“There is no planet B”, was the message of thousands of young people in the series of demonstrations for climate across the world in March 2019. According to the Intergovernmental Panel on Climate Change (2014, p. 6), changes in climate have already “caused impacts on natural and human systems on all continents and across the oceans”. Today, the world is 1°C warmer than pre-industrial levels. We are already experiencing more frequent natural disasters and extreme weather events, rising sea levels and diminishing Arctic sea ice, among other changes (IPCC, 2018).
The 2015 Paris Climate agreement aims to limit global warming to well below 2°C above pre-industrial levels, and to pursue “efforts to limit the temperature increase to 1.5°C” (. To this end, signature countries committed to communicating their nationally determined contributions to post-2020 climate actions. , 2016)1 In 2018, climate scientists warned that the impacts of even a 1.5°C warming above pre-industrial levels will be far greater than originally expected, including extinction of coral reefs, many plants, insects and animals (IPCC, 2018).
Growth in greenhouse gas emissions paused around 2015, but resumed in 2017
A growing concentration of (WMO, 2019)., mainly of carbon dioxide (CO2), methane ( ), nitrous oxide ( ) and fluorinated gases ( ), in the atmosphere has been identified as the main cause of increased temperatures on the planet. Greenhouse gases let solar radiation reach the Earth’s surface, but absorb infrared radiation emitted by the Earth. They thereby heat the surface of the planet, an effect known as the “greenhouse effect”
In 2017, emissions of CO2, CH2, N2O and F-gases, the ‘critical’ greenhouse gases, amounted to 50.9of . They increased by 1.3 per cent compared to the previous year, after a period of little or no growth during the previous two years. When including emissions from , which are difficult to measure, the total emissions are estimated to have reached 55.1 Gt in 2017. This level was about 55 per cent higher than in 1990 and 40 per cent higher than in 2000 (see figure 1).
According to simulations, reaching the Paris target of keeping global warming below 2°C will require emissions of critical greenhouse gases to peak by 2020, and decline sharply thereafter. To remain below 2°C warming by 2100, global emissions should not exceed 40 Gt of CO2e in 2030, and to achieve the below 1.5°C warming target, total emissions should remain below 24 Gt of CO2e by 2030. This requires a reduction of nearly 25 per cent and 55 per cent in greenhouse gases, respectively, from 2017 levels (UNEP, 2018).
Most carbon dioxide emitted in Asia – per unit GDP and in total
As figure 1 reveals, CO2 is the most important of the critical greenhouse gases. It is a gas released through human activities, such as deforestation and burning of fossil fuels, and through natural processes, such as respiration and volcanic eruptions. Around 90 per cent of CO2 emissions are generated by burning of fossil fuels in the form of coal, oil and natural gas. However, CO2 concentrations in the atmosphere are also influenced by deforestation and other types of land-cover or land-use change, due to their impact on the land’s potential to absorb or generate CO2.
In 2017, CO2 accounted for almost three quarters of total greenhouse gas emissions. Thus, by focusing on CO2, SDG indicator 9.4.1 helps monitoring the largest part, however not the full amount of global greenhouse gas emissions.
The regional concentration of CO2 emissions varies considerably across the globe. In 2016, most countries in Africa recorded emissions of less than 20 kg/km2. In Latin American countries and in Australia, emissions remained below 50 kg/km2. Much higher CO2 emissions, typically more than 200 kg/km2 and sometimes even higher than 2 000 kg/km2, were common for countries located in a band that ranges from the United States of America and Central America over to Europe, excluding Iceland and Scandinavia, and the Near East, to Southern, Eastern and South-Eastern Asia. Within that band, particularly high emission levels were recorded in Central Europe and Eastern Asia. Farther to the North, in Canada, Northern Europe and in Northern and Central Asia, emission levels were lower, usually ranging between 50 and 100 kg/km2 on average per country.
