State-owned carbon footprints: The missing link in climate accounting
The climate crisis is often framed as a battle between environmental advocates and major corporations, with multinational conglomerates most notably in the firing line. However, new figures from the recently-released Carbon Majors Data Update revealed a wider, more complex picture. That is, state-owned companies, not just investor-owned firms, are responsible for most global carbon emissions.
The report indicates that 16 of the world's top 20 greenhouse gas (GHG) emitters are state-owned, controlled directly by national governments, and were responsible for 52% of fossil fuels emissions in 2023. The top five state-owned emitters alone – Saudi Aramco, Coal India, CHN Energy, National Iranian Oil Company and Jinneng Group – accounted for nearly one-fifth of all global emissions in 2023. By contrast, the largest investor-owned companies contributed less than 5% collectively.
However, whilst ESG reporting frameworks should be applicable to both privately held and state-owned companies, the latter are not always subject to the same ESG disclosure rules. Specific requirements and the nature of disclosures can differ due to factors like ownership structure, political context and the objectives they are pursuing. There is a telling opportunity – and a need – to hold these organisations more accountable for their climate impact and to create greater reporting transparency as a driver for positive change.
Imbalance in climate accountability
Investor-owned companies, particularly in the fossil fuel and heavy industry sectors, have faced mounting pressure from investors, regulators and the public to disclose and reduce their GHG emissions. ESG regulations like the EU's Corporate Sustainability Reporting Directive (CSRD) and California's SB 253 and SB 261 subject these companies to stringent, strict policies.
While many international corporations are transitioning away from high-carbon product portfolios and even divesting their higher carbon assets, state-owned companies often face domestic political pressures to continue investing in new oil and gas projects. As state-owned companies account for well over half of the global production of oil, national governments are therefore directly linked to the climate crisis.
While multinational corporations face mounting legal challenges, shareholder activism and public scrutiny, state-owned organisations are rarely held to the same standards of accountability – despite their impact – as their investor-owned counterparts. Legal barriers such as sovereign immunity often shield them from litigation, making it difficult for affected communities or environmental groups to seek justice in court.
UN-appointed experts wrote to Saudi Aramco in 2023, seeking clarification on how it was abiding by human rights laws related to the climate crisis despite its pursuit of fossil fuel exploration and production. The letter mentioned Saudi Aramco's obligations under the UN's Guiding Principles on Business and Human Rights (UNGPs), which the Human Rights Council adopted in 2011. However, the organisation did not make their response public.
Transparency in data to drive change
The accountability gap for state-owned enterprises poses a serious challenge to global climate goals. The OECD has called for governments to integrate climate targets into their ownership policies, but only a minority have made such commitments mandatory. Transparency remains crucial to climate accountability, and technology can play a role in bridging this gap. Detailed, auditable emissions data is essential for both regulatory compliance and public scrutiny and awareness. Specialist ESG software platforms are making it far easier for companies to track and report emissions in line with global standards. These platforms allow businesses to navigate climate legislations, gaining clarity on measurement, reporting and monitoring requirements. By standardising data collection and reporting, these tools can provide transparency for state-owned organisations.
Whilst 'marking their own homework' could be a concern, governments do need to combine their dual role as both policymakers and business owners. International agreements and national policies must evolve to require state-owned companies to adopt the same rigorous reporting and reduction standards as their investor-owned counterparts. Detailed emissions tracking, third-party auditing and public disclosure – underpinned by specialist software platforms – are key steps in addressing our climate challenges. With robust data and automated processes for carbon accounting, businesses can drive more effective compliance and strategies for decarbonisation in line with global goals.
Closing the accountability gap
The Carbon Majors Data Update reinforced a clear reality – our climate challenges demand accountability and action from all major GHG emitters, regardless of ownership. Whilst state-owned businesses should be increasingly expected to report on their ESG performance – just as privately-owned ones are – it's not a level playing field. The specific requirements and nature of their disclosures may differ due to the influence of government, political context and their objectives. Software solutions provide the data-driven accountability, transparency, compliance and analytics needed to drive change – but only if governments and policymakers commit to applying them equally. This would be a key step towards levelling up the responsibilities for – and the contributions to – the fight against climate change.
