Businesses play a crucial role in the race to reduce carbon emissions and achieve net zero targets. But to do so, better transparency disclosures need to be in place.
Carbon disclosures, although pivotal, are fraught with complexities that may prove to be a major deterrent for companies, especially those in Asia, says Max Lee, co-founder of Pantas, a smart invoicing platform.
Complexities alongside the crucial need for carbon disclosure, necessitate the implementation of carbon accounting software, says Lee.
“The responsibility to disclose and report carbon emissions has become much more important due to the increase in global regulations around environmental disclosure,” he continues.
“Companies will need to disclose their emissions data to international organisations such as CDP (Carbon Disclosure Project) and SBTi (Science Based Targets initiative) to remain competitive in the market. Large companies in the US and Europe have set standards and requirements for their suppliers to have this information publicly available.”
SBTi reported that 1,379 companies globally have emissions reduction plans approved as being in line with the science of climate change, which calls for emissions to be halved globally by 2030.
A partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF), SBTi enables organisations to set science-based emissions reduction targets. It aims to mobilise companies across the world to halve their emissions before 2030 and achieve net zero emissions by 2050.
CDP, on the other hand, aims to incentivise and guide companies towards disclosure by scoring them.
To date, only 14 companies in Malaysia have committed to SBTi, with Pantas joining in by committing to reach net zero emissions across its value chain by 2033.
The Pantas Green Solutions — the start-up’s carbon accounting software developed in collaboration with Universiti Kebangsaan Malaysia (UKM) in May — is able to seamlessly calculate, monitor and disclose greenhouse gas (GHG) emissions of companies, leveraging Pantas’ proprietary data as well as UKM’s carbon emissions factors, which are categorised into three scopes — Scope 1, 2 and 3.
The process of calculating, managing and disclosing a company’s Scope 1, 2 and 3 emissions is expensive, tedious and filled with jargon, says Lee. The majority of companies conduct this exercise using Excel spreadsheets and often omit Scope 3 emissions, he adds.
Expanding on the need for carbon accounting software, Dr Marlia Mohd Hanafiah, head of the Centre for Tropical Climate Change System at UKM, calls for better action to be taken by businesses and organisations to reduce their emissions, especially since they are the biggest contributors to GHG emissions.
“What Pantas did here is to simplify and help organisations to measure their energy emissions, because we know collecting inventory data is very time-consuming, as some of the employees don’t really understand the reason behind this assessment and why it is important,” says Marlia.
“This is why we need an assessment tool that can help them to better understand the impact of their activity and at the same time, to provide them with solutions to mitigate the problem.”
Multinational companies will soon remove suppliers that endanger their net zero emissions target by 2025, says Lee, citing Southeast Asia’s Green Economy 2021 Report by Bain & Co, Microsoft and Temasek.
“The power of the software is first you measure, then you match. Which is why we are working with experts like UKM and other solution partners who can help reduce emissions once the calculations are done,” says Lee.
“Having this disclosure means we can provide a specific emissions reduction target and you can have approximately a five-year projection of how much GHG emissions can be reduced by about 20% or 10% from your total operational activity,” says Marlia.