Struggling with new carbon footprint and carbon reduction plan regulations? Take See Through Carbon’s Compliance Quiz. 

If your business, institution or public body is suddenly having to comply with new carbon reporting regulations and you’re unsure about how to be compliant, this quiz may help.

Your Compliance Dilemma – New Red Tape

You run a successful business or public sector entity. The government introduces a new regulation that requires you to submit some information. 

You want to be compliant, and read the new law carefully. You’ve never seen the like of it before.

Non-compliant submissions incur a significant penalty. You don’t want to risk being non-compliant, and you’ve not budgeted for any costs associated with being compliant.

You try filling in the form to the best of your ability. As far as you can tell, it should be compliant with the new regulation, but before submitting it, you’d like to at least know the size of the financial penalty in the worst case.

QUIZ QUESTION 1

Q1: Do you pick:

• Option 1 – PAY AN EXPERT: Pay professionals (‘It’s worth paying for certainty’)
• Option 2 – ‘ASK THE TAXMAN’: Email the regulatory authority to confirm your submission is compliant ‘The safe and free bet’)
• Option 3 – RISK IT: Go with your best guess  (‘Professionals are expensive and DIY is low risk’)

Let’s say you choose Option 1.

Paying experts is an additional cost, but you value predictability and stability, you’re responsible for assessing potential risk, and being fully compliant with all regulation is literally part of your job.

QUIZ QUESTION 2

Q2: Which expert should you ask for definitive advice to ensure your submission is 100% guaranteed compliant?

1. Your Lawyer
2. Your Business Consultant
3. Your Accountant 
4. Your Insurer

You visit them all, just to make sure. They all concur that when it comes to managing new risks:

• Option1 (PAY AN EXPERT) is wise: being compliant is the first duty of any business executive
• Option 2 (‘ASK THE TAXMAN’) is imprudent: the ‘wrong’ answer leaves you no wiggle room
• Option 3 (RISK IT) reckless: when submitting to new regulation for the first time, being compliant is doubly critical

For each Expert you then:

• show them the new law
• explain your amateur estimate of the worst-case penalty for non-compliance
• ask them to guarantee compliance, including accepting liability if you follow their advice but still get fined

A: Your Lawyer’s Dilemma

Your Lawyer says they’re unfamiliar with the new legislation and there’s no case history to guide them. 

They decline to 100% guarantee you’ll be compliant.

B: Your Consultant’s Dilemma

Your Consultant’s opinion covers many options, but is mainly estimates, caveats, exclusion clauses, known unknowns, and unknown unknowns.

They decline to 100% guarantee you’ll be compliant.

C: Your Accountant’s Dilemma

Your Accountant says that they’re very familiar with most grey areas of regulations and statues, but these new rules are uncharted waters, which they can’t navigate with confidence.

They decline to 100% guarantee you’ll be compliant.

D: Your Insurer’s Dilemma

Your Insurer explains they can only calculate premiums based on an actuarial analysis of extensive information, from statutes, to case law and industry averages of real-world outcomes, but no such dataset exists for your new business. 

They decline to 100% guarantee you’ll be compliant.

QUIZ QUESTION 3

Q3: Do you now:

1. Reckon your Lawyer, Consultant and Accountant and Insurers’ answers are good enough and go for Option 1 (RISK IT)
2. Go for Option 2 (‘ASK THE TAXMAN’)
3. Type your compliance question into a search engine, to see if anyone online can offer anything better. (DO YOUR OWN ONLINE RESEARCH)

Let’s say you choose 3.

Free, Open, Transparent Online Solution

Your online search for your compliance question produces 100 results. 

99 of them are paid advertisements from Lawyers, Consultants, Accountants and Insurers.

You read them all carefully, but they all sound familiar. You now know enough about the new regulation to conclude that just like you, your own Lawyer, Consultant, Accountant and Insurer, they’re guessing, and for the same reasons.

Everyone in business valued certainty, and with this new regulation, no one is prepared to offer a 100% guarantee indemnity or underwriting of the risk of being penalised for non-compliance.

The 100th result, however, is not from a business, but from an ‘ecosystem’. Let’s say this ecosystem is called…‘Option Two’.

Option Two’s website has a section called ‘The Taxman’s Responses To The Questions No One’s Ever Seen The Like Of Before’.

It lists a series of date-stamped emails sent to the relevant regulatory authority. Each email: 

• Describes a specific category of business with specific characteristics.
• Details what the website’s own panel of independent experts thinks is a reasonable way for that type of business to comply with the new law.
• Asks if the regulators authority would consider a tax return made using Option Two’s methodology as compliant. 

Below each of their email requests, the ecosystem website publishes the tax authority’s response, sorted into 5 categories:

1. ‘NO RESPONSE’: ‘No reply as of [today’s date]’
2. ‘NO GUIDANCE’: A official reply declining to comment on your email, 
3. ‘YES AND’: An official reply, agreeing that Option Two’s methodology seems reasonable.
4. ‘NO BUT’: An official reply correcting Option Two’s methodology, and outlining a compliant one.

QUIZ QUESTION 4

Q4: Does the ecosystem’s website leave you better off than before you saw it?

QUIZ QUESTION 5

Q5: If you’re better off, would you expect to pay this ecosystem, more or less than what your Experts charge?

QUIZ QUESTION 6

Q6: Does the ecosystem website provide you with a cast-iron guarantee of compliance?

