To cure sustainability reporting burnout, join forces

Accountability is essential to corporate climate action, but sustainability officers are already struggling under a reporting burden. There must be a better way, writes IDH’s cocoa programme director, Renske Aarnoudse.

More than 8,000 companies have committed to climate targets, which is an opportunity to create meaningful change. But the resources available for climate action are not giving rise to credible, accurate sustainability data reliably or efficiently enough. There is a way to get there. But to do it, competitors will need to cooperate.

Scope 3 emissions remain a hard nut to crack

Companies have been backing nature and climate initiatives for years. To give examples from my field, in Côte d’Ivoire, Nestlé is helping protect and restore the Cavally forest and Hershey’s is supporting the Mabi-Yaya Nature Reserve and reforesting nearly 1,000 hectares. In Aceh, Indonesia, PepsiCo and Unilever support deforestation monitoring and regeneration work that is helping bring back rainforests threatened by palm oil expansion.

Major brands in cocoa, coffee and apparel have pledged to cut 30-50% of their Scope 3 (indirect) greenhouse gas (GHG) emissions by 2030.But reducing emissions at farm or plantation level remains elusive, although up to 80% of emissions come from the first steps in the supply chain. There is a lingering perception in some sectors that reducing emissions beyond tier-1 suppliers is at odds with competitiveness. Why is this?

Insurance and derisking

Lack of access to loans and insurance delays transition action on the ground, exacerbating risks and costs. As time passes, climate impacts grow, and the complexity and demands of collaborating increase, dissuading companies from collaborating widely.

However, if collateral or evidence of company sourcing commitments are in place, farmers can have easier access to loans and insurance from local banks to facilitate farm-level transitions. For example, farmers producing rice and beans in Tanzania gained access to loans and insurance after receiving the appropriate support as part of an initiative led by Raphael Group.

Decarbonisation finance comes with requirements

Private sector finance will become increasingly central in climate action as public and grant funding is constrained. This trend has already begun, after major international development institution USAID was formally closed, and the Netherlands, the UK, France, and Belgium all cut their international development budgets by between 25 and 40%.

But decarbonisation finance has requirements, which the current dynamics in agricultural production are failing to meet. One requirement is high-quality, credible measurement, verification, and reporting (MRV) systems and carbon accounting.

Missed opportunities in monitoring and reporting

We hear from many sustainability professionals that much of their resources in terms of time and budget are taken up by reporting. Brussels-based think tank CEPS last month flagged what they called a ‘sustainability reporting overload’. When it comes to Scope 3 emissions, some of our partners have told us that up to 40% of the costs of key programmes is spent on MRV.

High-quality data and accountability are the cornerstones of meaningful change. Indeed, monitoring was reported by forest protection experts as the number one most important factor in forest protection in the Brazilian Amazon in the 2010s.

New rules and new opportunities

The GHG Protocol is behind the most widely used greenhouse gas reporting standard. The Science Based Targets Initiative (SBTi) was created to help companies set climate ambitions in line with climate science.

New guidance by the GHG Protocol and SBTI is expected to authorise companies to make greenhouse gas emissions claims at the level of larger agricultural areas. This would provide more flexibility for multiple companies that source from the same area to invest in emissions reduction together, lowering cost and risk and increasing the credibility of claims.

A partnership of the most important cocoa companies has already jumped on the opportunity. The World Cocoa Foundation and Quantis led the development of a new GHG accounting manual based on the draft protocol. with input from leading cocoa companies, to help companies in the sector with more accurate and aligned GHG accounting and reporting. This is a clear signal that the cocoa sector sees the need for collaboration.

Don’t hesitate: collaborate

It is clear to us, as IDH, after 15 years working with companies to improve the sustainability of their operations and of value chains, that we see the best results when companies collaborate with one another.We also understand the business reasons why collaboration is not always easy.

But data sharing is an accessible and practical way to collaborate with clear mutual benefits, and it often generates its own evidence of the value of collaboration. This, in turn, can break the vicious cycle of distrust and hoarding of data and insights.

It is up to the private sector to lead with long-term vision, which can then be enabled through public policy and financial innovation.

The article was first published on edie.net.