By Jane Andrew, University of Sydney and Corinne Cortese, University of Wollongong

Five years ago, we really didn’t have a clue what an organisation’s carbon impact might look like, and few firms had any sort of carbon-oriented business plan. Now, the trend is to fill this gap by producing carbon reports.

But within this story of emerging carbon reporting practice lies another story that has received little attention – how corporate elites have worked together to design their own self-regulations.

Before we get to that, it’s important we map out the story so far.

A brand new idea

Going back a few years now, there was a general feeling that organisations should tell us more about their carbon footprint, so that both insiders and outsiders could start to move towards more carbon sensitive decisions.

This was a kind of mobilisation phase – getting people on board with a new idea. Arguments were developed, suggesting reasons why organisations should tell us more about carbon. Some of these reasons offered a moral framing of organisational responsibility, while others articulated a more strategic need for good carbon data to manage climate change risks.

Carbon reporting soon became the focus of discussion, and we saw a rapid growth in the production and reporting of carbon-related data. Many organisations began to focus on the carbon disclosures they produced for outside users.

Such projects are technically difficult, and also very “market sensitive”. It’s understandable that firms didn’t want to get the measurements wrong, and most of us can appreciate that they didn’t want to get their carbon image wrong either. Outside of these organisations, there was a growing call for carbon information to be placed in the public domain to give us some idea of how organisations were managing carbon “risks and opportunities”. Firms began to respond.

The idea was simple; organisations provide information voluntarily, thereby signalling their good citizenship and strategic management of climate change abatement responsibilities.

Such a disclosure regime rests on the logic that a free market will provide the information demanded by participants without the need for regulatory intervention. “Good” organisations would be rewarded with greater investment and better borrowing conditions and “bad” performers would be disciplined (they’d be put out of business or reform their behaviour to attract necessary capital).

The problems with this kind of green capitalism that are well documented. So, for the purposes of this article, we’ll just focus on one tiny part: the practical reality of carbon reporting data and its potential role in climate change abatement.

Who designs the standard?

In reality, carbon reports are almost impossible to compare. There are now so many voluntary disclosure regimes and carbon reporting practices. These are based on a variety of frameworks and protocols. In effect, this means carbon information can look comparable, but in actual fact the output can be significantly different.

This has been frustrating. The frustration is particularly acute when trying to make the capital allocation decisions that have driven much of the carbon reporting agenda. These decisions depend on information that is comparable and standardised.

The existence of different reporting frameworks has limited the capacity for good market allocation decisions, and it has also limited our capacity to understand an organisation’s actual carbon impact.

The problem has not gone unnoticed. But up to this point, it has dodged any serious regulatory intervention, and has presented an opportunity for reporters to build a “standardised” framework themselves. It’s a scenario with obvious problems, but it has managed to fly under the radar and avoid much attention.

So who is designing the “global standards” for carbon reporting? The answer: perhaps disturbingly – is the private sector within the Carbon Disclosure Standards Board (CDSB) leading this international initiative. It is important to note that the CDSB is a side project of the World Economic Forum (WEF), an organisation that is well known for its elite, private status.

This in itself is problematic. But the problems are amplified because the obvious exclusivity of membership within the WEF has been reproduced within the centres of the CDSB – without an eyebrow raised.

By way of example, the advisory board that guides the work of the CDSB is made up of representatives from corporations including Duke Energy, Praxair, Rio Tinto, British Telecom and Tokyo Electric Power Corporation. On the Board itself are representatives from groups such as CERES, the WEF, the Climate Registry, the Carbon Disclosure Project, the Climate Group, the World Resources Institute and the International Emissions Trading Association (IETA).

On face value, there appears to be an appropriate mix of “players” in the development of standards. But with a little further digging, it is apparent that within all of these groups, similar organisations are funding or participating in their activities in some way.

For example, the IETA has over 180 members from around the globe. The current Chairman is a Senior Climate Change Adviser for the Royal Dutch Shell Group, and a Vice Chairman is from Rio Tinto. Both Royal Dutch Shell and Rio Tinto have served on the Advisory Committee of the CDSB. Other members of the IETA that are also members of the CDSB Advisory Committee and Technical Working Group include Duke Energy, APX Power Markets, JP Morgan Chase, Deloitte, Ernst & Young, KPMG, and PricewaterhouseCoopers.

Closed shop

Similar patterns of interconnectedness can be seen with other members of the board, advisory group and technical consultants. In other words, the same key players have a role in the development of carbon reporting initiatives. In effect, voluntary carbon regulation has become a closed shop. There are all kinds of reasons why this may be a reasonable space for regulatory development but we make a simple, yet important, observation.

Organisations like the CDSB are not neutral arbiters of best practice. They are vested with a wealth of political and economic power – and they are working hard to make sure carbon reporting regulation reflects the wishes of their members.

Given this, some researchers are now suggesting that the focus on reporting techniques has distracted attention away from more fundamental questions about environmental governance. In our rush to encourage a carbon sensitive market, there has been little room to pause and ask, who is behind all this? What will be the tangible environmental benefits that result? Are we ready to believe that publicly listed companies will formulate carbon regulations that serve the planet?

Jane Andrew and Corinne Cortese received funding from the Institute of Chartered Accountants for their project on carbon reporting.

Corinne Cortese does not work for, consult to, own shares in or receive funding from any company or organisation that would benefit from this article, and has no relevant affiliations.

This article was originally published at The Conversation.

Read the original article.