An effective corporate climate change strategy requires a detailed understanding of a company’s greenhouse gas (GHG) emissions. Until recently, most companies have focused on measuring emissions from their own operations and electricity consumption, using the GHG Protocol’s Scope 1 and Scope 2 framework. But what about all of the emissions a company is responsible for outside of its own walls—from the goods it purchases to the disposal of the products it sells?
The GHG Protocol Scope 3 Standard, released in late 2011, is the only internationally accepted method for companies to account for these types of value chain emissions. Building on this standard, GHG Protocol has now released a new companion guide that makes it even easier for businesses to complete their scope 3 inventories. The guidance is freely available for download via the GHG Protocol website.
How Can Businesses Use the New Guidance?
Assessing GHG emissions across the entire value chain can be complex. For companies just beginning to assess their scope 3 emissions, it can be difficult to know where to start. This calculation guidance is designed to reduce those barriers by providing detailed, technical guidance on all the relevant calculation methods. It provides information not contained in the Scope 3 Standard, such as:
Agriculture is a major actor in spurring global climate change. The sector is already responsible for at least 10-12 percent of global greenhouse gas (GHG) emissions, and agricultural emissions are expected to increase by more than 50 percent by 2030.
Key Challenges to Measuring Agricultural Emissions
Reporting agricultural emissions in GHG inventories is a decidedly complex endeavor, which can hinder reduction efforts. For example, agricultural emissions are strongly affected by weather and are therefore often calculated with a large amount of uncertainty. This ambiguity makes it challenging to set and track progress toward reduction targets. The carbon stored in biomass and soils can often be emitted into the atmosphere, making it imperative that companies do not over- or under-count the impact of farming practices on stored carbon. And companies vary widely in how they control different parts of agricultural supply chains—such as commodity production, processing, and retail —so it’s difficult to maintain consistency in how inventories are reported.
With the latest round of global climate negotiations at an end, many countries, states, and cities around the world are taking action to reduce greenhouse gas (GHG) emissions through mitigation policies and goals. Decision-makers need to understand the emissions impacts associated with these initiatives in order to evaluate effectiveness, make sound decisions, and assess progress.
However, there is currently little consistency or transparency in how such analysis is done. WRI aims to address this situation through forthcoming Greenhouse Gas (GHG) Protocol standards for mitigation accounting, which have recently been released for review.
The Need for Accounting Standards for Mitigation Policies and Goals
To date, no standardized approach has existed for quantifying the GHG effects of policies and actions and tracking performance toward mitigation goals. For example, there is an ongoing debate on whether the United States is on track to meet its goal of reducing emissions by 17 percent below 2005 levels by 2020. A recent study by Resources for the Future found that the United States is on track to meet its goal. However, the U.S. Energy Information Administration’s 2013 Annual Energy Outlook expects carbon dioxide emissions to be only 9 percent below 2005 levels by 2020 as a result of policies currently in place. This difference in findings reflects differences in assumptions about the emissions impacts of policies, such as performance standards for power plants and vehicle fuel efficiency standards. These variations have very real policy implications for the degree to which the United States needs to ramp up actions to meet its 2020 goal.
The Greenhouse Gas (GHG) Protocol recently partnered with the UNEP Finance Initiative in a critically important endeavor – developing guidance to help the financial sector measure its ”financed emissions” and track reductions. These types of emissions, which are associated with lending and investments, are the most significant part of a financial institution’s carbon footprint.
As risk management experts, it’s essential that financial institutions have the necessary tools to consider the implications of continued investment in, and financing of, carbon-intensive sectors and companies. Some financial institutions have developed their own methodologies for accounting for financed emissions, but there’s a lack of consistency between them. Financial institutions need new guidance like that being developed by GHG Protocol and UNEP to adopt risk-management policies and lending procedures that address climate change in a systematic way across the sector.
What do three leading chemical, automobile, and software companies have in common? All three – Honda, BASF, and SAP – are looking to curb risks and take advantage of opportunities across their global supply chains. They’re doing so by measuring their greenhouse gas emissions—not just in their operations, but up and down their value chains.
Many other multinationals are heading in the same direction. The Carbon Disclosure Project’s (CDP) annual survey of the Global 500, released last month, reveals that seven in ten respondents measured some value chain emissions in 2011, up from about half in 2010. (Note this figure is based on WRI’s analysis of the 405 companies that submitted data to the CDP 2012 survey data.)
What’s driving the world’s biggest corporations down this path? In a nutshell: reputation, risk, and opportunity.
Facebook, a business that relies so heavily on people’s willingness to share information, took an important step recently by sharing some details of its own. The social networking company has, for the first time, released information about its greenhouse gas (GHG) emissions.
Facebook used the GHG Protocol’s Corporate Standard for reporting emissions, categorizing them into Scope 1 (direct emissions), scope 2 (emissions from electricity consumption), and scope 3 (all other indirect emissions including, in Facebook’s case, emissions from business travel and the construction of its data centers). Measuring GHG emissions is a crucial first step for any company seeking to manage and reduce its climate change impact.
At WRI, we pride ourselves in being a mission-driven organization that defines success as bringing about positive outcomes in the world. But what about our own operations? Along with the work we do externally to achieve our mission, we have a responsibility to ensure that our own actions are the best reflection of the changes we want to see in the world.
WRI’s History of Sustainability
We recognized the need to “walk the talk” back in 1999, when we became the first NGO to complete a greenhouse gas (GHG) emission inventory and set a net-zero reduction target. At that time we also relocated to a green office, striving to incorporate our values directly into our physical surroundings.
Companies around the world are increasingly measuring and managing their greenhouse gas (GHG) emissions in response to drivers like consumer preference, purchaser demands, and sustainability goals. As a growing number of Asian companies look to manage their emissions, they’ll require training and resources available in their own languages and cultural contexts. To that end, the Greenhouse Gas Protocol recently held a week-long training session in Delhi, India to further build Asian companies’ capacities to measure and curb emissions.
Training participants included government representatives, business and industry council leaders, and NGOs from India, Indonesia, Malaysia, Nepal, the Philippines, Thailand, and Vietnam. The workshop focused on providing those in the region with tools to teach companies how to develop GHG inventories based on the GHG Protocol Corporate Standard and establish programs to measure and report their emissions. The Program Design Course provided a forum for participants to share experiences and future plans, and identified the steps involved in designing a blueprint to establish their own programs. The course drew on case studies from existing corporate GHG reporting programs like the Brazil GHG Protocol Program, the Mexico Greenhouse Gas Program, the Israel Voluntary Greenhouse Gas Registry, and the former U.S. EPA Climate Leaders Program, all of which are based on the GHG Protocol.
I recently presented at the 7th Product Carbon Footprint (PCF) World Forum Summit, a gathering of experts brought together by Berlin-based think tank Thema1 “to foster and facilitate international discussion on how to assess, reduce, and communicate the impact of goods and services on the climate.” This group historically has focused on the life cycle of greenhouse gas (GHG) emissions and product-level emission inventories. But this year’s theme included an additional focus: whether and how renewable energy purchases should be reflected in corporate GHG emissions calculations.
Renewable energy sources like wind and solar have no GHG emissions associated with generation and thus play a vital role in reducing overall emissions from electricity use. Many companies seek to purchase this energy and use the zero-emissions rate in calculating their indirect emissions from electricity consumption (also known as scope 2 emissions). However, several uncertainties surround how this practice should be used in GHG accounting—or whether it should be permitted at all.