As pressure to tackle climate change intensifies, so does scrutiny of the actions we’re taking to reduce our carbon footprint. On a corporate level, this plays out in many ways. For instance, organizations are exploring how to measure greenhouse gas emissions, minimize their corporate impact, and manage and report on their ESG performance overall. Reducing your carbon footprint is a core objective if your organization wants to address its environmental impact. Greenhouse gas (GHG) emissions are a fundamental aspect of this. Here, we look into how to measure your emissions and report on them in a way that meets your obligations.
The Imperative for Measuring Greenhouse Gas EmissionsSince 2010, certain US businesses have been required by law to report on greenhouse gas emissions. These include manufacturers of vehicles and engines, suppliers of fossil fuels or industrial GHGs, and facilities that emit at least 25,000 metric tons of GHGs per year. These businesses must submit annual reports to the US Environmental Protection Agency (EPA). Businesses and others can use the data reported under this program to track and compare facilities’ greenhouse gas emissions, identify opportunities to cut pollution, minimize wasted energy, and save money. Another driver for measuring GHG emissions is the increasing weight being given to non-mandatory reporting. One example is the ESG disclosures that inform ESG ratings and scorecards used by investors and advisors when making investment choices and recommendations. Reporting frameworks like TCFD, which is now supported by more than 1,700 organizations in 77 countries, are becoming more accepted and expected, even being mandated in some countries. Even for businesses not legally obliged to report, ESG reporting is becoming the norm, with carbon emissions and sustainability as a whole forming a vital element of this reporting. Many organizations are also proactively choosing to commit to lowering greenhouse gas emissions and making net-zero commitments as they recognize the broader benefits of prioritizing the planet and people alongside profit. In a world where buying decisions are increasingly being made with an eye to environmental performance, businesses need to demonstrate their “nature positive” credentials and a focus on reducing their corporate carbon footprint.
What Greenhouse Gas Emissions Reporting Do Businesses Have To Do?As above, in the US, companies that meet specific criteria have to report by law to the US Environmental Protection Agency (EPA). The EPA’s Greenhouse Gas Reporting Program (GHGRP) captures data covering 85-90% of all US GHG emissions. A complete list of the industrial operations covered by the reporting requirements is available on the US EPA’s website. Organizations have to calculate their emissions in line with specific methodologies set out by the EPA and report using an online tool, the Greenhouse Gas Reporting Tool (e-GGRT). Accuracy is vital. The EPA carries out a verification process on all data received to ensure it’s “accurate, complete, and consistent.” Verified data is made publicly accessible online, opening companies to public scrutiny and comparisons.
How to Measure Greenhouse Gas EmissionsKnowing what you need to report is one thing, but how do you calculate greenhouse gas emissions? First, you need to understand your obligations around Scope 1, Scope 2 and Scope 3 emissions.
What Are Scope 1, 2 and 3 Emissions in Greenhouse Gas Reporting?
- Scope 1 emissions are direct greenhouse gas emissions from sources controlled or owned by an organization.
- Scope 2 emissions are indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling — i.e., emissions that result from the organization’s energy use.
- Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization. But instead that the organization is indirectly responsible for throughout its value chain. In practice, this might mean emissions that result from an organization buying products from its suppliers or from customers using its products. The majority of an organization’s total GHG emissions tend to fall into Scope 3.
What Are the Challenges in Measuring Greenhouse Gas Emissions?When considering how to measure greenhouse gas emissions, you will inevitably come up against several challenges. Some of the obstacles businesses face when measuring carbon emissions are:
- It’s time-consuming. Greenhouse Gas Emissions in many reporting initiatives such as the Carbon Disclosure Project (CDP), Dow Jones Sustainability Index (DJSI) and FTSE4Good index make up less than 40% of the total questions. However, these can take up to 90% of the total time involved in compiling the report for some responding organizations.
- The range of data needed can be overwhelming. Organizations may need to prepare, track and disclose key metrics in line with many regulatory frameworks and standards — and across a large number of data points, in their own operations and their supply chain.
- Reporting rules and emissions factors are ever-evolving. For instance, different countries, industries, and cities may have different reporting requirements and emissions targets. The number of emissions factors is growing all the time. Keeping pace with your obligations can be exhausting.
- Reporting has to be done within tight deadlines. Under the US GHGRP, businesses are required to report emissions from the previous calendar year by March 31 of each year. You need to work quickly to capture, verify and report on all the metrics within your remit. The stakes are high. When it comes to climate-related reporting, accusations of greenwashing are rife; investors, customers and other stakeholders are suspicious of a “smoke and mirrors” approach to compliance. Accuracy is imperative — but with so many data points, often across entities and geographies, accurate and comprehensive data can be elusive.
- More broadly, best practice in environmental, social and governance (ESG) demands that you integrate your greenhouse gas emissions reporting with broader environmental and ESG strategies. This is a challenge for many organizations; data-gathering is a struggle, and aggregating metrics into a comprehensive ESG strategy is even more so.