Person drawing green pollution from a chimney.

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Calling time on greenwashing

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If international standards for measuring greenhouse gas emissions are flawed, what does this mean for companies and institutions trying to reduce their footprint?

It’s easy to be cynical about big businesses’ green credentials, but what if it wasn’t just the big corporations engaged in ‘greenwashing’? What if the global environmental reporting standards governing how organisations disclose their carbon footprints were also guilty of misrepresenting how well we’re cutting greenhouse gas emissions? Dr Matthew Brander and his international colleagues want to fix this system designed with the best intentions but flawed from the start.

Downbeat but determined might describe the mood during 2021’s United Nations Climate Change Conference, COP26. The verdict? The 2016 Paris Agreement goal of limiting global warming to ‘well below 2, preferably 1.5 degrees Celsius’ is on life support. To keep it alive and avoid a climate catastrophe that will dwarf even the most extreme consequences we’re experiencing right now, we have to do more and faster to cut greenhouse gas (GHG) emissions.

Contributing around 25 per cent of global GHG emissions annually, electricity generation is a crucial focus for international policymakers. As more than two-thirds of that power goes to companies running everything from manufacturing plants to the office printer, people understandably pay a lot of attention to corporates’ emissions-reducing efforts. For thousands of businesses, including some of the world’s biggest names, from Unilever and AstraZeneca to Marks & Spencer, the go-to solution to curb their carbon footprint is increasingly to buy green energy certificates.

It’s not easy being green

Dr Matthew Brander
Dr Matthew Brander, Senior Lecturer in Carbon Accounting at the University

“In the same way domestic green energy tariffs help us feel good about doing our part to reduce emissions at home, green energy certificates allow businesses to say that a proportion – or even 100 per cent – of their electricity comes from renewable sources,” explains Dr Matthew Brander, Senior Lecturer in Carbon Accounting at the University.

A great idea, Dr Brander says if it were not for one unfortunate fact: “My research with leading international colleagues shows that it’s highly unlikely that buying these certificates actually increases the amount of renewable electricity generated. Which also means that the money spent doesn’t help to reduce emissions. Whether we generate electricity by burning coal or harnessing the power of the sun, wind and water, it all feeds into the same grids. So, there’s no way to trace it.”

However, Dr Brander doesn’t feel corporate greed is necessarily to blame. “The certificates give companies a cheap way of communicating their environmental credentials, but they are not alone in using them,” he explains. “Many large organisations from universities to public service providers are also employing them to report emissions reductions. But that doesn’t mean this is only a cynical marketing ploy for everyone that buys them. Many organisations do believe in good faith that these certificates reduce their carbon footprint.”

Standard-setters should know better

Dr Brander feels it’s little wonder companies and others buying certificates they think are legitimate: “Governments and political institutions, such as the European Union, set the legal framework for issuing green energy certificates,” he says. “Meanwhile, many accounting standard-setters, and now non-governmental organisations (NGOs) that promote carbon reporting, still endorse their use – when they should know better. Whereas the revenues from selling carbon-offset certificates are invested in activities that actively reduce greenhouse gas emissions, the income from green energy certificates is too low and too uncertain to drive new renewable energy investments.”

Businessman puts dollar money bag on scaled opposite a small painted wooden green house.

Still, the idea has become so popular that there are now NGOs, such as RE100 in the United States, dedicated to encouraging companies to pledge to use certificates despite any evidence that they work.

There is another way

One major player to opt out of the green energy certificate market was software firm, Salesforce, and Dr Brander says the alternative it came up with might just be the future. “Salesforce has signed long-term contracts with renewable project developers to buy power from their solar or wind farm for an agreed price and a set amount of time,” he explains. “These Power Purchase Agreements can be impactful as they give these developers the collateral they need to secure finance to make new renewables projects happen.”

Dr Brander is currently engaging with the world’s leading emissions measurement standards setter, the Greenhouse Gas Protocol, to improve its guidance on how companies should account for their carbon emissions. He hopes these standards will lead to new practices that more accurately account for organisations’ carbon footprints and, crucially, reduce emissions.

“Not every organisation has the financial clout to sign a Power Purchase Agreement with a renewable project developer, but that doesn’t mean that accounting standards should allow misleading claims via non-additional certificates,” Dr Brander says. “Ending the sale of green energy certificates, or at least obliging issuers to prove their impact in terms of extra megawatt hours (MWh) in renewable energy produced, could make a significant difference. Ultimately, it’s all about showing the impact of actions to reduce emissions.”

Managing expectations

The researcher also draws a broader lesson from green energy certificates.

“Following the Paris Agreement, there has been talk of ‘non-state actors’, such as companies and NGOs, playing a key role in reaching global reduction targets,” explains Dr Brander. “However, the fiasco of green energy certificates calls into question how much governments can or should rely on voluntary corporate action. If trading non-additional certificates is the best that the majority of ‘non-state actors’ can come up with, given the limited time we have to tackle climate change, governments shouldn’t pass the buck this way. Instead, they must focus on direct and impactful policy interventions.”