Reducing GHG emissions is good for business as well as the environment
Globally, the push to create and strengthen ESG (environmental, social, and governance) requirements is primarily a response to climate change and a need for sustainability. In the EU, these requirements are quite stringent. In fact, for the EU, companies that have more than 250 employees (regardless of whether the company is public, private, or a foreign subsidiary), reporting is mandatory, with requirements being phased in between 2024 and 2026.
Why is ESG so important for a company? It turns out that investors look at how a company treats these issues to determine whether or how much to invest in that company. Back in 2018, a Forbes article noted that “ESG investing is estimated at over $20 trillion in AUM or around a quarter of all professionally managed assets around the world.” The problem, up to this time has been a lack of accurate tracking and reporting. Recent and new mandates are attempts at increasing both performance and accurate reporting.
GHG is the first area of concern in the U.S.
In the U.S., the focus currently is on climate reporting regarding greenhouse gas (GHG) emissions and applies only to publicly traded companies. In March of 2022, the Securities and Exchange Commission (SEC) in a nearly 500-page document, proposed new rules for these public companies to provide information regarding climate-related risks. The public comment period ended June 2022 and about 14,000 comments were received. The original goal for adopting the final rules was October of 2022; however, the SEC is still reviewing comments and they expect some legal pushback once the rules are adopted. Regardless of this, the SEC has indicated that these rules would be for FY 2023 reporting for filing in FY 2024.
When it comes to GHG, the SEC-proposed rules would mandate required disclosure of a registrant’s Scopes 1 and 2 emissions and Scope 3 emissions, if applicable on the Form 10-K disclosures. Scope 1 emissions are direct GHG emissions from a company which includes emissions associated with fuel combustion in owned and leased vehicles. Scope 2 emissions are indirect emissions associated with the purchase of energy, while Scope 3 emissions are indirect upstream or downstream emissions from the supply chain, in other words, indirect emissions that are not “owned” by a company.
Obviously, for fleet owners and managers, Scope 1 emissions are the most relevant for their own reporting. However, Pat Gaskins, Sr. Vice President of Corcentric Fleet Solutions, in a recent FleetOwner blog, noted that shippers are interested in a fleet’s GHG emissions as part of Scope 3 reporting as the vehicles would be part of their supply chain. As Pat notes, “We are seeing more requests for proposals from shippers that contain questions about what fleets are doing to lower their emissions and reduce their carbon footprint.”
Corcentric helps fleet customers save money while providing accurate reporting
Although the SEC proposed regulations apply only to public companies (at least at this point), we’ve found that private companies with fleets are interested in reducing their GHG as well and complying with Scope 1 emissions standards. Scope 1 mobile GHG emissions are produced as fossil fuels are burned. Carbon dioxide (CO2), methane (CO4), and nitrous oxide (N20) are emitted directly through the combustion of fossil fuels in different types of mobile equipment.
Corcentric has the expertise and technology to help fleets accurately measure their emissions, regardless of whether they lease all or only a portion of their trucks through us. We do this on a monthly basis, using data from the fleet’s vehicle’s own onboard computer, analyzing things like fuel type, fuel use, distance traveled, fuel economy, vehicle type and model year. The methodology we use in calculating GHG emissions is from the Greenhouse Gas Protocol Corporate Accounting and Reporting Standards and the results go right on 10K disclosure forms.
But how is this saving money? The last couple of years have been difficult for fleets when it comes to vehicle replacement and maintenance due to supply chain shortages. Asset management has become ever more important, so we help our customers by managing their asset lifecycle more effectively, helping to ensure they don’t run their assets too long. We measure the emissions for the entire fleet at a truck level and compare the emissions of a new asset to the emissions from the vehicle it replaced. This way, we can quantify the reduction in a way that customers can actually see.
In addition to a reduction in emissions, newer trucks are more fuel-efficient, and with the volatile nature of diesel prices, better fuel economy savings go straight to the bottom line. Those savings are in addition to lower emissions so it’s a win-win all around. GHG disclosure rules are coming. Public companies need to be ready; private companies should consider this a nudge to find ways to increase efficiency and decrease emission levels.
Contact us to learn how we can help your business calculate emissions and maintain business continuity at [email protected].