May 18, 2024

Coming clean

Neal Baldwin looks at the complexities and challenges of tighter legislation relating to ESG reporting and sustainability claims

Your sales executive is taking a return flight from Milan Malpensa to New York JFK. Simple enough. But what about the carbon emissions?

That journey likely creates around 715kg of CO2. Or maybe 1,360kg. Or perhaps 1,790kg. You might even get to 2,767kg. Welcome to the crazy world of sustainability reporting, where facts and fiction swirl around in confusing and often contradictory fog.

With estimates as varied as these from a selection of well-known carbon calculators, it is perhaps no surprise that a raft of European and domestic legislation is now seeking to sort out an area of corporate travel long-criticised for being rife with ‘greenwashing’.

For an industry that loves an acronym there is now a new set of letters to obsess over, chiefly the European Union’s Corporate Sustainability Reporting Directive (CSRD). Having gone live at the start of this year, CSRD vastly increases the burden on large companies to account for the environmental, social and governance impact of their activities, including travel, via the production of independently-audited annual reports.

Throw in the EU’s Empowering Consumers Directive and Green Claims Directive too – which both seek to outlaw unsubstantiated environmental claims – and you’ve got an alphabet soup of laws that could leave a nasty taste for unsuspecting or negligent firms. Extra spice comes from the UK’s own Advertising Standards Authority, which has pledged to crack down on spurious green statements and has already found fault with ads from a number of airlines.

“Regular updates on progress are important. Celebrate your achivements but be honest on where you’re falling short”

To add further complication, CSDR reports must feature Scope 3 emissions from supply chain partners, which means delving into the performance of accommodation suppliers. Critically, this includes all ESG areas, including ‘social’ factors such as wages and worker rights alongside ‘environmental’ issues such as water usage.

“CSRD takes sustainability reporting much further than before because it is on a legal footing, rather than just a nice ‘to have’,” explains Adam Braun, CEO of environmental consultancy Clarasight. “Firms must set targets [for 2030 and 2050] and provide commentary on their performance.

“Going forward there are very real penalties for non-compliance, set by each European nation. This can mean huge fines and, in the case of France, even jail for up to five years.”

For Braun, shining light on emissions boils down the issue of sustainability to a level that senior executives will understand – and that’s money. The negatives that come with being seen as a ‘dirty’ business can be very persuasive.

“The idea is that capital markets and investors will think twice about dealing with companies with poor environmental performance, while there will also be pressure from shareholders and consumers,” he says.

Turn down the volume

Since technological advancements in transport, such as hydrogen and battery power, cannot deliver necessary carbon reductions at speed, the inevitable knock-on effect for corporate travel is a potential reduction in trip volume.

Good Travel Management Commercial Director, Laura Busby, says the TMC’s clients are naturally gravitating towards more ‘purposeful’ travel and shifting budgets towards trips that deliver to the bottom line.

“We’re advising clients to look at their policies and identify more clearly the return on investment. For example, giving the sales team a bigger ‘carbon budgets’ to use might make more sense than your operations team, because you are more concerned about winning business.” she says.

“A lot of our work is about capturing data on the reason to travel and showing where carbon savings can be made. Building out the supplier base comes after that.”

“The whole area will become one concerned with presentation. It’s no surprise the large consulting firms are massively expanding their sustainability teams”

At the same time, accuracy is key and businesses are moving away from bog-standard calculators, such as those from Defra and IATO. Good Travel Management uses Thrust Carbon as its calculator of choice, while consultancy Advito has built its own solution, GATE4, to provide more ‘granular’ levels of analysis.

Shelley Fletcher-Bryant, Advito Vice President, Sales & Client Relationship Management, believes having the best-quality data is central in shaping travel policy, and thus forcing down emissions.

“Great info supports travel managers,” she explains. “When presenting travel options in a booking tool, we can, for example say ‘choose Airline A over Airline B’ because it uses a newer aircraft type on a particular route. Our technology can look at detailed specifics – load factors, the amount of freight carried on a particular service, the seat configuration, so you might even point travellers to particular times of departures for these different reasons. These things can affect emissions by as much as 30%.

“Having access to this information helps educate an organisation’s travellers too. We have created videos and infographics to boost policy understanding and show what savings mean in practical terms – ie, what a tonne of carbon really equates to. It also helps us demonstrate the sustainable choice isn’t always the most expensive, and why it might make sense to switch from air to rail.”

Tread carefully

That said, industry voices are still concerned about how the practicalities of extra reporting will shake out. Fletcher-Bryant believes the plethora of ‘green’ hotel certification schemes is a particular worry.

“I’d guess there are more than 200 programmes for hotels,” she says. “Many are robust, but some will just give hotels a stamp of approval for ticking a box and paying a fee. That can be confusing when contracting. Going forward, I think we’ll see travel managers leaning more on the advice of TMCs.”

“Going forward there are very real penalties for non-compliance, set by each European nation. This can mean huge fines and, in the case of France, even jail for up to five years”

Similarly, TravelCarbon Managing Partner John Harvey is critical that the new laws are more concerned with presentation rather than actually dealing with the issue of carbon emissions – a fact that has driven his interest in offsetting via Sustainable Aircraft Fuel (SAF), which is recognised by the Science Based Targets initiative (SBTi) as making a genuine environmental impact.

“Companies may want to cut carbon over time, but despite the good intentions, there is absolutely no compulsion to do anything yet,” he explains. “At least companies trying to offset their impact with SAF credits are driving development of a technology.

“Emissions offsetting has been used widely in the past and is a real Wild West. The positives from CSDR and the Empowering Consumers Directive is that you won’t be able to make spurious offsetting claims any more, like bogus tree planting initiatives. Sustainability has attracted organisations that want to make a fast buck.

“There’s also a problem for companies that are expanding. Your business may do more travel as it grows, but emissions reporting puts the onus on having lower figures each year. Ultimately, the whole area will become one concerned with presentation. It’s no surprise the large consulting firms are massively expanding their sustainability teams!”

Top tips from Ami Taylor, Associate Consultant, Festive Road

Assemble allies and experts. A sustainability team would be the obvious choice when seeking support, but if you don’t have dedicated people get in touch with finance, compliance and legal teams. If you can’t find support internally, seek advice from independent experts outside your business. If you’re leading a global programme, be aware of legislation across all the markets you manage.

Be data ready. Any claim made about a reduction achieved or a target needs to be backed up by solid data that you can retain (consider GDPR compliance) and present on demand to auditors. When setting a target, be specific; you will need a robust plan to demonstrate how it will be achieved. Regular updates on progress are important. Celebrate your achievements and be honest on where you’re falling short. 

Manage suppliers. If your goals are reliant on suppliers, be conservative and build formal disclosure obligations in to your agreements. Columbia Law School has a searchable database of climate litigation cases, so consider this in your vendor selection process. Be aware of, and take action on, any misleading or exaggerated claims by your existing suppliers.