Earlier this yr Securities and Exchange Commission approved principle of disclosure of climate-related information for US public firms. The rule, currently being challenged in federal court, will for the first time require U.S. firms to reveal any type of greenhouse gas emissions.
However, it does not require reporting of indirect emissions that occur in the value chain of the reporting company. These emissions are the most difficult to trace and can account for over 70% of a company’s carbon footprint.
If public firms can avoid the hassle of most reporting, why would a capital-conscious startup consider this time-consuming and expensive process?
Practical reasons
By 2026, a California-based company with annual revenues of greater than $1 billion can be required to report direct greenhouse gas emissions (similar to fuel that powers the company’s equipment), indirect greenhouse gas emissions (similar to electricity consumed off-site), and by 2027, the value of chain emissions – the mentioned category, which can include the whole lot from purchased goods and services, through leased assets, to delivery vehicles. State law is now more progressive than the SEC and closer to EU regulations.
California has a long, noteworthy list of firms that might be future customers, partners or buyers of the startup. Now consider the growing variety of corporations that already voluntarily measure, disclose and reduce greenhouse gas emissions downstream in their supply chains.
In total, these are many entities that evaluate purchased products and services and look for low-emission alternatives. A startup that is already reporting, or at least showing progress, can be a more attractive partner.
Additional arguments for startups to voluntarily start measuring their sustainability efforts develop into a little more sophisticated. Every founder I know has a specific “must do” list and a much longer “must do” list. You need convincing arguments to shift priorities, especially when it requires a lot of funds, talent and time, not to say the difficult-to-determine return on investment.
That said, here are some of the softer the explanation why a startup should measure greenhouse gas emissions: to ascertain consumer loyalty, build public trust, and create a purpose-driven culture.
Where to start
This is not a linear path. And for many startups facing financial realism, this requires a daring approach. The ultimate goal is to higher understand a company’s overall environmental impact in order to discover opportunities for improvement.
There are many widely used and accepted standards similar to Greenhouse Gas Protocol, which provide firms a methodology and reporting framework to measure, manage and report on emissions. A startup offering a product may also start with a life cycle assessment to estimate the environmental impact from cradle to grave, covering raw materials and processing, production, distribution, use and end of life.
This is a company-wide endeavor that can likely require commitment, budget, and talent. There are many sustainability management resources to decide on from, including free online platforms. Carbon accounting software can cost anywhere from $50,000 to $70,000 a yr and requires the help of consultants to implement.
Although expensive, an external service provider helps eliminate internal bias and increase credibility. Some of those options may offer more capabilities than your team currently has arrange. It is necessary to make a thorough and honest assessment of what is feasible as your small business grows.
Once a company has a more complete picture of its greenhouse gas emissions, it could start comparing practices among competitors, setting long-term goals and considering energy-saving changes. Startups should rely on their management to make use of pressure testing results and review draft roadmaps.
Even if you are just beginning to measure your organization’s carbon footprint, you should discuss the right time to start.