The Challenge for Coal Sector of Net Zero and a Just Transition

As the build-up continues to the pandemic-delayed UN Climate Change Conference (COP26), all eyes – and hopefully all agendas – are on how to reach net-zero carbon emissions. And as the International Energy Agency (IEA) made clear in its recent Net Zero by 2050 report, this aim will fall short without a radical decrease this decade in the share of coal in global energy generation. Indeed, taken together, the coal, oil, and gas sectors are the single main cause of climate change due to their production of greenhouse gas (GHG) emissions.

It’s timely, therefore, that Global Reporting Initiative (GRI) has released an exposure draft for a Sector Standard for Coal, currently out for public comment. With the aim of ensuring transparency on impacts that matter most, the draft Standard has the potential to unlock improved public disclosure on the most significant sustainable development challenges facing companies in the coal sector.

Of all GHGs from fossil fuels, 40% comes from burning coal. And given the sector’s wide-ranging impacts in areas such as biodiversity and human rights, in addition to climate change, the rationale for developing a new reporting standard is clear.

Impacts and opportunities

The proposed GRI Standard for Coal acknowledges that the sector is challenged by the tension of opposites. On the one hand, organizations have a responsibility to mitigate and combat the effects of climate change – manifested, for example, in how they are transforming their business models to lower-carbon alternatives. At the same time, they have a remit to ensure ongoing operations are conducted responsibly. After all, in some regions, coal mining and consumption is still growing. At least 50,000 people continue to be employed in the coal sector, while hundreds of thousands of jobs are indirectly connected.

In addition, whole regions and communities rely on income from coal. These regions will likely make the shift more slowly than developed countries, where decarbonization is already well underway. And there is an imperative for a just transition, to ensure that workers and communities get both protection and benefits from the shift towards climate resilience and a low-carbon future.

A part of GRI’s new Sector Program, which has an aspiration to deliver 40 Sector Standards, the exposure draft for the Coal Standard is the culmination of a rigorous process, which has drawn on multi-stakeholder expertise. An independent working group, including diverse and global expertise from organizations within and connected to the coal sector, has been instrumental to getting the draft Standard to this stage. Its final version will help companies use the GRI Standards to identify likely material topics for the sector, increasing consistency when it comes to how they provide transparency to their stakeholders.

Targeting impact areas

The exposure draft makes the connections to existing topic-specific Standards, in areas such as biodiversity, waste, local communities, taxes, and employment. It also introduces new topics that don’t have a corresponding GRI Topic Standard.

The Standard emphasizes disclosures that get to the heart of the transition challenges faced by coal companies and the communities where they operate.

For example, it seeks forward looking information on the actions organizations are taking to manage their actual and potential impacts that contribute to climate change. This recognizes the crucial role that the decisions and strategies of fossil fuel companies have on global efforts to mitigate climate change.

This Standard singles out three key topics:

• Climate adaption and resilience guides organizations to report on how the low-carbon transition impacts workers and local communities, to encourage a just and fair transition for all. Organizations should also disclose the climate change scenarios they use to assess the resilience of their strategy, and whether they are investing in low-carbon solutions. Acknowledging that the climate change debate evolves rapidly, the topic conveys the latest stakeholder expectations for transparency.

• GHG emissions covers carbon and methane emissions from coal activities. It advises organizations to report on all GHG Scopes, including Scope 3 emissions from product use, which cause the most emissions in this sector. Disclosures about product use emissions are not a means to allocate fault, but rather to enable a link to the global carbon budget, allowing set limits on how much can be burned.

• Closure and rehabilitation focuses on preparation for ending operations, which can happen quickly, especially from the workers’ perspective. This topic asks organizations to disclose how they will support the future employability of workers as well as their financial provisions to cover closures and rehabilitation.

Role of coal in society

Even in the IEA’s most progressive pathways, coal will be mined for the next 20 years. And the sector’s activities will continue to have major impacts on those working for coal companies, their families and surrounding communities. These people-related impacts are also addressed in the Coal Sector Standard. They include issues such as health and safety risks; providing decent work; supporting local development and mitigating social impacts around mining sites; conducting business with integrity when it comes to distribution of wealth and corruption; and last but not least, respecting human rights.

That said, we recognize all sustainability topics are interconnected. The environment may be the initial receptor of impacts, but the effects of climate change will eventually – and at an alarmingly exponential pace – pervade human and animal health and wellbeing.

Seeking multi-stakeholder input

With the global public comment period on the Coal Sector Standard’s exposure draft open until 30 July, we need your input on its comprehensiveness and relevancy. We encourage all interested parties and stakeholders to complete the online questionnaire. Further development will follow the public comment, and we then expect to launch the final Standard in 2022.

Ultimately, this process is about ensuring GRI can deliver a Standard that meets global requirements and expectations for the best transparency practices in the coal sector. At the same time, we remain ready to help coal companies’ fulfill their responsibilities towards a just transition through acknowledging and managing their impacts on people and planet.

ABOUT THE AUTHOR

Noora Puro is a project manager for the GRI Sector Program, and is currently leading the work to develop a sustainability reporting standard for coal companies. She has been with GRI since 2017 and has also worked on the GRI Oil and Gas Sector Standard.

Before entering the world of standard-setting, Noora specialized in corporate and sustainability communications, advising and preparing reports for multinational enterprises. She holds a master’s degree in humanities from the University of Helsinki.

ABOUT GRI

Global Reporting Initiative (GRI) is the independent, international organization that helps businesses and other organizations take responsibility for their impacts, by providing the global common language to report those impacts. The GRI Standards, which are provided as a free public good, are the world’s most widely used sustainability reporting standards.