GHG Risks

From Open Risk Manual

Definition

GHG Risks are any Risk Type that is strongly related to a company's GHG Emissions profile. A company’s GHG exposure is a management issue in light of heightened scrutiny by the insurance industry, shareholders, and the emergence of environmental regulations/policies designed to reduce GHG emissions.[1]

In the context of future GHG regulations, significant GHG emissions in a company’s value chain may result in increased costs (upstream) or reduced sales (down- stream), even if the company itself is not directly subject to regulations. Thus investors may view significant indirect emissions upstream or downstream of a company’s operations as potential liabilities that need to be managed and reduced. A limited focus on direct emissions from a company’s own operations may miss major GHG risks and opportunities, while leading to a misinterpretation of the company’s actual GHG exposure.

Mitigation

Compiling a comprehensive GHG Inventory improves a company’s understanding of its emissions profile and any potential GHG liability or “exposure.”

Accounting for emissions can help identify the most effective reduction opportunities. This can drive increased materials and energy efficiency as well as the development of new products and services that reduce the GHG impacts of customers or suppliers. This in turn can reduce production costs and help differentiate the company in an increasingly environmentally conscious marketplace. Conducting a rigorous GHG inventory is also a prerequisite for setting an internal or public GHG target and for subsequently measuring and reporting progress.


References

  1. The Greenhouse Gas Protocol, A corporate accounting and reporting standard, Revised Edition 2008