The Earth just set heat records on back-to-back days. Scientists warn this is only the beginning of the dire consequences of human-caused climate change. This phenomenon is becoming more than a headline — 85% of consumers say climate change is disrupting their lives in some way.
This impact has spurred action. Nearly half of surveyed adults say they are buying more sustainable products, incentivizing companies to demonstrate the environmentally friendly nature of their products. But experts say consumer action may be far less significant in the long run than what corporations do (or don’t do).
Businesses already face pressure from new government regulations mandating sustainability reporting and action. The European Union recently adopted the Corporate Sustainability Due Diligence Directive (CSDDD), which requires large companies doing business in the EU to take concrete action to mitigate their adverse impacts on human rights and the environment. In the U.S., the Securities and Exchange Commission also announced new rules requiring public companies to report climate-related information, although those rules are on hold pending court challenges.
As it stands, consumers remain skeptical about corporate climate action. Some companies have been exposed for greenwashing their data, while others make big promises but only achieve small results. Corporations must overcome this public uncertainty, ESG experts say.
“A lack of climate transparency leads consumers to fill the void with incorrect assumptions or misinformation. Data and validated claims are key for companies striving to make a positive climate impact,” said Tim Weiss, CEO, and co-founder of Optera, an ESG and carbon management software company. “Accurate emissions data enables better decisions making at the company level but also for end consumers. Granular and trusted information on product carbon footprints or corporate emissions will accelerate decarbonization, because all market participants from investors, businesses, end consumers, and regulators will all be able to act on the same fundamental information and believe the claims they hear. The problem today is that many companies lack sufficient data to achieve these ends.”
The responsibility of corporations
As much as we would like to think we are making a difference by buying sustainable products, the reality is our contribution is only a small drop in the bucket. Yes, every little bit helps, but corporations hold the real power to drive substantial impact.
According to government figures, the industrial sector accounts for one-third of all U.S. energy consumption, with manufacturing consuming the lion’s share. Meanwhile, the residential sector uses only 21% of the total. Small sustainability changes at a manufacturing plant will create a much bigger impact than major adjustments at a home or even an apartment building.
Most of us try to recycle, but a large chunk of consumer products are nonrecyclable. Additionally, we have little control over upstream emissions (those generated by material sourcing, manufacturing, transportation, etc.). We can only buy what companies are selling.
It’s true that consumers care about sustainability and are willing to pay for it. According to a recent Prosper Insights & Analytics survey, 30% of consumers spend more on environmentally sustainable brands. The percentage is higher for Gen Z and Millennials, who are about to surpass Bomers in purchasing power.
However, the business benefits of sustainability extend far beyond brand reputation.
“Companies cannot continue with business as usual. We will not consume fossil fuels at the same rate in the future as we do today, and this is fundamentally changing how companies need to operate and what products and services they sell,” said Weiss. “Climate change threatens everything from material sourcing to shipping to product usage. Businesses must mitigate that operational risk while moving toward the low-carbon economy. There is no downside to embracing sustainability, while there is only danger in continuing to ignore the problem.”
While ESG initiatives have become somewhat political, new data suggests this debate hasn’t impacted consumer sentiment.
Consumers are also voicing their concerns when providing public feedback to businesses. In the past three years, reviews mentioning “sustainability” on Sitejabber, a consumer reviews website, have increased by over 40% compared to the previous three years. “We’re seeing a big uptick in consumers who care about the impact brands have on the environment,” said Michael Lai, CEO, and co-founder of Sitejabber. “In fact, reviews mentioning “eco-friendly” have more than doubled in each of the past two years, indicating that this is something that continues to gain importance when consumers decide which brands to associate with.“
The real challenge for companies is demonstrating to consumers that their efforts are more than lip service.
Proving sustainability
So, how can companies reduce their greenhouse gas (GHG) emissions and prove their impact? Weiss says that when a climate program is run correctly, reduction and reporting go hand in hand, and it’s all about the data.
He explains that establishing a baseline is the first step in the decarbonization journey. Companies must measure scope 1 emissions, which encompass those generated from sources owned or controlled by a company, such as waste disposal or manufacturing equipment, and scope 2, consisting of emissions generated by the energy a company consumes.
These are all owned emissions, which means companies have direct control over them. Improvements are somewhat more straightforward because they can be made internally, such as transitioning to renewable power sources or upgrading to energy-efficient equipment.
“Reporting on owned emissions is already table stakes for most companies, and companies will now begin to focus on the more substantial risk—scope 3 emissions,” said Weiss. Scope 3 emissions—those generated by the entire value chain—account for 70% of a company’s total carbon footprint. These emissions come from everything from a supplier’s manufacturing processes to how the end buyer disposes of a product.
Mesuring and reducing this output poses a challenge, but organizations must develop strategies to both gather this data and engage with partners to reduce emissions.
Carbon accounting software supports this effort by facilitating data sharing and providing tools to measure, track and manage emissions. When companies can gather more granular data at the product, supplier, or facility level, they can build more actionable strategies to reduce emissions.
One particular scope 3 category that has been notoriously difficult to quantify is direct-use product emissions. These are generated when we, as consumers, use a product, such as a lawn mower’s fuel usage and exhaust or the electricity required to run a hairdryer. This information is particularly useful to major retailers in their efforts to reduce climate impact. Members of the consumer and climate sectors are collaborating to make this data available.
For example, the Retail Industry Leaders Association (RILA) partnered with Optera to create the Direct-Use Product Emissions Database (DPED), which combines information from suppliers and the EPA to provide standardized product emissions data.
The database is available to any retailer who wants to use it. Right now, the information is at the product category level, but creators hope it will eventually narrow to the product level. This data will help retailers take accountability for these emissions and offer more eco-friendly products to us, the customers.
The future of sustainability
Many companies are making tangible strides toward climate goals, but more action is needed.
“It’s important to remember that any progress toward decarbonization is significant progress,” said Weiss. “A ton of carbon saved today is worth far more to the world than a ton saved in ten years. The time for measurement has passed — corporations must take decisive action to reduce emissions. Carbon reporting is more than an effort to appease the government and the public — it should be part of a holistic strategy to drive impactful change and business longevity.”
