New CEPR Policy Insight - Mandatory corporate carbon disclosures and the path to net zero

Monday, October 4, 2021

In anticipation of COP26,  Patrick Bolton, Stefan Reichelstein, Marcin Kacperczyk, Christian Leuz, Gaizka Ormazabal and Dirk Schoenmaker, all members of CEPR’s Sustainable Finance Research and Policy Network, argue, in a new Policy Insight, that the widespread implementation of mandatory carbon disclosures for firms can make a decisive difference in achieving net zero targets. Crucially, to succeed, mandatory carbon disclosures should be made simple, be straightforward to interpret, and be enforced with due diligence. 


Patrick Bolton (Imperial College London and Columbia University), Stefan Reichelstein (University of Mannheim and Stanford University), Marcin Kacperczyk (Imperial College London), Christian Leuz (University of Chicago, Booth School of Business), Gaizka Ormazabal (IESE Business School); and Dirk Schoenmaker (Erasmus University Rotterdam).  

Available for download here >>>


Given the urgency of the climate crisis, information about corporate carbon emissions is becoming increasingly important. The proposals detailed in this Policy Insight could deliver much of what policymakers and asset managers need to manage carbon transition risk and accelerate the pace of future carbon emissions reductions. 

Numerous global corporations from a wide range of industries, including financial institutions and asset managers, have recently issued carbon reduction pledges, frequently culminating in a net zero position by 2050. The authors of this Policy Insight argue that voluntary disclosures and pledges currently lack a coherent measurement and reporting framework necessary to be successful. 

The Policy Insight details a clear strategy for measuring and reporting emissions, which has the potential to transform the current low rate of emissions reporting – the overwhelming majority of listed and private companies around the world still do not disclose their emissions – and ensure firms make tangible progress towards achieving net zero targets.   

“The pathway to net zero is narrowing by the day and its success depends on a universal and ambitious drive to eliminate or capture carbon emissions by all players – governments, corporations, financial institutions, and consumers.”

Bolton, Reichelstein, Kacperczyk, Leuz, Ormazabal, and Schoenmaker  

The authors emphasise that the key to any emission reporting mandate must be simplicity and immediate feasibility, and therefore they recommend to limit the mandate to the disclosure of direct greenhouse gas emissions for now – but to be ambitious in the range of the mandate – and require carbon disclosures from all firms, private and publicly traded.

The Policy Insight recommends specifically that “publicly listed firms are to report their global greenhouse gas emissions for the past calendar year in their annual reports. Private firms beyond a certain minimum size are to report their global greenhouse gas emissions for the past calendar year to a national registry in the country in which the firm is headquartered”. The recommendation is explicit in requiring firms to report their gross direct carbon emissions and net direct carbon emissions separately, and also to include the trajectory of past emissions, beginning with the year in which the mandate went into effect.

To supplement these reports, the authors recommend that firms should also be encouraged to submit forecasts that specify targets for emission reductions in future years (milestones) on the path to net zero. 

Business commitments to net zero currently lag behind those of governments, and the reality is that a country cannot meet a net-zero commitment without changing the way its economy and industries approach climate change commitments. To fully transition, companies need to make consequential decisions on the process. This Policy Insight lays out a clear and achievable strategy towards mandatory greenhouse gas emissions disclosure that would make a significant contribution on the path to net zero if implemented in the near future.  


Read an accompanying VoxEU column here >>>.

Find a full list of CEPR's Policy Insights here >>>