The Embodied Carbon Construction Calculator (EC3) is a cloud-based platform built by structural engineers, architectural firms, materials manufacturers, contractors, and data scientists to measure and reduce the environmental footprints of buildings. EC3 is the forerunner of what the connected platforms of a sustainable future will resemble. It brings together standardized material-manufacturer information across project phases.
EC3 utilizes Open Data to tackle cradle-to-gate embodied carbon, as buildings contribute about 40 per cent of greenhouse gas (GHG) emissions worldwide. Cradle to gate embodied carbon refers to the emissions associated with the production of building materials, from raw material extraction to the manufacturing of finished products. It can be thought of as supply-chain carbon.
By 2023, every item of clothing sold in France will require a label that details the precise climate impact of the garment. The EU will implement the same rule by 2026. Ademe, the French Agency for Ecological Transition is now testing eleven proposals for platforms that can compile Open Data on the origins of raw materials in garments, including the dyes that were used, the distance the products travelled, and whether the factories were powered by renewables.
Brands must make their products traceable and organize automatic data collection. Traceability is obligatory. Plastics in the ocean will outweigh fish by 2050. Eight million tons of plastic waste spill into the sea every year, pushing hundreds of marine lifeforms to the edge of extinction either by way of ingestion, entanglement, or toxin exposure. By 2040, the amount of plastic trash that flows into the oceans annually is expected to be about 29 million metric tons.
In France, all fruit and vegetables weighing less than 1.5Kg will no longer be sold in plastic bags. In France, a multi-year packaging legislative rollout will phase out plastic straws, cups, cutlery, and styrofoam takeaway boxes. By 2026, the complete legislative package comes into effect. Companies must adapt to changing consumer preferences, and a nascent regulatory landscape that addresses issues pertinent to the climate crisis including hazardous flooding and dangerous heatwaves.
Low-lying large water states will soon face inundation. Coral reefs are bleaching and dying. Mangroves, seagrasses and wetlands are being degraded. Oceans are more acidic. These climate-related risks generate financial risks and global disclosure platforms leverage investors, companies, cities, states, regions and buyer-power to motivate companies to disclose and manage their environmental impacts.
In a 2019 survey, CDP, an international non-profit that runs a global disclosure system, found that 215 of the largest global companies faced nearly $1 trillion in risk from climate impacts. How companies in Latin America and the Caribbean plan for and respond to climate risks will affect their ability to engage in industry, trade, and commerce. What is at stake is not obscure. Investors want a clearer picture. Over 4,000 investment firms that manage over $120 trillion in assets back the UN-sponsored Principles for Responsible Investment. Signatories include BlackRock, Vanguard, State Street Corporation, and other top tier asset managers. They all commit to incorporating environmental, social, and governance (ESG) issues, including climate risk, into investment analysis and seeking disclosure from the companies in which they invest.
The COVID-19 digital transition accelerates the possibility for investors to expect standardized reporting that enhances comparability, reliability, and transparency in disclosure. In the United States, The Securities and Exchange Commission (SEC) has proposed requirements for companies to disclose information about climate-related risks that can affect their businesses, as well as climate goals and planning processes that firms have developed in response to climate risks. The proposed new rule suggested standardized climate-related information in statements and reports to the SEC.
The SEC designed the disclosure requirements to pull together a coherent investor narrative around risks, finance, and strategy. Drawing on the work of the Task Force on Climate-Related Financial Disclosure, the SEC proposal included: 1) Oversight and governance of climate-related risks by the company’s board and management; 2) Considering how climate-related risks, including recognized risks, and risks that are likely to have a material impact on operations or consolidated financial statements, may affect the business in the short, medium and long term; 3) Exploring how climate-related risks shape or are likely to affect the firm’s strategy and business model; 4) Examining how the company’s processes for identifying, assessing, and managing climate risks integrate into its overall risk management framework; 5) Probing how climate-related events, and transition activities like policy changes, impact the line items of the company’s consolidated financial statements, and on its financial estimates and assumptions used in the financial statements and, 5) some disclosure about climate-related opportunities.
This proposed rule mirrors how the state of the law has evolved. Investors want more detailed disclosure on climate risks. The rule is grounded in the traditional definition of materiality and Supreme Court case law, and it is bolstered by the ongoing evolution of Open Data, and that the SEC requires public companies to disclose a wide range of information on the climate impact of their inputs and plans. The resulting freedom from obscurity makes companies accountable for their role in the climate crisis. It inspires changes in business practices that currently contribute to pandemics and other predicaments. You can’t manage what you don’t measure.