As figure 2 shows, three regions of the world emitted most of the CO2 from fuel combustion: Eastern and South-Eastern Asia (12.4 Gt in 2016), Northern America (5.3 Gt) and Europe (5.0 Gt). Together, they accounted for almost three quarters of global CO2 emissions in 2016. While Europe has a larger economy, measured in terms of GDP, in Northern America, on average one third more emissions were associated with each unit of production than in Europe. Eastern and South-Eastern Asia was characterized by both higher GDP and higher carbon intensity than the other world regions shown in figure 2. The economies of Latin America and the Caribbean and of Sub-Saharan Africa caused less CO2 emissions per unit of production than the economies of Asia. Jointly, they contributed 7 per cent to the world total CO2 emissions. Fuels burned on ships and aircrafts involved in international transport, which cannot be distributed to economies, add another 4 per cent to global CO2 emissions from fuel combustion (IEA, 2018b).
Notes: The area of bars measures carbon dioxide emissions. Regions are arranged in the order of the amount of emissions. Emissions not caused by fuel combustion and emissions from fuels burned on ships and aircrafts in international transport are not included. US$ values are in constant 2010 prices, adjusted to purchasing power parities based on the United States of America. Central and Southern Asia includes developing economies in Oceania.
Population growth and rising prosperity drive carbon dioxide emissions
Since 1990, global CO2 emissions have increased by almost two thirds: from 20.5 Gt in 1990 to 33.1 Gt in 2018. This means they grew on average by 1.9 per cent each year. Between 2014 and 2016 CO2 emissions remained almost constant. But in the following year growth resumed, and by 2018 the annual growth had returned to 1.8 per cent (IEA, 2018b).
Much of the increase in CO2 emissions observed over the last decades relates to world population growth and increased consumption per capita, since consumption relies on the production of goods and services. In fact, CO2 emissions can be displayed as the product of population size, GDP per capita, and the carbon intensity of production:
An increase in GDP, the product of the first two factors in the equation, leads to rising CO2 emissions, unless carbon intensity, the third factor, decreases at a higher rate than the growth of GDP. Such decoupling of CO2 emissions from GDP growth is an important precondition for the achievement of the targets set in the Paris Agreement (see above) without counteracting target 8.1 in the 2030 Agenda to sustain per-capita economic growth.
Some studies suggest that carbon intensity decreases as a country’s level of development rises, to the extent that GDP growth can be offset. This would result in a bell-shaped relationship between GDP and emissions – the so-called “environmental Kuznets curve”. So far, research has provided mixed empirical evidence for the validity of this curve (see Stern, 2004; Victor, 2010; Hoffmeister, 2013; Pacini and Silveira, 2014).
At the world level, real GDP has more than doubled over the last quarter century – from US$46 trillion in 1990 to US$109 trillion.2 This is the result of a 41 per cent increase of the world population (1971: 5.3 billion, 2016: 7.4 billion) and a two thirds increase in real GDP per capita (1990: US$8 7230, 2016: US$ 14 703) (see figure 3). Carbon intensity reduced by one third (1990: 445 g/US$, 2016: 296 g/US$). Therefore, CO2 emissions have grown at a slower pace than GDP (see above).
Notes: Emissions not caused by fuel combustion are not included. US$ values are in constant 2010 prices, adjusted to purchasing power parities based on the United States of America. Central and Southern Asia includes developing economies in Oceania.
Decreasing carbon intensity cannot offset GDP growth in the less developed regions
Figure 3 highlights that in regions mainly consisting of developing economies, carbon intensity decreased less than in others over the past 26 years. Population growth combined with rising GDP per capita, especially after the turn of the millennium, led to high growth in CO2 emissions, particularly in Asia. The economies of Eastern and South-Eastern Asia released more than three times as much CO2 in 2016 as in 1990.
