Bridging the gap between emissions commitments and action amid short-term energy pressures

The persistent gap between organisational emissions commitments and demonstrable progress presents a long-term strategic opportunity for boards, even as they navigate short-term energy pressures, writes Yvette Manolas GAICD.

Australian boards have moved quickly to respond to climate-related disclosure requirements, with many now overseeing detailed reporting, risk registers and net zero commitments. At the same time, organisations are navigating more immediate pressures, including energy price volatility and supply constraints linked to geopolitical uncertainty.

In this context, a greater tension is emerging: how do boards continue to translate climate commitments into practical, defensible decisions without compromising competitiveness, resilience or energy security?

Emission blind spots

As climate and sustainability reporting matures, the gap between what companies disclose and demonstrable emissions reductions is becoming more visible.

In my experience, several blind spots are emerging. The first is boards treating emissions discussions as a near term compliance exercise rather than a strategic one. The second is methane. Methane emissions reductions are not only one of the most cost efficient and effective ways for businesses to achieve their emissions targets; recovered gas can also increase energy supply during shortages.

A further blind spot is the tendency to view emissions mitigation primarily as a social and environmental obligation, rather than as a driver of productivity, operational efficiency and safer, more resilient operations. This framing can limit how opportunities are identified, valued and prioritised at board level. The following sections highlight how more effective boards address this.

Disclosure into decision-making

Boards are increasingly focused on their responsibilities on climate, and most have responded with disclosure frameworks, risk registers and emissions pledges. Yet there remains a disconnect between those commitments and demonstrable reductions.

The most common pattern is climate targets without specific CAPEX and OPEX allocations. Mitigation activities are assumed to be covered by operational spend and lack clear ownership, and even motivated teams are left struggling to act – unsure how to prioritise emissions reductions alongside safety, uptime, energy security and cost.

This risk is becoming more acute as scrutiny on companies increases. Boards that fail to demonstrate credible transition plans face rising investor attention, disengagement and legal risk.

The shift now required is to connect reporting and decision-making – particularly in areas such as capital allocation, decarbonisation investment criteria, long term resilience and operational priorities.

While these dynamics are most visible in emissions-intensive sectors, the underlying governance challenge is broader. Most organisations – even those with relatively low direct emissions – are now exposed to climate-related decision-making through energy procurement, supply chains, and reporting obligations.

The compliance trap

A useful test for boards is this:

• Where is the Marginal Abatement Cost Curve (MACC) published?
• What is the company’s $/tonne emissions abatement threshold?
• Is more than a purely compliance-based view taken in assessing emission reduction benefits?

If these elements do not exist, it is likely that capital is not being allocated to emissions reductions appropriately. What is needed is a board-approved transition roadmap that includes measurable targets, ring-fenced funding, clear decision principles, and public reporting.

A related problem is valuation. Decarbonisation projects that are NPV-positive are frequently misperceived as value-negative because the full benefit – including reliability improvements, strategic positioning, reduced regulatory penalties and safeguarding future operations – are not fully included in valuations.

Forward-looking boards are increasingly asking whether all abatement benefits are being captured, and whether investment decisions reflect financial realism, competitive benefits and emerging regulatory expectations.

Methane as a case study in board assumptions

Methane is the most important example where this gap is evident – not because it is technically difficult to address, but because boards have often assumed it is.

While carbon dioxide reductions often require large capital investment, many methane reductions are low-cost, improve energy supply, and are achievable through improved operational practices. Rapid methane reductions not only cut emissions but recover gas, increasing energy supply during shortages and delivering both near-term climate and economic benefits.

In the current energy security environment, that is not solely a climate argument. It is a business one.

The accounting also matters. Over a 20-year horizon, methane’s Global Warming Potential is approximately 84 times CO₂e, compared with approximately 28 times on a 100-year basis. Most regulations currently use the 100-year figure, but companies are increasingly incorporating the 20-year measure to support more financially realistic, science-based decisions.

Requiring both 20 year and 100 year methane measures to be considered is important – not only to improve capital allocation decisions, but to anticipate likely shifts in regulatory and investor expectations, and to avoid decisions made only based on compliance outcomes.

What good looks like

Boards that are moving beyond these blind spots are taking a more integrated approach. The most effective board approaches share several characteristics.

They prioritise methane and carbon dioxide emissions reductions to ensure the most immediate, highest-impact and lowest-cost emissions reduction opportunities are progressed, rather than (often unintentionally) relying on capital-intensive pathways, which require future technology improvements or future production scale to be economical.

They publish clear capital allocation criteria – including MACC and $/tonne abatement metrics – to focus investment on the highest-value opportunities.

They earmark funding and resources, rather than treating mitigation as discretionary operational spend. This is a key driver of whether action is taken.

And they pursue collaboration – across supply chains, with customers, governments, financiers, and peers – recognising that shared ownership of emissions sources and mitigation opportunities can lower cost, reduce risk and accelerate deployment.

The stakes for boards

These are not hypothetical risks. The gap between what companies have pledged and what they can demonstrate is, for many, still very wide.

Scrutiny from investors, regulators, and the public is not easing. The tools available to identify emissions underreporting are improving, including increased access to free, public data sets.

In this environment, a credible transition plan is increasingly a competitive differentiator. The question is not whether boards will face this pressure. It is whether they are equipped to respond in a way that aligns climate commitments with financial, operational, and strategic decision-making.

Questions for directors

On capital and decision-making

• Where is our emissions reduction MACC and $/tonne emissions abatement threshold published?
• Are all abatement benefits fully valued – including safety, reliability, strategic market positioning, OPEX reductions and avoided regulatory penalties?
• Do we have a board-approved transition roadmap, with clear CAPEX and OPEX allocations over the next three years?
• How are emissions reduction priorities balanced alongside other business priorities?
• Have we considered collaborations and hybrid financial structures to reduce implementation costs?

On reporting and governance

How are our climate disclosures informing decision-making (rather than operating as a standalone reporting exercise)?

• What level of assurance and internal governance supports the credibility of our transition plans? Is historical expenditure reviewed to inform governance of mitigative action undertaken?

On methane and specific risks

Are both carbon dioxide and methane emissions considered in abatement decisions, as distinct gases with distinct economic benefits?

• Has the 20-year Global Warming Potential of methane been considered alongside the 100-year measure?
•  Have we adopted credible measurement and reporting frameworks appropriate to our sector?
• Where assumptions exist that emissions are difficult to measure or reduce, how are these being tested? (For example, are we members of global frameworks and business knowledge sharing collaborations relevant for our sector. This includes the Oil and Gas Methane Partnership (OGMP2.0) for oil and gas producers, the Steel Methane Partnership (SMP) for steel and coal producers, and have learnings from these industries been leveraged for other sectors, including agriculture and waste via science studies undertaken by the International Methane Emissions Observatory.)

Final note

Climate reporting is accelerating board attention and improving transparency. The next phase is more demanding – translating intent into action.

Yvette Manolas is a climate expert, non-executive director and ex-industry executive with over 20 years industry experience. She works for many corporate, not for profit and advocacy organisations as a strategic advisor, including the Environmental Defense Fund.