Tuesday, May 29, 2007

Emission Estimates

Companies across a number of industries have taken the initiative to begin disclosing carbon footprint, environmental impact and corporate sustainability. The revelations, in whatever form the come, provide insight into future liabilities as regulation of carbon emissions and other pollutants become more stringent.

While the openness can be applauded, there is little comparability across or within industries. There are groups attempting to set standards for calculations and disclosures. For example, the
Global Reporting Initiative was set up by the United Nations Environmental Program to give public companies guidance in preparing sustainability reports. (See my post on May 18, 2007, “Due Diligence Dilemma.”)

American Petroleum Institute promotes its SANGEA Emissions Estimating System. This is an automated electronic data management information system designed to help petroleum companies in estimating and reporting greenhouse gas (GHG) emissions. The system was originally developed by Chevron Texaco Corp. (CVX: NYSE), which has been using the system for its own GHG emissions reporting efforts since 2002.

While neither the Global Reporting Initiative nor the SANGEA system include everything an investor needs to know, widespread use of standards will at least bring about some comparability. I also expect that as reports along these lines from public companies become more commonplace, discussion will ensue on what needs to be disclosed. The next important step for investors is a discussion of what should be reported in financial statements.

Neither the author of the Small Cap Copy web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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