that there are differences when it comes to guidance and action when companies report on avoided emissions or want to offset emissions.
The study discusses that conflicting demands of regulators, shareholders and customers are often overlooked. This presents challenges when selecting the best abatement options and can lead to inefficient decarbonisation strategies.
In response to the challenge of meeting net zero targets and decarbonisation priorities, Northumbrian Water collaborated with Newcastle University. This partnership involved uniting academic and industry stakeholders for a research initiative, specifically concentrating on the timely theme of carbon accounting and measurements within the policy-industry framework.
Using the water sector as an example, the authors of the study recommend a more dynamic approach that considers the multiple demands on businesses, particularly prioritising the efficient use of customer money. The study argues that companies should be encouraged to invest sufficient resource into developing their carbon accounting methods to ensure their management strategy is attainable and accurately aligned with global climate commitments.
References
Christy, A., Elnahass, M., Amezaga, J., Browne, A., & Heidrich, O. (2023). A dynamic framework to align company climate reporting and action with global climate targets. Business Strategy and the Environment