The Actual Problem Revealed – New Green Regulations

Before jumping to the answers below, you might like to read this key to the real-world situation this thought experiment illustrates:

• The New Regulation = new ‘Mandatory Era carbon reporting requirements, like the EU’s Corporate Sustainability Reporting Directive (CSRD), Cross-Border Adjustment Mechanism (CBAM), or the UK government’s Carbon Reduction Plan.
• The Legal System = The Legal System, in this case the jurisdictions governing the new regulations for corporate carbon reporting, rather than business financial tax.
• You = any business falling under new carbon reporting regulations.
• The Consultant = any consultant you pay to help report your carbon footprint. Like your Mechanic, consultants offer a range of services, of which carbon reporting is just one. Established financial accounting firms adding a new service, start-up carbon consultancies responding to the new regulatory environment, and sectoral specialist consultancies integrating carbon reporting with other services, all face the same problem of accurate Scope 3 reporting. This is a storytelling problem, immune to technological shortcuts, because thirty years of Voluntary reporting has bequeathed no functional dataset on which to train an AI.
• Your Accountant =  any accountant you pay to advise you on how to comply with new environmental regulations. 
• Your Insurer = Your insurer Like casinos, insurance companies calculate the likelihood of a particular event, and charge a premium priced slightly above that probability in return for taking on liability. To stay in business, insurance companies need to be minutely familiar with the actuarial risks of non-compliance fines for financial regulation, but have no comparable data with which to calculate the risk profile of insuring against the regulators judging a submission non-compliant. The carbon reporting statutes are brand new, sketchy on methodological detail, and untested in the courts. With no case law or precedent to guide their risk assessment calculations, pricing any premium would be a wild guess. Insurance companies are not in the business of wild guesses. Their duty to their shareholders is either quote a very expensive premium to cover their own risk in taking on liability, or not quote at all.
• ‘Option Two’ website  = See Through Carbon, an accurate, free, open, transparent carbon reporting ecosystem that charges nothing for its services and makes the carbon-related data it collects publicly visible online. Its methodology is either based on what regulators recommend, or the judgement of a neutral panel of pro bono experts motivated only by creating the most accurate possible carbon reporting standards. The Clause 3 is a direct quote from See Through Carbon’s End User Licence Agreement.

QUIZ ANSWERS

Now you know what the particular new regulation this quiz is about, you may have gathered that carbon reporting in its current form has no clean, unambiguously correct answers.

This is because the thought experiment set up by the quiz assumes carbon reporting is as mature, standardised and well-understood as financial reporting. This is a category error.

The reality of carbon reporting is that it’s in its infancy.

No one – not even the regulators – is, or can be, 100% sure of anything. Not only is the whole mandatory regulatory environment utterly different from the previous voluntary self-regulation, but the climate emergency that made it necessary is getting more acute by the day, as emissions keep rising.

Businesses are used to minor shifts of the goalposts. What no one is prepared for is for the playing field itself to be increasingly flooded, burnt, getting bigger, more unplayable and boggier with every passing day.

The answers, for what they’re worth:

A1: Both 1 and 2, if you can afford it. If not, See Through Carbon, as an ecosystem, can afford to ‘ask the taxman’, and is free for anyone – including your Expert 1-4, to use to better inform their opinion.

A2: As many as you can afford. If not, See Through Carbon is free to use.

A3: If they’ve not yet done so, suggest your Lawyer, Consultant and Accountant and Insurers saves themselves the trouble of doing the due diligence you did by choosing 3. If they use the See Through Carbon site, they’ll see the ecosystem has already done 2) for them for free. Commercial entities could never be so foolish as to ‘ask the taxman’ – their businesses depend on their capacity to interpret regulations.

A4: Clearly better off. You can’t get any better clarity than asking the regulator a specific question and publishing both question and answer, so you can’t be more compliant.

A5: Whatever you may expect, See Through Carbon is free, as it’s an ecosystem, not a business.

A6: See below

100% Guaranteed Compliance for Carbon Reporting

No one, not even the regulators themselves, has the ‘right’ answers to a question as huge and complex as our species’ shortest route to speeding up carbon drawdown.

This should not be a surprise. Breaking our fossil fuel addiction is the greatest challenge our species has faced in its 300,000 year history.

We still have options, but the more we postpone addressing them, the fewer, and worse, they are.

‘Saving the planet’ is how we explain the goal to our children. ‘Mitigating the worst effects of human-induced climate change on human civilization’ is the adult version. We all know what we say about taxes and death, but carbon accounting is fundamentally different from financial accounting, because it’s not a zero-sum exercise.

See Through Carbon isn’t the only solution. Like all other ‘solutions’, it cannot work in isolation. But it’s another thread in the lifeline thrown to us by a sustainable future.

Regulations like the EU’s Corporate Sustainability Reporting Directive (CSRD) and  Cross Border Adjustment Mechanism (CBAM) or the UK’s Carbon Reduction Plan initiative are initial, tentative steps towards sustainability.

Such legislation clearly signposts the destination, but the exact path is still winding, full of obstacles and hard to discern. Not something any Expert can meaningfully guarantee.

Whatever the solution, See Through Carbon’s accurate, free, open, transparent ecosystem is surely a step in the right direction. 

For more:

• How See Through Carbon swaps free carbon footprint calculation for open data, explained in its End User Licence Agreement 
• Why ecosystems like See Through Carbon can afford to take Option Two where commercial entities can’t.