In June, 2023, Elon Musk took to Twitter (now X.com) to complain that his electric car company did not have a higher ESG rating. At the time, Tesla had a lower ESG score than fossil fuel companies such as Shell and Exxon. In fairness to the ESG ratings, Tesla had not made enough efforts to clean up its manufacturing emissions. But it also highlighted how the current carbon compliance regime fails to reward systemic efforts by entrepreneurial companies — whether they be producers of electric cars, wind turbines, plant-based food, or firms that use their social influence to change policy or advise clients cutting emissions
To Incentivize Companies to Address Climate Change, Measure Their Broader Impact
Recognizing system-level efforts can mobilize some of the most creative and influential people inside companies.
September 06, 2024
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Summary.
Current climate reporting focuses primarily on reducing carbon emissions within companies’ direct operations and value chains, often overlooking the broader impact businesses can have on society. This narrow approach fails to recognize or reward companies for their innovative contributions to climate solutions beyond their immediate emissions, such as developing green products, influencing policy, or investing in sustainable initiatives. To better mobilize businesses as agents of systemic change, new reporting frameworks should be introduced, allowing companies to highlight and be rewarded for their broader societal contributions. This could reignite enthusiasm for climate action, particularly among innovative and entrepreneurial firms, while also addressing the risk of greenwashing by providing clear guidelines for credible impact reporting.