Greenly rolls out a climate rating system to monitor decarbonization in companies

Greenly, a carbon accounting platform, recently announced the launch of its new climate rating system for companies. The platform aims to monitor decarbonization in businesses and ensure decarbonization transparency.

Greenly has developed a points-based system, which will measure the progress that firms make in an attempt to reach their decarbonization goals. In addition, it will make those efforts and their success transparent.

ESG ratings are not a reliable way to track decarbonization efforts

The world’s interest in decarbonization has grown exponentially over the last several years, so most, if not all, businesses claim that they are taking major steps to reduce their carbon footprint. However, determining whether they are staying true to their carbon reduction targets is a major challenge, primarily due to dishonest reporting of ESG ratings.

Scientific Beta conducted research that revealed this by showing that companies that have high ESG ratings do not emit any less carbon than firms with low ESG ratings. As a result, researchers concluded that ESG ratings alone are not accurate enough to determine the firms’ efforts to lower their emissions. A different approach was necessary, and Greenly’s new climate rating system might become the most reliable new way of measuring it.

The platform’s system involves a detailed examination of greenhouse gas emissions, green projects undertaken by companies, as well as their strategies. The idea is to use these metrics to ensure greater transparency and keep a close watch on the firms’ climate trajectories.

Greenly will reward low emissions with medals

Alexis Normand, Greenly’s co-founder and CEO, said that decarbonization in companies is not on track with the Paris Agreement objectives. Investors wish to finance the energy transition, and businesses wish to remain relevant in the climate-conscious world. However, at the same time, they face a dilemma — should they prioritize real carbon reductions or simply pursue high ESG scores?

“These two goals can often be incompatible, so it’s essential to distinguish between a genuine decarbonization effort and a mere ESG display. Our Climate Ratings System sets out to do exactly this,” Normand added.

Greenly’s new system will start by assessing companies by allocating points for multiple categories. Those include creating greenhouse gas reports, offsetting emissions, and setting goals aligned with the Paris Agreement. After that, the system will rank the firm’s performance and categorize it with a rank ranging from E to A+.

Any company that manages to secure a score above C will be awarded a medal, and medals will range from bronze to platinum. They will serve as a way to acknowledge the company’s efforts and will also be a good way for climate-conscious investors to know which firms to support.

So far, Greenly has already granted several Climate Action Medals to three firms — Exaprobe, share(d), and Pomelo.