Say you are a maker of computer graphics cards, under pressure from investors questioning your green credentials. You know what to do. You email your various departments, asking them to tally up their carbon emissions and the energy they consume. Simple enough. You write a report pledging a more sustainable future, in which your trucks are electrified and solar panels adorn your offices.
Good start, your investors say. But what about the mines that produced the tantalum or palladium in your transistors? Or the silicon wafers that arrived via a lengthy supply chain? And what of when your product is shipped to customers, who install it in a laptop or run it 24/7 inside a data center to train an AI model like GPT-4 (or 5)? Eventually it will be discarded as trash or recycled. Chase down every ton of carbon and the emissions a company creates are many times times higher than it first seemed.
Calls are growing to require corporations to go through that rigorous carbon accounting process, part of a push to reveal emissions hidden within product life cycles. Wall Street’s regulator, the US Securities and Exchange Commission, argues that each ton of carbon emitted represents a risk that investors deserve to know about, because it might lead to costs and disruption from future carbon regulations around the world, and could alienate customers or employees concerned about climate change. Last year, the agency proposed rules, expected to be finalized next month, that would require most of the largest companies to take stock of all emissions, including those concealed deep in their supply chains.
Politicians in California have a parallel effort to force both public and private companies doing business in the state to confess the full scope of their emissions. The motivation is not just to help investors, but to make companies own up to the damage they cause, and help consumers sniff out false claims about sustainability. The proposed rules would require roughly 5,000 companies with revenue that exceeds $1 billion to report their emissions to a public database.
Scott Wiener, a state senator from San Francisco, imagines standing in the grocery aisle and being able to quickly check up on the emissions of companies marketing “climate-friendly” or “low-carbon” products. He’s hopeful forcing companies to make full disclosures will make greenwashing wither and “push enormous companies to do whatever it takes to decarbonize their supply chains.” A bank that invests in carbon-intensive businesses, for example, might think twice before doing so if customers can easily compare its operations with competitors.
Cynthia Hanawalt, a senior fellow at Columbia University’s Sabin Center for Climate Change Law, says that requiring these disclosures could flush out the true scale of corporate emissions. The majority are currently hidden from sight. “Right now we have a very haphazard system with inconsistent voluntary reporting,” she says. “That's not serving anyone well—except maybe the fossil fuel industry.”
Both the SEC and California’s efforts to force greater transparency have seen pushback. Many companies voluntarily disclose some of their carbon pollution, but with a focus on emissions from their own emissions and those from their energy use, categorized as “Scope 1” and “Scope 2” in climate jargon. These are often the easiest emissions for a company to control, by doing things like installing solar panels on offices or electrifying trucks. “Scope 3” is everything else, including emissions related to supply chains and product use or investments.