Net Zero: Improving CO2 Reporting by Companies

In recent years, numerous companies have committed to reducing their CO2 emissions to net zero by 2050. For them, net zero means that all avoidable emissions must be reduced and unavoidable residual emissions must be removed from the atmosphere. However, there is currently no standardized measurement and reporting structure for these net zero commitments. It is therefore unclear how extensively companies intend to fulfill their voluntary commitment to reduce CO2 emissions – or whether they are merely engaging in so-called greenwashing. A team of researchers from ZEW Mannheim and Stanford University, USA, has developed a new standard for Time-Consistent Corporate Carbon Reporting (TCCR).

The TCCR standard combines several elements into a regular target/actual comparison. Firstly, the companies decide on one of various key figures on the basis of which the CO2 emissions are measured. They commit to annual reporting on their emissions. Initially, they provide an initial forecast of the future emissions trend up to the year 2050. In the following years, this forecast is regularly compared with the reductions in CO2 emissions actually achieved, and it is adjusted accordingly for the remaining years up to 2050.

Companies' disclosures should be clear, consistent over time, comparable within a sector or industry and timely. The TCCR standard thus follows the general principles for effective disclosure of CO2 emissions as recommended by the Task Force on Climate-related Financial Disclosures (TCFD). It also makes companies' CO2 reporting more credible and transparent for political decision-makers and the general public. “The TCCR standard should not be introduced as a mandatory part of corporate reporting. However, companies that are really serious about net zero can set themselves apart from those that use it as a mere buzzword,” says Reichelstein.

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