Recently, I wrote a LinkedIn post about examples of surreal sustainability reporting. Well, the story has evolved, particularly around CGN Power Co Ltd. After I highlighted their reported 16.4 billion tons of CO2 emissions – that’s 40% more than China’s total annual emissions -, journalist Sophie Robinson-Tillett did what good journalists do: she asked questions. In my role as an academic, I had double-checked these figures against the Refinitiv database, a trusted source in financial markets.
Sophie’s inquiry led her to Ernst & Young Hua Ming LLP, which had provided limited assurance on CGN Power’s report. In their assurance statement, they promise to have looked at “purchased electricity equivalent to carbon dioxide emissions.” Therefore, they are the right people to talk to. The auditor’s response pointed to lower figures reported elsewhere in the report of about 164 million tons.
So, was this just a case of some misplaced digits? Interestingly, Refinitiv had also reported 16 billion tons of CO2 emissions for 2022. Therefore, it’s more than an academic finding an error in reporting, it’s about a prime information source for decision-making in the financial markets repeating and spreading it. This information was deleted during the last few days. It seemed like a victory for accuracy, but the story does not end there.
Digging deeper, it turned out that the data on Refinitiv for 2022, and previous years, is not about CGN’s actual CO2 emissions at all. Instead, it refers to the amount of CO2 emissions the company claims to have helped reduce. Finding information on the company’s actual CO2 emissions in the report is surprisingly difficult and maybe even impossible. The data, whether in millions or billions, is as misplaced as putting my bank account number in that field.
The checks and balances that we urgently need to make sure that data is reliable or quite simply usable do not seem to work.
The limited assurance reports’ claim now appears even more puzzling. The plot thickens further when looking at the NOx and SOx emissions data. In the Refinitiv field where other firms’ emissions are usually reported, we find information on emissions reduced due to nuclear power. It is a bit like being asked to count calories to lose weight but then report on the calories one could have eaten but did not eat. It’s kind of interesting but misses the point.
Sustainability reporting, just like financial reporting, has a range of checks and balances that should help to avoid misstatements. There are reporting standards like the Global Reporting Initiative (GRI). Some jurisdictions, and the Stock Exchange of Hong Kong where CGN is listed is a good example, also have reporting requirements. Appendix 27 of the main Board Listing Rules stipulates for example the disclosure of direct and indirect greenhouse gas emissions. Companies have internal controls, of course, and stakeholder engagement and market forces should help to check and improve what is reported.
Errors can nevertheless occur. Errors are part of life and as such not a major concern. What is troubling is that data – real and nonsense – seems to be repeated mindlessly. The checks and balances that should be in place and that we urgently need to make sure that data is reliable or quite simply usable do not seem to work.
This is based on a LinkedIn post by Frank Figge and gives the views of its author, not the position of ESCP Business School.
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