Measuring Corporate Carbon Footprint

The Green House Gas Protocol of 2001 categorised greenhouse gas (GHG) emissions into three groups, known as Scopes 1, 2 and 3. Scopes are now the basis for mandatory GHG reporting in many countries.

Scope 1 emissions are those that a company makes directly, for example while operating manufacturing equipment or running a fleet of vehicles. Scope 2 emissions are those that it makes indirectly, when, say, the electricity or energy it buys for heating and cooling its buildings is being produced by others on its behalf. Scope 3 emissions cover all the emissions that the company is indirectly responsible for, up and down its value chain, when buying products from its suppliers, for example, and emanating from its products when customers use them. They include anything that isn’t already included in Scopes 1 or 2 and, for most organisations, Scope 3 emissions create the largest GHG impact.

If you do business with other companies as part of their supply chain, you may need to know and demonstrate your own carbon footprint in order for them to calculate theirs, so the whole system has a built-in element of mutual dependency. In future, companies needing to reduce their Scope 3 emissions may turn to their suppliers for help, and having a low carbon footprint may mean the difference between a supplier keeping or losing a vital contract.

Measuring your carbon footprint gets more complicated as you move through the Scopes. Most companies will normally have the source data needed to convert their gas and electricity consumption into a value in tonnes of GHGs. You can reduce your Scope 2 emissions quite easily by buying only renewable electricity and renewable gas, and moving all your vehicles to electric or hydrogen power. Calculating your Scope 3 footprint is where it gets complicated. Online tools are available, or you can hire skilled specialist staff, or outsource the task to any of the growing number of third-party consultancies offering such a service. Some governments offer free advice and support in carbon footprint calculation, so it’s worthwhile checking what advice and support may be available before embarking on what could easily be a $20,000-$30,000 initial investment. If your government doesn’t provide such a service, it’s worth checking the web for one that does.

Whether you opt for doing it yourself or engaging outside experts, here are the basic steps you’ll need to take to calculate the carbon footprint of your business.

Start by selecting a 12-month period to collect activity data. Then gather data from your own records for electricity and gas usage during that timeframe, along with water consumption, water treatment, the amount of fuel used in company-owned vehicles, employee details, and waste disposal and recycling. The better the quality of data, the more accurate the measurement of your emissions. Some data, such as indirect emissions, may be hard to obtain, so you should make reasonable estimates where necessary.

If you can’t get the data you need from your own records or from employees, suppliers and service providers, there are a number of databases out there that can help you fill the gap with estimated GHG emissions from common business activities based on widely available data. Combining data provide from these resources with actual figures from your business can help you evaluate your indirect emissions. It’s best to base your calculations on material quantities rather than cost, because costs can vary widely and deliver imprecise results.

The next step is to calculate the greenhouse gas emissions associated with each business activity. To do that, you will need to use an ‘emission factor’. This is a representative value that allows you to convert the activity data you’ve measured into greenhouse gas emissions. These conversion factors are presented in units of 'kilograms of carbon dioxide equivalent of the gas emitted per unit activity'. The factors are normally available on your government’s websites and are used to multiply each of your activity data measurements to give an estimate of the GHG emissions for that activity. By adding the GHG emissions for each activity, you can calculate your total greenhouse emissions for the year.

Once you’ve calculated your GHG emissions, you can use these data to reduce your emissions in many ways – and your costs. You could reduce waste, perhaps embracing the circular economy in which you use, return, recycle and reuse materials; switch to renewable forms of energy such as solar, wind and hydropower; switch to electric, hydrogen fuel cell or hydrogen-powered vehicles; and reduce commuting and business travel.

Understanding your corporate carbon footprint is an essential first step on the road to being part of the climate change solution rather than part of the climate change problem. Doing something about it is an important next step. And don’t be shy: research by McKinsey has found that companies with more aggressive carbon reduction targets appeared to overperform on the path toward achieving those targets. So get measuring – and be bold!