In Europe and Northern America, on average, half the amount of CO2 was emitted per unit of GDP in 2016 compared with 1990. After 2005, also the overall amount of CO2 emissions has been reducing, so that, by 2016, they were by around 15 per cent lower. Between 1990 and 2016, in Australia and New Zealand, carbon intensity decreased by one third, in Eastern and South-Eastern Asia by around one quarter. The reduction in carbon intensity in Eastern and South-Eastern Asia could not compensate for the extraordinary increase in GDP per capita. It has just been sufficient to offset population growth.
As countries are connected by global value chains and trade relations, the observed growth in carbon intensity of GDP in developing regions may be driven by demand for carbon-intensive final products in other regions. In fact, studies based on inter-country input-output tables prepared by find that demand-based CO2 emissions of developed economies are generally higher than their production-based emissions, while most developing economies are net-exporters of CO2 emissions embodied in final products (2018)(Wiebe and Yamano, 2016). As environmental policy is more stringent in some regions than in others, companies can save production costs by relocating carbon intensive production processes globally, a process described as “carbon leakage” (Lanzi et al., 2013).
Energy efficiency an important factor in cutting emissions
Fuels are mostly burned to produce energy. For that reason, CO2 emissions and energy supply are closely interlinked. According to the IEA (2018a), energy-related CO2 emissions account for 88 per cent of CO2 emissions globally. Energy is an indispensable input for most processes generating value added in an economy. This means that energy intensity is an important determinant of the carbon intensity of GDP. The other determinant is the carbon intensity of energy supply, as the decomposition below reveals:
Figure 4 demonstrates the important role of efficient use of energy in reducing the carbon intensity of GDP. From 1990 to 2016, energy intensity reduced on average by 1.6 per cent each year. In Europe (-2.0%), Central and Southern Asia (-1.9%), Northern America (-1.9%) and Eastern and South-Eastern Asia (-1.8%), that rate was close to two per cent. In Central and Southern and in Eastern and South-Eastern Asia, as well as in Latin America and the Caribbean, diminishing energy intensity has been the sole reason for the observed decrease in carbon intensity of GDP. In the absence of that effect, CO2 emissions per unit of GDP would have risen, due to increasing carbon intensity of the energy supply. By contrast, in Europe and Northern America, the effect of rising energy efficiency has been complemented by a significant reduction in emissions per unit of supplied energy.
Notes: Emissions not caused by fuel combustion are not included. US$ values are in constant 2010 prices, adjusted to purchasing power parities based on the United States of America. Central and Southern Asia includes developing economies in Oceania.
A mixture of positive and negative trends
Climate change is a development issue, demonstrated particularly by the trends in Asia, where CO2 emissions have dramatically increased in tandem with the rapid growth of GDP per capita. This is a sobering message, considering the urgent need to limit the concentration of greenhouse gases in the atmosphere. At the same time, some statistics give hope: in the most developed regions, CO2 emissions have been diminishing for more than ten years, despite continuous GDP growth. This provides signs that a decoupling of emissions from the economic development is feasible.
More effective efforts are needed to reduce CO2 emissions and other greenhouse gases to limit global warming to below 2°C or even 1.5°C by 2100. As populations and GDP per capita continue growing, a drastic reduction in carbon intensity will be required. Rising energy efficiency is serving as an important means to that end worldwide, the same as cleaner energy generation in Europe and Northern America.
International trade causes particular challenges, as freight transport is a direct source of emissions (see Adapting transport for sustainable development), and free exchange of goods increases the possibilities for carbon leakage. At the same time, international trade can help improve access to new technologies to make local production processes more resource efficient and contribute to a greater capacity for environmental management. Good governance can influence the way in which trade affects the environment: Analyses show that countries having stringent environmental regulations tend to be larger exporters of environmental products (Sauvage, J., 2014).
Governments can make an important contribution to reducing emissions, not only through trade policy but also more generally by adapting national legal frameworks with a view to applying strict climate policies, generating incentives for emission-free production and consumption and providing tailored support for. Consumers make important choices daily when purchasing goods and services produced and supplied with lower emissions. Finally, also the business sector plays a central role by developing new technologies and achieving higher energy efficiency. As the world will inevitably depend on new green technologies, investments in that area are likely to pay off, and the front-runners will gain the advantage.
