The 2013 “Carbon footprint” report “Accounting for carbon risk in the FTSE 100: Reinforcing disclosure” review measurement and reporting of GHG emissions to create an active dialogue(s) between key stakeholders about a reporting entity’s carbon intensity / financial risk matrix.

A significant challenge is to close the gap between measurement and change. On measurement the GHG Protocol classifies emissions into three ‘scopes’. Scope 1: emissions are direct emissions from owned or controlled sources. Scope 2: emissions are indirect emissions incurred in the supply of purchased electricity. Scope 3: emissions comprise all other indirect emissions occurring in the reporting company’s value chain, including both upstream and downstream activities.

On change our research focuses on macro carbon emissions for the UK national economy and a meso-economic level of analysis comprising 62 companies listed continuously in the FTSE100 over the period 2006 to 2012. Our analysis suggests that whilst national aggregates reveal reductions in carbon emissions these are contested. At a meso-level aggregate carbon emissions for our FTSE62 group of companies describe a relatively stable picture with total emissions in the range 450 to 460 million tonnes CO2e.

Within these aggregates there is significant company level volatility. This relates to the malleability of ‘boundary setting’ and the need to frame GHG emissions within the reporting entities responsibility and control. Firms are constantly restructuring: outsourcing and off-shoring business processes and carving up asset ownership and this, in turn, adjusts operational responsibility and reported carbon emissions.

These negative aspects concerning measurement are offset by other potential benefits. In this report we focus on the FTSE 100 listed companies and their scope 1 and 2 carbon emissions and match this with their key financial metrics. Our analysis required the development of a pilot software tool. This carbon risk-analytics tool is employed in this report to reveal relative carbon-financial risk in the FTSE100. Our argument is that our relative carbon-financial risk metrics should be incorporated into managerial remuneration packages as incentives to motivate change.

It is important to also be innovative and move beyond existing carbon emissions disclosure framing and reporting. The challenge is for the accounting profession to inspire new ways of thinking. In our research we draw from the institutional accounting debates, and our own research, on the application of business models for structuring accounting standards and as a means to help filter out relevant and material financial disclosures.

A focal firm’s business model can be financially described as the outcomes of stakeholder relationships some of which are more relevant and financially material than others. We could substitute ‘financial relations’ with ‘carbon relations’ and ask reporting entities to disclose their top ten carbon-material stakeholder relationships. This would not only provide additional contextual information: it would also be less susceptible to changes in a reporting entity’s boundary and would improve information consistency from one year to the next. It would reveal which stakeholder relations may be amenable to change and those that are not.

The first Carbon footprint” report was written together with Professor Colin Haslam, Dr Nick Tsitsianis, Dr John Malamatenios, Mr John Butlin, Dr Ya Ping Yin, Dr Edward Lee and Dr Glen Lehman.