Fights against climate action: Inaccurate emission quantification can hinder the fight against climate change. To create action plans for mitigation and adaptation, one needs the right data of emissions released. If emissions are not accurately quantified, it becomes challenging to identify sources of emissions that can be targeted for reduction. Additionally, if emissions are underestimated, mitigation efforts may not be sufficient to reach emissions reduction goals. At the organizational level, if companies are exceeding their emissions quota, it might ruin prospects to meet the Nationally Determined Contributions (NDCs).
Investment options: Not disclosing emissions can ruin investment prospects for a company because it creates uncertainty and risk for investors. If a company is not transparent about its environmental impact, investors may assume that the company is not taking the necessary steps to reduce its GHG emissions and may be exposed to environmental and long-term financial risks. Conversely, companies that are transparent about their GHG emissions and are taking action to reduce their environmental impact may attract environmentally conscious investors and have a more positive investment outlook.
Regulatory risk: Organizations that fail to accurately quantify their emissions may face regulatory risks. Governments are increasingly implementing emissions reduction regulations, and failing to comply with these can lead to fines or legal penalties. In various jurdisctions across the globe, disclosing emissions figure has become compulsory. Some countries have restrictions on imports or exports of goods based on emissions data. Failure to disclose emissions data can result in market access restrictions, making it difficult or impossible to sell products in certain markets.
Cost optimization: Being aware of operational/supply chain emissions can help make processes more efficient directly translating to reduced fuel/electricity consumption. Furthermore, an organization might overestimate their emissions, leading to overpaying for carbon credits or other emissions reduction programs.
For example, a company might overestimate their emissions and purchase too many carbon offsets, leading to unnecessary expenses. Inaccurate emissions reporting could also result in higher costs for compliance with emissions regulations or taxes.
Reputation: Misreporting or inaccurate reporting of emissions can damage an organization’s reputation. Companies seen as not taking climate change seriously or failing to accurately report their emissions may face negative public perception, leading to loss of trust and confidence from investors, customers and vendor partners. For example, in 2015, Volkswagen was found to have cheated on emissions tests for their diesel vehicles, leading to a scandal, significant fines and damaged the public’s trust in the company.
In conclusion, accurate emission quantification is crucial for effective emissions reduction, meeting regulatory requirements, protecting reputation, and promoting transparency. Failing to quantify emissions accurately can have significant consequences, including hindering efforts to fight climate change, exposing organizations to regulatory risks, damaging reputation, and reducing transparency.