Involving the private sector in the sustainable development agenda
Businesses play a critical role to play in promoting human, environmental, economic and institutional development. They support livelihoods, generate significant domestic and international financial flows, consume natural resources, shape institutions, create positive or negative externalities for other sectors and pave the way for the future through investment in physical capital and research and development. Enterprises are also instrumental in promoting responsible consumption and production practices.
The business sector is identified in the Addis Ababa Action Agenda as a significant player in the financing of sustainable development (United Nations, 2015). Their actions contribute directly or indirectly to the attainment of all . Nonetheless, the business sector is mostly absent from the SDGs targets and is explicitly mentioned in only one of them: target 12.6, which calls for a greater integration of sustainability information in the regular reporting cycle of firms.
More comprehensive reporting is important for making companies’ contribution to the 2030 Agenda visible and for encouraging them to review how their operations affect all stakeholders and assess their direct and indirect impacts on the environment. Sustainability reporting promotes transparency in the business sector and increases business accountability to society.
SDG indicator 12.6.1 aims to measure the number of companies that publish sustainability reports. However, a count of reports may not be enough since reporting practices vary in terms of quality, coverage and comprehensiveness. There are multiple reporting frameworks that need to be aligned so that the concept of sustainability for businesses and the way to report on it can be agreed. These frameworks include the International Integrated Reporting Council ( framework, the Global Reporting Initiative , 2013)( standards, the standards proposed by the Sustainability Accounting Standards Board , 2019)(, and the , 2018)UNCTAD (2018) Guidance on Core Indicators3.
The inclusion of this item in the 2030 Agenda is a unique opportunity to promote sustainability reporting among firms, but especially high-quality, reliable reporting as part of annual reporting cycles. UNCTAD and UNEP, as custodians of SDG indicator 12.6.1, have been actively working in this area. They propose sustainability reports covering four themes: economic, environmental, social and institutional and governance. As a “”, only reports that cover certain elements in a meaningful way will be counted as sustainability reports contributing to the SDG indicator. To further strengthen sustainable practices and accountability, the agencies also identified an “ ” with more comprehensive reporting rules.
The sustainability reporting framework does not add a new reporting requirement, instead it suggests a way to reconcile the existing frameworks and identify minimum and advanced reporting levels. UNCTAD and UNEP have also prepared correspondence tables so that firms choosing to report according to different standards can still be assessed against the minimum and advanced requirements relevant for SDG indicator 12.6.1.
Not all disclosure elements apply to every firm, since activities vary by sector and country. To account for this, businesses can apply a. This would facilitate reporting, especially for small and medium enterprises. Special rules are also applied to multinational enterprise groups which have operations in several countries, sometimes in different sectors.
Businesses striving to close large gaps in sustainability reporting
UNCTAD regularly convenes a Group of Experts onto discuss international accounting and reporting standards in order to improve the availability, reliability and comparability of enterprise reporting of financial and non-financial aspects of their performance, and especially to integrate sustainability information into the business reporting cycle.
Although official statistics for SDG 12.6.1 are not yet available, an initial assessment is possible by looking at company sustainability reports published by theand their alignment with the UNCTAD Core Indicators. The UN Global Compact database compiles reports submitted voluntarily by companies.
In March 2019, the database included 2,894 sustainability reports prepared by companies of different sizes from 111 countries and 41 sectors of economic activity. Although this is a collection of voluntary reports and not representative of the world population of firms, the exercise still provides a first glimpse of current sustainability reporting practices and reveals some tentative regional patterns.
