The ESG disclosure aims to create an incentive for companies to work towards more sustainability in their activities and requires that companies make a comprehensive report on their emission reduction goals and publicly state their level of emissions. With carbon, the different emission scopes and the protocol for its reporting are clearly out in the open. When matters of ESG disclosure and greenhouse gas emission reporting protocol are discussed, carbon takes center stage. It seems only to be a source of concern for stakeholders and investors. Here is why companies seem to be falling behind in NOx and SOx disclosure in ESG reporting.
Carbon Is Not the Only Threatening Greenhouse Gas
It seems that only carbon is invariably considered for the greenhouse gas emissions in ESG disclosure, as nitrous oxide and sulfur oxide lurk in the Shadows and do not get to share the spotlight of carbon.
Nitrous oxide and sulfur oxides are also significant greenhouse gases, and although they form a relatively small fraction of the total greenhouse gas emissions, they are also significant. Nitrous oxide is often omitted during industrial activities, including the combustion of fossil fuels and solid waste as well as the treatment of wastewater.
NOx and SOx disclosure in companies’ ESG reporting, which respectively contribute to radiative forcing, and sulfur oxides can also create aerosol particles that can warm the atmosphere, contributing to climate change and harming the environment. Aside from the environmental hazards, it could also be toxic to human respiratory health and lead to several respiratory-related complications.
Why Then Do We Not See Enough of These Gases in The ESG Reports
The reason behind NOx and SOx disclosure, in terms of not-so-evident reporting of sulfur oxide and nitrous oxide in ESG disclosure, is not a blatant dismissal of the significance of these gases but rather due to some constraints which has made it much more difficult to include them in the ESG reporting. Measuring the amount of nitrous oxide and sulfur oxide emitted is quite difficult. The diversity of the sources and various factors affecting its emission makes it harder to estimate accurately.
For instance, from measuring nitrogen oxide emissions from the soil following the use of fertilizers and varying factors altering the emission of gas from the soil, there are bound to be irregularities in the estimation. Analytical methods of measuring also do not cut it due to spatial and temporal variance that could be obtained from estimates.
To top up the difficulty of estimating nitrous oxide, one requires special equipment, contributing to the cost of estimating the nitrogen oxide and sulfur oxide gas emissions. It is not uncommon for companies to attempt to quantify nitrogen oxide and sulfur oxide gas emissions by giving them a carbon equivalent.
Additionally, one can say that several countries are yet to incentivize the reduction of nitrous oxide and sulfur oxide emissions, and there is a significantly low number of policies already put in place to curb emissions.
Based on the ESG Enterprise level 2 database with 12000 companies’ curated data, only 1552 out of 12000 companies reported NOx and SOx. In our research, 281 companies in China reported, followed by 217 from the United States, most other countries are not disclosing their toxic gas emissions.
Compared to carbon, one can see that there is a lack of a defined scope and regulation regarding nitrous oxide concentration reporting, perhaps due to the lesser threat it constitutes. While nitrous oxide and sulfur oxides are generally considered to have a lower GWP, the story might soon change as there are concerns about the increased emissions of these less significant yet deadly greenhouse gases. As more discovery is made, we await a comprehensive disclosure regulation and scope to ensure that the efforts to reduce greenhouse gas emissions and attain a net-zero economy are fully effective.