Notable room for improvement for Danish companies' climate reporting

A new analysis from KPMG and FSR - Danish auditors shows that only a few large Danish companies report on their own climate impact according to the internationally recognised reporting standard, Greenhouse Gas Protocol. This means that companies' climate data do not provide reliable benchmarks for investors and consumers.

Only a few large companies report their climate impact according to the Greenhouse Gas Protocol, which is the internationally recognised reporting standard for calculating companies' greenhouse gas emissions.

The review of the companies' climate reporting shows that 88 per cent of the 2,000 largest Danish companies have either completely opted out of reporting on their climate impact or disclose their CO2 emissions according to other methods than the dominant international standard, the Greenhouse Gas Protocol. Only 12 per cent of companies report at an international level.

Customers who want to buy sustainably thus find it difficult to assess whether they should buy the company's products or not. Investors lack the knowledge to make decisions about green investments and climate-related financial risks. And potential employees cannot deselect companies based on their climate footprint.

If Denmark and Danish companies are to make a serious contribution to combating the global climate crisis, this can only be done on the basis of a robust overview of their CO2 emissions, so that progress can be monitored. It is important that such an overview is comparable and validated. In this context, auditors can play an important role in helping companies use the right methods and validate their data.

The review of the 2,012 companies' most recent report on climate impact reduction was carried out by KPMG and FSR - Danish auditors using artificial intelligence and machine learning. 1,860 of companies are from accounting class C, and 143 of them are in accounting class D. These are the two accounting classes that are covered by the statutory requirement for CSR reporting in section 99 a of the Danish Financial Statements Act.

240 out of 2,003 companies report climate impact reduction in accordance with the Greenhouse Gas Protocol's division of CO2 emissions into scope 1 and 2.

Out of the 240 companies, only a quarter explicitly state that they use the GHG Protocol's principles for the inventory.

o   3 per cent of the 1,860 companies in accounting class large C state that they actively use the GHG Protocol's GHG Protocol principles for the inventory, while the same applies to 4 per cent of the 143 companies in accounting class D. There is thus no significant difference between the two accounting classes’ propensity to report on climate according to the principles of the GHG Protocol.

o   The companies (43 percent) that assign resources to preparing an external CSR report or refer to a parent company's climate reporting are better at using the GHG Protocol's principles (6 percent) than the companies (58 percent) that incorporate their climate-related risks in their financial statements (1 percent).

o   Among the sectors that report most on scope 1 and 2 are ICT companies and the transport industry companies. 21 percent of ICT companies and 18 percent of transport industry companies report their greenhouse gas emissions divided into scope 1 and 2.