Big companies employ a wealth of tricks to keep their climate pledges on track. They use vague and misleading wording to improve their image without actually making any real changes; they offset their corporate travel through donations to environmental projects without actually flying any less. And then there’s creative climate accounting: Furniture behemoth Ikea, for example, counts the carbon stored in its wooden chairs and beds, even though they’re unlikely to grace a home for as long as the trees they come from would have stayed in the forest. When it sells a solar panel to a household, Ikea puts the emissions saved in its carbon credit column too.
Sometimes, these “greenwashing” tactics happen by accident. “I don’t think all greenwashing is intended,” says Lubomila Jordanova, the founder and CEO of Berlin-based carbon reporting firm Plan A. During a trip to Morocco in 2016, Jordanova became aware of how much humans were harming nature. Instead of surfing with her friends, she spent a week picking plastic from the beach. Back home, she educated herself about climate change and pollution and realized that businesses are the key to combating these issues on a large scale. “Because they have capital, they have people, they have visibility and also a lot of influence,” she says.
But she quickly learned that even companies that wanted to tackle climate change, and specifically their own greenhouse gas emissions, weren’t always going about it the right way.
Under pressure from investors, partners, and consumers, companies have stocked up on reporting tools and adorned themselves with flawed green credentials. Because of the low level of education in the market, Jordanova says, some companies are making misinformed announcements about their decarbonization. They might think they’re doing the right thing, even if they’re not. “There will be a lot of shiny dashboards that are being sold as carbon accounting software or sustainability optimization tools,” Jordanova says.
Jordanova also sells dashboards. But Plan A doesn’t promise “net zero” or “carbon neutral” labels; instead it offers a digital platform that processes corporate data through automation and prediction. On the dashboard, users can then track their emissions and identify areas—whether in manufacturing, the workplace, or business travel—where they could reduce more, faster, and help mitigate the worst effects of climate change. However, tackling these hotspots is not so easy, especially when a company’s products are characterized by a long and globalized value chain—relying on materials and resources from all over the world.
Take BMW, for example. Since 2020, the German carmaker has been using Plan A’s platform to calculate monthly emissions from sources it owns or controls. “The platform starts with what we call data mapping,” says Jordanova. Companies make their existing data available. Where there are gaps, Plan A uses proxy measurements. “It gives us a really good opportunity to understand the data maturity of the company, but also enables them to see the sustainability picture from all these different sources in a single place,” she says.
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After mapping comes planning. Sustainability professionals, warehouse managers, CFOs, or whoever uses the platform are given a to-do list for decarbonization. “It explains specifically what kind of materials you need to switch to, what stakeholders you need to involve, and who is responsible for this decarbonization activity,” Jordanova says. The science-based approach to analyzing company data and setting targets is particularly important to Jordanova. Reducing emissions takes precedence over offsetting, although companies still have the option to purchase schemes to balance out unavoidable emissions, as is common in industry.
The next step is reporting: important for investors, business partners, and increasingly for consumers and regulators too. The platform generates automated reports on a company’s environmental, social, and governance (ESG) impacts, which are roughly divided into three groups: Scope 1 are direct emissions from resources owned and controlled by the company; Scope 2 are indirect emissions from purchased energy, such as electricity, heating, or cooling. Companies around the world must report these according to the standardized Greenhouse Gas Protocol. And they can do even more if they want to: Emissions from the value chain, or Scope 3, for which companies are indirectly responsible, are often the biggest sticking point in decarbonization.
Let’s return to the example of BMW. The group already buys electricity from renewable sources for its plants—there are even four wind turbines on its site in Leipzig. But what happens before and after production is also crucial. For example, around 70 percent of current emissions occur once the cars and motorbikes are being driven by their new owners. The switch to all-electric vehicles brings BMW closer to its goal of reducing the overall carbon footprint of its vehicles by at least 40 percent by 2030 compared to 2019. To do this, it must also deal with how lithium, cobalt, and other metals in its batteries are mined, processed, and ultimately recycled. “If you take a company like BMW, you’re talking about a vast, transformational challenge that is related to engaging not only your internal entities, but your suppliers,” says Jordanova.
In October 2022, Plan A introduced a module that also allows companies to track emissions along the value chain (Scope 3). Specifically, this means that third parties such as suppliers or logistics partners are invited to feed their data into the platform. “This creates network effects for the whole decarbonization assessment,” says Jordanova.
For companies to avoid greenwashing, it is important that they disclose all areas of emissions in their reports. Otherwise, their goal of achieving net-zero emissions may look good on paper but bad in practice—and well-meaning investors, partners, and consumers could be misled. ESG reporting has become even more important in recent months as regulators in Europe and the US are cracking down on greenwashing, causing companies to shy away from big decarbonization announcements, Jordanova says. “All these net-zero targets are meaningless if we don’t really understand what it takes to achieve them,” she says.
On November 2, 2022, Lubomila Jordanova will be speaking at WIRED Impact, Europe’s leading one-day event examining the fast-changing world of sustainability and ESG. Find out more and book your ticket here.
This article appears in the January/February 2023 issue of WIRED UK magazine.