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Keeping Companies Accountable

A recent analysis from Stanford Graduate School of Business (GSB) notes that though humanity has had a number of climate conferences in the past, the results are startlingly lacking. One of the reasons is that effective climate policies—meaningful carbon pricing and direct emission regulations—are costly and take a long time to show results. Therefore, they are not championed by politicians, who often need short-term wins to secure their seats in the next election cycle. However, there is still a way out: legislate a carbon footprint report.


Research from Prof. Stefan Reichelstein, a Stanford GSB professor, shows that mandatory carbon footprint reporting can lead to tangible results which can yield better, more stringent environmental laws in the future. In the UK, the only country in the world where the law requires carbon reporting, companies outperform their European counterparts in carbon reduction by 8%. Though this might seem strange, as Europe has always been hailed as the green continent, it must be understood that the reporting of carbon footprint puts firms in a direct judgment of consumers. With environmental concerns being at the forefront of people’s minds, they are increasingly likely to support businesses that take action to prevent climate change and environmental disasters. Therefore, British companies found direct economic value in taking concrete action to reduce their emission to win consumer support.


One of the most exciting phenomena in this Stanford study is that while many UK firms invested millions of Pounds into reducing emissions, they continued to profit. This was because companies could command more premium prices from consumers. By gaining brand loyalty from today’s environmentally-conscious people, businesses could charge a higher price that covers all their investments to lower their carbon tracks. Besides that, Prof. Reichelstein also noted that carbon reporting would benefit ESG investment, which, according to Bloomberg, is steadily rising. Companies can present themselves in a good light, ready for ESG investors to assess and make the investment.

Climate action and environmental preservation require effective laws and regulations for substantive changes to take hold. However, while more drastic policies are in work, a quick win is necessary to show the skeptics that the fight against climate change is possible. The regulation of carbon reporting is undoubtedly a GREAT example of a quick win that can only happen with concerted efforts—government’s policies, companies’ actions, and consumers’ supports.

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