Standards and Methods for a Corporate Carbon Footprint Calculation

Carbon reporting is increasingly developing from a niche topic to being an essential part of non-financial reporting by companies. While only 221 companies reported their greenhouse gas (GHG) emissions to the CDP (Carbon Disclosure Project) in 2003, this figure grew to more than 8,400 companies in 2019 (Business Strategy and the Environment). Throughout this time period, the CDP has established itself as one of the most influential sustainability ratings (Harvard Business Review), enabling companies, investors, municipalities, states and regions to report on their environmental impact. As a result, the disclosure of GHG emissions has increasingly become a standard process over the past decade (Knox-Hayes and Levy, 2011; Sullivan and Gouldson, 2012; Varnäs et al ., 2013).

Due to the increasing pressure of investors, governments and organizations for emissions reporting, the requirements for companies to provide transparent reports are continually growing. This transparency has the potential to encourage companies to become more climate conscious about their carbon footprint. Emissions reporting is thus an important lever for underpinning the process of change in companies towards greater sustainability with measurable indicators.

This increasing awareness of the carbon footprint of companies and its transparent and uniform measurement are crucial for leading the corporate world into a sustainable future. To ensure the comparability of carbon footprints, various standards have been developed over the last 20 years. ISO 14064 and the GHG Protocol Standards are particularly relevant for carbon calculations of the corporate carbon footprint.

GHG Protocol Corporate Standard

The Greenhouse Gas Protocol Corporate Accounting and Reporting Standard – short GHG Protocol Corporate Standard – is one of the oldest and most established standards for carbon reporting. It was created when the World Resource Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) identified the need to establish an international standard for corporate GHG measurement and reporting in the 1990s. Published in 2001, the GHG Protocol Corporate Standard has become the most widely used standard for carbon reporting. By 2016, 92% of Fortune 500 companies reporting to the CDP had already been using the GHG Protocol as the basis for their reporting.

The GHG Protocol defines clear requirements for the structure and content of carbon corporate reports and for the collection of the key figures contained therein. An essential aspect of the GHG Protocol is the definition of scopes, which differentiate between different types of emissions and avoid double entries.

Overview on Scopes according to the GHG-Protocol Standard

Scope 1, 2 and 3 Emissions GHG Protocol

Scope 1 represents the direct emissions of a company – either in its own facilities or in mobile assets such as vehicles. The majority of Scope 1 emissions are caused by the use of fossil fuels, i.e. by fuel and fuel consumption. In addition, gases released in production processes also fall under Scope 1, such as carbon in cement production, methane in agriculture and sulfur hexafluoride (SF6) in the electrical industry.

Scope 2 includes indirect emissions that other companies have generated to supply the reporting company with energy. Among other things, the generation of electricity and district heating is therefore included.

Scope 3 goes far beyond the emissions recorded in Scopes 1 and 2 and includes all indirect emissions of a company. The idea behind Scope 3 is to create transparency about all emissions that are influenced by corporate decisions. To this end, Scope 3 covers the entire value chain of a company. In addition to all services and goods purchased, the system also records commuter traffic and business trips by employees. In the case of companies that manufacture, resell or lease products, Scope 3 also covers the entire product life cycle.

The GHG Protocol Corporate Standard defines in particular the reporting requirements for Scope 1 and 2 emissions. Although Scope 3 emissions are recommended in this standard, they are neither strictly required nor specifically defined.

GHG Protocol Scope 3 Standard

Since the GHG Protocol Corporate Standard was published in 2001, it has been used for numerous corporate reports. However, it quickly became apparent that a considerable proportion of corporate emissions occur within Scope 3, which is not yet uniformly standardised, and therefore comparability between companies is not always possible. To close this normative gap, the GHG Protocol Corporate Value Chain (Scope 3) Standard – or short for GHG Protocol Scope 3 Standard- was published in 2011. This standard defines 15 categories in which the indirect Scope 3 emissions of a company must be reported. The categories are defined uniformly and without overlap. Minimum criteria have been defined for all categories, which must be recorded for a standard-compliant report. The basic principle is that all categories must be reported in full. If individual categories cannot – or not yet – be reported, this must be disclosed and transparently justified in the reporting process. In addition, the GHG Protocol Scope 3 Standard specifies methods for the assessment of data quality and contains numerous best practices and instructions for recording scope 3 emissions.

While Scope 1 and 2 emissions can usually be determined exactly by measuring consumption data, these exact data on Scope 3 emissions are often not available. Since it is usually not possible to determine these emissions exactly, the GHG Protocol Scope 3 Standard offers a range of permissible methods for recording these emissions. At Planetly, we always use the method that provides the highest accuracy based on your data.

ISO 14064

DIN EN ISO 14064 Part 1 (Greenhouse gases – Part 1: Specification with guidance at the organisation level for quantification and reporting of greenhouse gas emissions and removals) is an international standard for corporate reporting of greenhouse gas emissions. ISO 14064 was first published in 2006 to create a greenhouse gas reporting standard that is fully compatible with the established ISO standards for energy and environmental management (ISO 14001 and 50001). ISO 14064 is based on the GHG Protocol Corporate Standard and translates its requirements into the structure of an ISO standard. In 2007, ISO, WBCSD and WRI also decided to jointly support both the GHG Protocol and ISO 14064 (Memorandum of Understanding).

Similar to the GHG Protocol, ISO 14064 distinguishes between direct and indirect emissions, but does not define scopes. While Scope 1 emissions in the GHG Protocol correspond to the direct emissions of ISO 14064, ISO 14064 summarises Scopes 2 and 3 in indirect emissions. In addition, ISO 14064 does not provide strict guidelines for the categorisation of indirect emissions and places different requirements on the structure and content of the report. In principle, however, the emissions covered by both standards are almost identical.

Which standard do we recommend?

Generally, we recommend the use of the GHG Protocol Scope 3 standard. With this standard, almost all GHG reporting requirements that a company has to meet can be fulfilled. This applies in particular to reporting to the CDP and the GHG aspects of sustainability reporting in accordance with the standards of the Global Reporting Initiative. In addition, the GHG Protocol improves comparability between companies through a more comprehensive categorisation of Scope 3 emissions, which enables better benchmarking, but also more targeted carbon management and reduction strategies. However, should you require an ISO 14064 compliant report for your sustainability report, we can certainly provide this as well.

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