The World Economic Forum published the Global Risks Report in 2023, which brought together 1,200 experts to assess 34 risks and provide an in-depth analysis of these possibilities and impacts. Among the top ten risks in the long term (within the next 10 years), six are directly related to the climate environment.
Source: World Economic Forum (2023)
1. International greenhouse gas reduction practices and regulations:
- The European Emissions Trading System (EU ETS) is one of the main climate policies launched by the European Union.
Since its implementation in 2005, it has become one of the world's largest and most successful carbon emissions trading systems. The EU ETS emissions trading model encourages companies to compete in achieving lower carbon emission levels while providing economic incentives to achieve the EU's greenhouse gas emission reduction targets. The European carbon market is constantly adjusting and is seen as a reference model for carbon markets in other parts of the world, with a demonstration effect.
- The Carbon Border Tax (CBAM) is a carbon border adjustment mechanism introduced by the European Union to prevent carbon leakage and promote clean industries.
CBAM requires the purchase of certificates for high-carbon emission products imported into the EU to ensure that their production complies with EU carbon emission standards and to prevent companies from transferring high-carbon emission products to non-EU countries with looser environmental policies, causing carbon leakage. CBAM was piloted in 2023 and will be officially levied in 2027.
- The US carbon tariff (CCA), also known as the Clean Competition Act, is designed to penalize manufacturers of carbon-intensive products.
The implementation of CCA will be based on the average carbon content of U.S. products, and carbon fees will be levied on both imported products and U.S. products whose carbon content exceeds the benchmark. CCA is expected to be officially launched in 2024.
Take a European manufacturing company participating in the EU ETS as an example:
- Companies are allocated carbon emission quotas, and if they can reduce emissions within the quotas, they can sell them to other companies for a profit.
- Excess emissions require additional purchase of quotas or investment in emission reductions, otherwise fines will be imposed.
2. What is ISO14064-1?
ISO14064-1 is a standard developed by the International Organization for Standardization (ISO) that focuses on greenhouse gas (GHG) monitoring and reporting by organizations. The standard provides guidance for organizations to establish a complete greenhouse gas management system to ensure accurate tracking, monitoring and reporting of their carbon emissions.
How does ISO14064-1 affect your business or organization?
- Establishing a greenhouse gas management system: By complying with ISO 14064-1, companies can establish a complete greenhouse gas management system to effectively track, monitor and manage their emissions.
- Risk Management: Through regular measurement and reporting, organizations can better identify their carbon footprint and develop emission reduction strategies to reduce carbon risks.
- Market competitiveness: Open and transparent carbon reporting helps to enhance a company's image of social responsibility. An environmentally friendly corporate image is more popular in the market and improves competitiveness.
ISO14064-1 application cases:
- Walmart uses ISO 14064-1 to measure carbon emissions in its supply chain and assist in developing sustainable business strategies.
- Microsoft implements ISO 14064-1 to achieve carbon neutrality and has an environmentally friendly image.
- Ford Motor Company uses ISO 14064-1 to monitor greenhouse gas emissions during production and improve its ecological footprint.
3.What is ISO14067?
ISO14067 is an international standard on carbon footprint, providing a framework for assessing greenhouse gas emissions throughout a product's life cycle; including raw material collection, manufacturing, transportation, use and disposal. Through carbon footprint assessment, organizations and businesses can understand the impact of their products on the environment and take steps to reduce their carbon footprint. ISO14067 is different from ISO14064-1, which focuses more on the organization's overall greenhouse gas monitoring and reporting.
ISO14067 application cases:
A manufacturing company might use ISO 14067 to calculate the carbon footprint of its products and optimize its production processes to reduce emissions, while using ISO 14064-1 to monitor the company’s carbon emissions overall.
In the current business environment that emphasizes environmental sustainability, applying ISO 14064-1 and ISO 14067 is essential.
- Urgency of applying for ISO 14064-1:
- Compliance and regulatory requirements, following ISO 14064-1 is a key step in ensuring that your organization complies with relevant regulatory and environmental requirements.
- Consequences of not applying: Failure to comply with regulations may result in additional costs, fines, etc., and increase the risk of business losses and reputation damage.
- Urgency of applying for ISO 14067:
- Comprehensively understand the impact of products and apply for ISO 14067 to enable companies to fully understand the carbon footprint of their products and optimize production and supply chains.
- The consequences of not applying: loss of market opportunities, increased supply chain opacity, and difficulty in identifying potential environmental risks.
Overall, these two standards are important tools for companies to proactively address climate change, helping to improve their environmental image, comply with regulations, and remain competitive in a highly competitive market.
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