GUEST SUBMISSION: The U.S. Securities and Exchange Commission (SEC) announced last year that it has proposed new climate rules, and based on a recent federal notice, the rules could be implemented in the U.S. by April 2023. These rules will require publicly traded companies to provide detailed reporting on climate-related risks.
The Canadian Securities Administrators (CSA) published its own proposed climate-related disclosure requirements in October 2021, and it’s expected to announce its updated requirements this year once the SEC’s rules are finalized.
What does this mean for businesses?
When companies measure their environmental impact, greenhouse gas emissions are categorized into three “Scopes.”
● Scope 1: Direct emissions, including company vehicle emissions or fuel combustion.
● Scope 2: Indirect emissions a company produces through its purchase of generated energy like electricity, steam, or heating and cooling.
● Scope 3: All other indirect emissions in a company’s value chain, including anything from employee commuting, purchased goods and services, transportation, investments, the use of sold products, and more.
The proposed CSA rules would require businesses to disclose information about their Scope 1 and Scope 2 emissions. While they do provide a safe harbour for liability with respect to Scope 3 emissions, that does not mean businesses won’t have to prepare.
Digital carbon footprint
A digital carbon footprint is the accumulation of greenhouse gas emissions that digital technology, websites and online activity produce. Companies tend to vastly underestimate their digital carbon footprint. Still, every email, click, website visitor, app user and video stream emit several grams of carbon dioxide due to the energy required to power devices, data storage and wireless networks.
On a global scale, digital technology and internet usage are responsible for four per cent of all greenhouse gas emissions and this digital carbon footprint is predicted to double by 2025.
With the new rules around reporting, digital carbon footprints become highly relevant in Scope 3 under “the use of sold products.” All the traffic passing across brands must be accounted for in the environmental impact, even if the product is not physical. So, what can be done?
There are some simple changes your business can make now to improve your climate policy and get ahead in the long run.
1. Inform and measure
The first step is understanding where your company produces carbon and establishing tools to measure its outputs accurately.
For many companies, carbon emissions come from the employees, the office, digital infrastructure, and travel. Digital infrastructure includes servers, software, data-intensive requests, websites, and social media. With the rise of remote work, companies have seen their digital footprints increase dramatically.
Measuring the true impact of Scope 3 emissions does pose a challenge. For instance, the operator of a tech company might find it difficult to measure the impact of its software products, but it’s necessary to track the emissions of every byte of data that travels between employees, consumers, and their own customer base.
At Redbrick, to address this challenge, we’ve developed Digital Scope, a custom tool for climate leaders who need clear data on how their digital presence impacts their total carbon emissions. You can also hire consultants or find software solutions that measure the impact of your company’s digital usage and allow your company to learn where adjustments can be made.
2. Identify climate leaders
The second step is to engage with your own organization and ask if there are employees who want to become climate leaders.
Once you have a team in place, get creative. Getting your team involved in brainstorming solutions to actively reduce, instead of offset, your organization’s carbon footprint increases employee engagement in the policy development process. For instance, at Redbrick, we’ve partnered with Carbon Neutral Club to foster employee engagement with sustainability, but there are a few other tools available.
3. Define goals and set objectives
The next step is to create a goal and determine the steps needed to achieve it. Publicly announcing the goal to achieve net-zero emissions is important to ensure your company is held accountable, but keep in mind that it should also be genuine.
In this phase, explore different options to achieve your objectives. For instance, although carbon removal options are valid, they’re not a substitute for cutting greenhouse gas emissions. Carbon removal is one part of the strategy, but businesses need to reduce their emissions first.
4. Getting started
Now comes the fun part (or the hard part, depending on how you look at it). The final step is to take action by enforcing the policy and staying on track to meet your business’ net-zero goals.
Some examples of carbon reduction methods include a matching initiative where businesses can match employee contributions. Another solution is to roll out a bike-to-work incentive for employees, offering a stipend for bike services, gear, or equipment. Applying for climate certifications like B Corp can help keep your team accountable. Following specific standards encourages companies to make actionable commitments to transparency, accountability, and real change.
Where to go from here
In a digital world where businesses rely on technological data, the road to net-zero requires commitment throughout all levels of an organization. Although the SEC disclosure will initially only affect public companies, it will likely impact government accountability, receiving funding from investors or banking institutions, and grants. These disclosures will naturally make their way into private companies, and all businesses must prepare.
Once the CSA’s proposed rules are finalized, teams will have to quickly adapt and find innovative ways to reduce their digital carbon footprint, but creating an effective policy does not happen overnight.
Companies need to account for the time it takes to hire a consultant, establish a baseline for their digital carbon footprint, introduce initiatives to reduce carbon, and test to see if their efforts resulted in a decrease in emissions — all before they can confidently say they are moving towards net zero.
Sooner or later, reporting on climate-related risks, including digital carbon footprints, will become standard in Canada. Creating an effective plan is a lengthy process, so it’s well worth it to prepare in advance and begin making changes today.