Why Carbon Accounting is Important for Businesses
Carbon accounting, or Greenhouse Gas (GHG) Assessment, refers to the process of quantifying the amount of carbon dioxide and other greenhouse gases that commercial or national institutions emit as part of their operations.
Carbon accounting assists companies in understanding their impact on global warming and climate change, as well as assisting them in setting goals to reduce emissions. This encourages climate action and corporate sustainability in meeting their net-zero emission targets. Additionally, carbon accounting helps in planning an emission reduction strategy by making clear which areas of a business’ operations are the primary sources of emissions.
What is Carbon Accounting?
Enterprise Carbon Accounting, or Corporate Carbon Footprint, is a quick and cost-effective approach to help businesses gather, summarize and report enterprise and supply chain greenhouse gas inventories. Greenhouse gas inventories are lists of emissions and their sources, which are quantified using standardized methods. Carbon accounting and monitoring will yield different results for each business.
To be successful, your Enterprise Carbon Account requires the following characteristics:
- Comprehensive: Incorporates scope 1, 2, and 3 emissions.
- Periodic: Allows for regular updates and comparisons across reporting periods.
- Auditable: Transactions are traceable and allow for independent reviews for compliance.
- Flexible: Uses data from various approaches to life cycle analysis.
- Standardized: Accommodates existing accepted standards and emergency standards.
- Efficient: Delivers data in a prompt timeframe.
Defining GHG Emissions
GHG emissions are categorized into 3 scopes:
Also known as direct emissions, these GHG emissions are produced directly by companies through burning purchased fuel on-site, such as natural gas, diesel and propane. Purchasing carbon offsets helps mitigate Scope 1 emissions.
Scope 1 emissions can be further divided into 4 categories:
- Stationary Combustion: Power plants, combined heat and power plants, industrial combustion plants, district heating plants and small plants.
- Mobile Combustion: Emissions from the combustion of fuels in company-owned or controlled mobile combustion sources during the transportation of materials, waste, products and employees.
- Fugitive Emissions: Unintentional and undesirable leakages and discharges of gases or vapours from pressure-containing equipment or facilities. They may also come from components within industrial plants such as pumps, storage tanks or compressors.
- Process Emissions: Emissions from the chemical transformation of raw materials and fugitive emissions.
Scope 2 emissions are indirect GHG emissions that are associated with the purchase of secondary sources of energy, such as electricity, steam, heating or cooling. These emissions are accounted for in an organization’s greenhouse gas inventory since they are a result of the organization’s energy use.
The Greenhouse Gas Protocol provides guidance for various scenarios and circumstances to assist with identifying Scope 2 emissions to avoid double-counting emissions between Scope 1 and Scope 2 emissions.
For example, if an instance of consumed electricity comes from owned or operated equipment from the same entity, it would not be reported as a Scope 2 emission since the emissions from power generation should be reported in Scope 1.
Scope 3 emissions, otherwise known as value chain emissions, are those that the organization is indirectly responsible for upstream and downstream of its value chain. This includes emissions related to buying products from suppliers and those associated with customers using products.
Overall, Scope 3 emissions (also known as value chain emissions) often represent the majority of an organization’s total GHG emissions according to the United States’ Environmental Protection Agency.
Below is a list of emission factors relevant to Scope 3 emissions as provided by the GHG Emissions Factors Hub:
- Upstream transportation and distribution.
- Downstream transportation and distribution.
- Waste generated in operations.
- End-of-life treatment of sold products.
- Business travel.
- Employee commuting.
How To Get Started with Carbon Accounting
For businesses who are new to developing a sustainability strategy, clarifying the sources and quantity of your emissions and pollution will give you insight into the most productive use of resources to meet your environmental goals. Our team assists in quantifying and reporting emissions data to help you get started.
Our Carbon Management Services
After consulting with us, we’ll work with you to define the boundaries of the emissions data to determine what’s needed for your selected framework. From there, we collect the data and quantify the emission’s sources and scopes. Then, we assist you in reporting data, so you gain a head start on hitting your net-zero targets.
What are the benefits of measuring GHG emissions?
Measuring greenhouse gas emissions is the first step to managing them. After a company audits its own greenhouse gas emissions, it can examine the sources of waste or inefficiencies. In the long term, greenhouse gas accounting benefits the environment through lowered emissions and a business through diminished financial costs.
Tracking your GHG Emissions
If your business is ready to work towards being carbon neutral and reducing its environmental impact but you’re not sure where to start, our team at EnergyRates.ca can help guide you through the process, including joining other businesses in energy aggregation, purchasing RECs and Carbon Offsets, or reducing scope 2 emissions via power purchasing agreements. Our team can even help you look at a greener energy plan that’s suitable for your organization’s needs.
How CPP Sustainable Investing Works
The Canadian Pension Plan is a retirement pension that allows Canadians to replace part of their income when they plan to retire. The government takes CPP contributions and makes investments to give Canadians the pension they need to retire with minimal risk.
Building on the principles of ESG, the CPP is moving towards prioritizing sustainable investments. This has two primary benefits: it helps Canadians approach net-zero emissions, but also offers more perceived stability of the investments “to maximize long-term investment returns without undue risk of loss” (Newswire).
The CPP has aligned with the Sustainability Accounting Standards Board (SASB) and the Task Force of Climate-related Financial Disclosures (TCFD) to disclose the relevant ESG information on the companies the CPP invests in.
ESG reporting frameworks: SASB, GRI, SBTi
How the SASB works
The Sustainability Accounting Standards Board is an ESG guidance framework that sets standards for the disclosure of sustainability information that is financially material (or relevant to a company’s financial performance). The SASB standards differ across 77 industry sectors, with the understanding that these standards should create value for the enterprise and that different industries will have environmental, social and governmental impacts.
The SASB has many different tools for ensuring effective ESG reporting, including their own Materiality Finder tool that generates a“visual representation of their portfolio’s exposure to specific sustainability risks and opportunities.”
The SASB identifies five dimensions of sustainability that it reports on: environmental, social capital, human capital, business model and innovation, and leadership and governance. SASB has downloadable standards for over 170 countries.
SASB standards are maintained by the Value Reporting Foundation, “a global non-profit organization that offers a comprehensive suite of resources designed to help businesses and investors develop a shared understanding of enterprise value.”
How the Global Reporting Initiative (GRI) works
The Global Reporting Initiative is a non-profit organization that seeks to establish a framework for communicating about and reporting on the environmental impacts of companies.
The GRI’s modus operandi is stated on its website: “GRI (Global Reporting Initiative) is the independent, international organization that helps businesses and other organizations take responsibility for their impacts, by providing them with the global common language to communicate those impacts.”
The GRI’s main goal is to develop a framework of communication that allows for transparent comprehensive disclosures of ESG impacts a company may make. For this reason, GRI is not only compatible with other frameworks that look at other factors but synergistic with some including the SASB.
How the SBTi works
The Science Based Target initiative is an ESG framework that aims to illustrate the path towards environmental conservatism with scientifically derived targets that satisfy the guidelines set by the Paris Agreement.
The SBTi introduced the first corporate Net-Zero Standard, with guidance, recommendations and criteria that companies require to reach net-zero emissions.
The SBTi is a result of collaboration between CDP, WRI, WWF & UN Global Compact.
What is the GHG protocol?
The Greenhouse Gas Protocol provides the global standard for companies and organizations to measure and manage their GHG emissions. As such, it provides GHG accounting and reporting standards, sector guidance, calculation tools and training for businesses and national governments.