“Transparency Pipelines”: From non-State actor accountability to meeting national objectives

Analysis note of the Global Observatory of Climate Action

Authors:

• Romain Poivet, Engagement Lead Decarbonisation & Energy, World Benchmarking Alliance
• Joachim Roth, Climate Policy Lead, World Benchmarking Alliance
• Tania Martha Thomas, Research Officer at the Observatory

Date: June 2024

Summary:

• The UNFCCC’s Recognition and Accountability Framework (RAF): A summary of the recommendations
• Contributing to national pledges: Takeaways from Climate Chance, CDP, CISL and Net Zero Tracker’s side-event at SB60
• Moving from transparency to action, accountability is key?

Against the backdrop of growing commitments to “net zero emissions” and “carbon neutrality”, the question of the credibility of these commitments has been evoked. This credibility depends on the ability of actors to rely on robust standards to 1) take stock of their emissions, 2) set targets, 3) formulate transition plans, 4) implement actions and 5) assess their impact on emissions. In the past year, civil society through various advocacy campaigns, governments through passed and ongoing legislations, and even UN General secretariat and the UNFCCC secretariat have pushed for a stronger climate accountability from non-State entities, to be able to standardise their objectives and measure collective progress. Credible commitments from non-State entities can eventually feed into national objectives and commitments, contributing thus towards the goals of the Paris Agreement.

The UNFCCC’s Recognition and Accountability Framework (RAF): A summary of the recommendations

At the 2023 Bonn Climate Change Conference, the UNFCCC Secretariat presented the Recognition and Accountability Framework for non-Party stakeholder climate action (RAF) along with a draft implementation plan, with an aim to “recognise” and “celebrate” the voluntary contributions and progress of these actors. Following this was an open consultation, the inputs to which were considered and consolidated by the independent co-chairs Sarah Bloom and Bing Leng in May 2024. These recommendations reflect the diversity of frameworks and targets that exist currently, and through the lens of the UNFCCC’s mandate, looks at how non-State entities can eventually contribute to national and international objectives. The following section analyses each of these recommendations, based on current trends in action.

The Consultation resulted in six concrete recommendations addressed to the UNFCCC Secretariat:[1]

1. The UNFCCC with relevant partners including the High Level Champions should implement measures that provide transparency and accountability of voluntary net zero initiatives

The recommendation stresses on comparability and consistency of voluntary disclosures, and suggests that voluntary initiatives report to the UNFCCC what commitments their members sign up to, what accountability mechanisms they adopt, how the initiative builds capacity and encourages wider participation. The Consultation recommends against assessment or scoring of voluntary actions by the UNFCCC, and propose instead enhancing transparency to strengthen voluntary responses – which appears to be in counter to the trend of harmonising assessment practices in addition to disclosure practices, as seen through the example of ATP-Col [2] (see below), or even the GFANZ, and others.

2. The UNFCCC should highlight gaps in the ecosystem of non-state entity accounting and reporting

This includes taking into account the gaps identified through the consultation process, and working with academia, the data community, civil society and the private sector to fill these gaps. The co-chairs propose focusing the attention of voluntary initiatives on issues like transition plans, verification and assurance processes, and adapting to needs of developing countries while incorporating equity concerns. They also call for a shift from a “narrow focus” on emissions reductions to “climate solutions” like low-carbon construction or regenerative agriculture.

3. The UNFCCC should support Parties as they translate the standards of voluntary cooperative initiatives into enforceable legal frameworks

The recommendation highlights the role that the Global Climate Action Portal (GCAP) could play to track the adoption of regulatory frameworks across jurisdictions, and advises that the UNFCCC push for the harmonisation and greater equivalence between rules in different jurisdictions. Examined by the Climate Chance Observatory in May 2024, mandatory rules relating to ESG disclosures[3] (and even due diligence along supply chains)[4] are being adopted around the world, though differences in requirements across jurisdictions. Moving beyond disclosure, the Assessing companies Transition Plans Collective (ATP-Col) was launched in June 2023, aiming to develop a consensual and harmonised framework to assess transition plans’ credibility.

The recommendation also calls for the UNFCCC to join the that was created during COP28, which aims to help translate into policy the recommendations of the UN Secretary-General’s High-Level Expert Group (HLEG) on Net Zero Emissions Commitments by Non-State Entities.[5]

4. The UNFCCC should bridge the information gap between net zero emission commitments made by non-state entities and Nationally Determined Contributions

It is in this recommendation that the idea of a “transparency pipeline » is introduced, wherein the Consultation refers to the GCAP as a potential pipeline linking commitments of businesses and subnational governments to NDCs that countries are preparing. The recommendation notes that such channels of information could inform the creation and implementation of national commitments, taking into account non-State pledges, and thus giving a comprehensive overview of the state of ambition and action.

