How do we measure the transition to a low-carbon economy?

This article was originally published on CDP and is republished with permission.

CDP and the French energy and environment agency are developing a new method to assess a company’s alignment with the shift to a low-carbon economy. We are now running a consultation to hear your feedback.

At CDP we have long understood the value of keeping score. The ability to measure your progress accurately is the only true way of knowing if you are on the right path to achieving your goals.

The same principles of measurement and transparency apply if we are to achieve a low-carbon economy, which is the goal of the historic Paris Agreement.

That is why CDP and the French energy and environment agency, ADEME, initiated the Assessing low-carbon Transition initiative, or the ACT project. We are also partnering with 2 degrees investing, the European Investment Bank and Climate Check, as well as major companies and investors.

Announced at the international climate talks in Paris, the aim of our project is to develop and test methodologies that will allow us to understand to what degree a company’s GHG emissions and management, investments, operations and climate strategy as a whole align with a low-carbon economy.

Why ACT?

The project came about as a natural next step to help make sense of the many commitments and actions companies are taking to tackle climate change.

Through CDP’s annual request for disclosure from companies, we have amassed an unparalleled global picture of corporate climate action. Our global climate change report revealed last year just how far business has come – nine in ten companies now undertake emissions reduction activities compared to nearly five in ten six years ago.

And over the past year we have had wave after wave of companies continue to make commitments to climate action through CDP and the We Mean Business coalition. This includes 68 companies pledging to procure 100% renewable power and 172 businesses planning to set science-based emissions reduction goals to date.

This is a welcome sign of progress. However these are diverse and varied commitments that don’t give a clear picture of whether such actions, taken as a whole, will be sufficient for creating a low-carbon economy.

A new thermostat for testing

It is a matter of urgency that we give companies a shared vision of what they need to do, on a sector by sector basis, to help orchestrate the transition to a low-carbon future.

We have developed three ratings methodologies (for the auto manufacturer, electric utilities and retail sectors respectively) that could provide such a model.

These methodologies draw on the latest thinking and research on science-based targets, 2 degrees scenario testing and business model transition (for example with utilities).

Questions we’ve asked to help formulate a ratings methodology include: What is the gap between corporate climate commitments and what climate science requires? Are a company’s yearly emission reductions good enough? Is their R&D sufficiently aimed at developing low-carbon technologies? And does the corporate transition strategy stand up to the challenges faced by the sector?

Your feedback is crucial

We are now holding a public consultation to hear your expert views on how to improve these methods.

The consultation is open to everyone with an interest in the topic, but the project team particularly welcomes input from investors, corporate sustainability representatives, and governmental and non-governmental GHG program operators. Specialists in the three pilot sectors (electric utilities, auto manufacturing and retail) are also invited to provide their insights.

Those participating in the consultation will have the opportunity to have their feedback incorporated into the final version of the methodologies launched at COP22 in Marrakech this November.

Our ultimate goal is to drive action by companies that would put them on a pathway that is compatible with a low-carbon economy. It is a lofty goal, and in order to achieve it, we need input from experts far and wide. Now is your opportunity to help drive the shift to a more sustainable global economy.