INSIDER: How Can Governments and Businesses Accelerate Climate Action? Through “Data and Ambition Loops”
Who needs to lead the way in tackling climate change? Some would say businesses, whose operations and products are responsible for a large share of emissions. Others say national governments can set policies to hasten the transition to a low-carbon future. In reality, we need both corporate and government leaders to work together to tackle a problem as big as the climate crisis.
Our research The Ambition Loop shows that every action businesses take to address climate change can add confidence for governments to set strong climate policies, just as government action to put in place new targets and legislation gives companies greater confidence that investing in a zero-carbon future is a smart business decision. A great example is the 28 major companies that recently committed to set climate targets aligned with what science shows is necessary to limit temperature rise to 1.5 degrees C (2.7 degrees F), while at the same time challenging governments to match this ambition at the forthcoming U.N. Climate Action Summit in September.
Data is a key area where business and governments can collaborate to accelerate climate action.
Countries need to be transparent when reporting their greenhouse gas emissions in order to give the public confidence that progress is being made on national climate goals. But governments cannot do this on their own---they often turn to the private sector to provide essential emissions data related to business activities. Credible, detailed data from both the government and non-state actors is critical not only to help fulfill reporting requirements under the Paris Agreement, but ultimately to help governments stay on track to actually achieve their commitments.
In a new paper, Data and Ambition Loops for Enhanced Climate Action, WRI outlines how governments can work with the private sector to develop more robust corporate and national greenhouse gas inventories, and the ways that such data can inform their decisions. We call this public-private collaborative effort a data loop. Our analysis also shows how data and ambition loops can interlink to pave the way for enhanced climate action, with a focus on Southeast Asia.
Data Loops for Climate Action
Two of the ways governments encourage the private sector to provide climate-related data is through mandatory reporting arrangements and incentivizing participation in voluntary reporting programs. By sharing more of their data, the private sector supports government efforts to strengthen domestic and international measurement, reporting and verification systems. These systems are vital to provide transparency and build trust with other governments and stakeholders. As described below, better data-sharing is good for business, too: Stronger information flows lead to better government policy and well-designed incentive structures, which in turn generate opportunities for the private sector to curb emissions and invest more in climate solutions.
Here are three things governments should consider when establishing an effective data loop:
Mandatory reporting requirements are not enough; governments must build trust in these systems. For example, when designing mandatory reporting systems, governments can implement measures to ensure confidentiality of commercially sensitive data, adopt robust methodological standards, streamline and harmonize greenhouse gas reporting with other reporting requirements, strengthen the stakeholder management process, and establish clear legal structures to ensure the system's sustainability. Most developed countries took such steps to build sophisticated mandatory reporting systems. South Korea, for instance, developed its Greenhouse Gas Target Management System through in-depth consultations between the government and the private sector.
Voluntary disclosure or reporting schemes should also be used to engage with and empower the private sector to transparently track efforts to reduce emissions. The private and financial sector is expanding participation in voluntary reporting programs; for example, the Task Force on Climate-related Financial Disclosures, which recently released recommendations on how companies can assess and disclose climate-related risks and opportunities, now has the support of more than 800 companies. Methodological standards, such as the Greenhouse Gas Protocol for emissions accounting, have also helped provide additional data quality and consistency. Currently, about 90% of Fortune 500 companies report to CDP using the Greenhouse Gas Protocol.
Investment from both governments and the private sector is essential. Governments need to invest in establishing robust greenhouse gas disclosure and reporting schemes. Meanwhile, companies require skilled staff to collect and process greenhouse gas data and to measure performance over time.
From Better Data to More Climate Action
Data loops can be more powerful when combined with cooperative efforts aimed at mobilizing and enhancing climate action. The data loop concept builds off the idea of an ambition loop, a positive feedback loop in which bold government policies and private sector leadership reinforce each other, and together take climate action to the next level.
There are many ways that data and ambition loops can work together. For example:
Carbon pricing. Not surprisingly, data collection and monitoring systems are prerequisites for effective carbon pricing schemes; if greenhouse gas emissions are not counted, they cannot be taxed or traded. For instance, for emissions-trading systems, a lack of accurate data could result in a mismatch of issued allowances and actual emissions. A well-equipped carbon pricing scheme can encourage investors to fund carbon-neutral technologies. For carbon pricing to effectively support greater climate action, the schemes must be built upon strong data. A growing number of countries are considering efforts to expand carbon-pricing schemes, and some companies have even adopted and applied internal carbon prices.
Science-based targets. The Science Based Targets initiative (SBTi) encourages companies to set science-based emissions-reduction targets, those in line with limiting global temperature rise to either 1.5 degrees C (2.7 degrees F) or well below 2 degrees C (3.6 degrees F). Doing so requires companies to understand their emissions and prepare greenhouse gas inventories. Japan's efforts to encourage private sector participation in the SBTi should be an example for other countries; the government has even set a goal of 100 Japanese companies with approved science-based targets by the end of 2020.
A good example of how data and ambition loops can be mutually reinforcing through the use of science-based targets and carbon pricing is demonstrated by City Developments Limited, a Singaporean real estate company. The company has taken steps to better understand its own greenhouse gas emissions data, including ensuring its accuracy via third-party verification. It also has a science-based target approved by the SBTi and has set an internal carbon price, furthering its efforts to explore ways to enhance climate action. The company has said that it was motivated by the global momentum from governments reflected in the Paris Agreement and by Singapore's efforts to reduce greenhouse gas emissions, including the recent adoption of Singapore's carbon tax.
Strengthening Corporate and Government Climate Action
Governments and business must significantly step up their game to stand a chance of achieving the objectives of the Paris Agreement. Strengthening efforts for data-sharing between governments and business will go a long way towards informing stronger national and corporate climate action at the pace and scale needed. This opportunity has yet to be fully seized by national governments and corporations. But as our latest analysis shows, there are a number of good examples that are ready to be replicated.
This paper was produced as part of the Partnership to Strengthen Transparency for co-Innovation (PaSTI)*, a collaboration between WRI, WRI Indonesia, the Overseas Environmental Cooperation Center, and the Japanese Ministry of the Environment. PaSTI aims to: engage non-state actors, including the private sector, in climate action; enhance the capacities of institutional structures in developing countries; and strengthen transparency systems at the regional, national and subnational levels. PaSTI's work focuses on Asia, particularly in countries in the Association of Southeast Asian Nations (ASEAN).