Ideally, this process also works in the other direction: NDCs and national objectives can feed into non-State actor commitments, and a first step towards this is the elaboration of sectoral transition plans at the national level. This is the case for example, in France, where the Ademe, the agency for ecological transition, has developed granular sectoral pathways for sectors of the French economy.[6]

5. The UNFCCC should promote technical capacity building and the inclusion of distributional and equity considerations to enhance the credibility of net zero commitments

This involves consideration of the limitations faced by small- and medium-sized enterprises and subnational governments in terms of their resources track their emissions and navigate the ecosystem of reporting and accountability. The Consultation also proposes a study to understand the distributional implications of net zero targets, to identify the impacts of emissions reduction actions. Certain countries already have measures in place – such as in France, where technical and financial support is available to smaller companies to develop their transition plans, through the ACT initiative.[7]

6. The UNFCCC should reset the vision for the Global Climate Action Portal (GCAP) to promote a race to the top through greater transparency

This recommendation pertains to the scaling up the GCAP to become a centralised source of raw data and models for individual non-state entities, gathering data from voluntary and mandatory frameworks. It calls for integration with Net Zero Public Data Utility (NZDPU) efforts. NZDPU, launched at COP28, is a repository of climate transition-related data from companies – planned to soon be placed within the UNFCCC.

It is also important to consider how the scaling up and revamp of the GCAP can be linked to developments already taking place at the national level or regional level, such as with the recent package of EU legislations on the topic, Australia’s new Sustainable Finance Roadmap[8], or other developments covered by the Observatory in previous notes.

Overall, the recommendations aim to operationalise the RAF, though a specific and detailed timeline is yet to be mentioned. It could also be important as implementation rolls out to specify how the RAF would apply to or work across other UN bodies, to avoid silos and duplication of efforts, especially on aspects of equity and just transition.

Contributing to national pledges: Takeaways from Climate Chance, CDP, CISL and Net Zero Tracker’s side-event at SB60

During the 2024 Bonn Climate Change Conference, Climate Chance, CDP, CISL and Net Zero Tracker co-organised a side-event titled “The role of the private sector in bolstering ambitious and credible NDCs on the road to COP30”, which highlighted the role that companies can play in accelerating climate action around the world. Over 65% of the 2,000 largest companies’ revenue is covered by net zero targets, though there is an evident implementation gap, as seen in Net Zero Tracker’s analyses. While noting the increasing number and popularity of voluntary actions, the panel agreed on the importance of regulatory scrutiny both in harmonising disclosures and driving transparency, as well as in tracking implementation progress over time. Harmonising datasets vertically over time and horizontally across jurisdictions is vital if private sector actions are to be taken into account in national targets, to which end organisations like CDP are working.

The issue of materiality – impact versus financial – comes into question once more, with several transparency frameworks that exist today adopting a single materiality approach, as the Observatory has previously pointed out.[9]

As shown by the ACT Initiative, CBI, TPI, UK TPT and the EFRAG’s upcoming sector specific ESRS, the transition is different from one sector to another but also varies from one country to another. Therefore, there is a need for national sectors specific transition plans in one hand, and sectors specific transition plan disclosure standards in the other hand. Indeed, as explain in the ATP-Col guidance: “A credible transition plan is aligned with international decarbonisation goals, is coherent with relevant sectoral and local transition plans where the company operates, and is feasible within its proposed timeline”.[10]

The energy sector was examined in detail, particularly in relation to the COP28 goal of tripling renewable energy by 2030.[11] While current NDC commitments of countries represent less than 50% of the capacity required to meet the goal in 2030, cross-border groupings of businesses can influence regulations across a region, create and align favourable narratives, and even share infrastructure, according to the Corporate Leaders Group.

Moving from transparency to action, accountability is key?

The side-event at Bonn highlighted the importance of regulatory approaches in moving beyond transparency enforcing accountability, with examples from Europe as seen through the CSRD and CSDDD. The caveat remains that most regulations are only being put into place and results will take time be evident.

An important next step could be enlarging the scope from emissions and “climate” to social and governance indicators – given as how they are inseparable at the most granular levels of supply chains, and have mutual bearings in terms of impacts. Companies’ actions on just transition have an important role here. Though less than 1% are planning effectively for a just transition,[12] just transition considerations are being increasingly integrated into disclosure requirements, and companies can use existing tools and methodologies to track their progress.

While it is key to transforming transparency on progress towards objectives into action, accountability cannot be limited as merely a duty to fulfil reporting requirements. Companies’ transition plans can be truly effective when they go beyond reporting exercises to being a steering and monitoring tool for transition. Current analyses point out that there is still a need to go beyond reporting compliance and transparency exercises, and provide guidance to help relevant stakeholders assess and understand the credibility of companies’ transition plans.

In this context, a positive loop can be created by reinforcing Parties’ NDCs and non-State entities’ actions in order to accelerate transitions that fit with national contexts and international goals, and support the just transition and protection of nature.