Studying every single report would be time consuming. Instead, machine learning and natural language processing techniques have been used to analyse text syntax structures in the CoPs and identify keywords based on the 33 core elements listed in the UNCTAD Guidance, organised according to the four themes listed above: economic (A), environmental (B), social (C) and institutional (D).4 Every report then received a score for each of the indicators: (0) if there was no mention of the indicator; (1) if the indicator was mentioned but with no quantitative information; or (2) if the report covered the indicator including quantitative information.5
Figure 5 shows the estimates from this exercise for 32 UNCTAD Core Indicators. Basic economic outcomes (revenue, value added and net value added) were routinely made available as well as “traditional” resource-related measures of productivity (water use and energy efficiency). Apart from that, there were large gaps in all four themes of sustainability reporting. Some disclosure elements, particularly in the institutional, environmental and social domains, were hardly reported at all. This was the case, for example, for indicators such as water stress (B.1.3), training on anti-corruption issues (D.2.2), compensation of board members (D.1.5), the representation of women as board members (D.1.2) and the expenditure on employee health and safety (C.3.1). It is noteworthy that, whenever an element was included in the report, it was in most cases supported by quantitative indicators. This was evidenced by the few occurrences of brown areas in figure 5.
There are, however, large disparities across countries. Map 2 shows the average compliance rate with sustainability reporting. To obtain country-level figures, the average percentage of elements reported by firms registered in the different countries was calculated, including elements reported with and without indicators. For example, a value of 50 per cent for country A means that firms from country A mentioned in their reports, on average, half of the elements included in the Guidance.
Countries like Costa Rica, the Russian Federation, the Republic of Korea, Finland and Chile had the highest rates of reporting compliance with the UNCTAD Guidance. However, in no country did the average rate of compliance reach 50 per cent. Large gaps in reporting in some regions were evident, especially in Africa, the Middle East and Central Asia, for which few or no reports were available in the database.
Figure 6 aggregates this information by region. The results should be interpreted with caution, however, due to the large gaps in some regions. Still, they can be taken as an indication of the regional differences in voluntary reporting. Apparently, in certain regions, such as Eastern Asia and Northern America, firms demonstrate a higher compliance with the UNCTAD Guidance than in others.
All in all, the 2030 Agenda has increased sustainability reporting among businesses and led to closer engagement of international organizations and businesses to develop a commonly agreed and harmonized set of indicators. The coming years will show if sustainability reporting will be used by an increasing number of firms to demonstrate commitment to sustainable development.
- The Paris Agreement sets up a five-year cycle of updates and specifies that in 2020 nations should revise their pledges for 2030, increasing ambition if possible.
- In constant 2010 prices adjusted to purchasing power parity based on the United States of America.
- The Guidance on Core Indicators, developed by UNCTAD upon request by the 34th session of the Intergovernmental Working Group of Experts on ISAR, lists the main elements for entity reporting to monitor company-level contributions towards SDGs (UNCTAD, 2018).
- Additional complexity is caused by the fact that the CoPs are reported in over 20 different languages and in different formats. Therefore, the algorithms use multiple data cleaning, noise reduction, image recognition and filtering methods to better identify relevant content for each indicator.
- The calculations were performed by Global AI Corporation, based mainly on CoPs available in United Nations Global Compact. However, some reports were obtained directly from companies’ websites, and other sources were used in some cases for additional data on revenue, value added and net value added.
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- UNCTAD (2018). Guidance on Core Indicators for Entity Reporting on the Contribution Towards the Attainment of the Sustainable Development Goals. United Nations publication. Sales No. E.19.II.D.11. Geneva.
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- Victor, P. A. (2010). Ecological Economics and Economic Growth, Annals of the New York Academy of Sciences. Annals of the New York Academy of Sciences. (1185):237–245.
- Wiebe, K. S. and N. Yamano (2016). Estimating CO2 Emissions Embodied in Final Demand and Trade Using the OECD ICIO 2015: Methodology and Results. OECD Science, Technology and Industry Working Papers, No. 2016/5. OECD Publishing. Paris.
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