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.
UPDATE: The deadline to apply to pilot test the Global Protocol for Community-Scale Greenhouse Gas Emissions (GPC) has been extended to March 31, 2013. Download the Terms of Reference and Application Form for the pilot project, as well as other relevant documents about the GPC. Or, for more information, please contact Wee Kean Fong at firstname.lastname@example.org.
“You cannot manage what you cannot measure” is a well-known adage for business, and the phrase is increasingly relevant for cities. In the past decade, many cities have started measuring their greenhouse gas (GHG) emissions data. GHG inventories are essential for building effective low-carbon strategies, tracking GHG reductions, responding to regulations and local GHG program requirements, and securing climate finance. Some cities also believe that tracking emissions can eventually conserve financial and other resources.
The challenge is that most cities conduct their inventories using different methodologies. Without an internationally consistent framework for GHG accounting and reporting, inventory results can be confusing and misleading to decision-makers, investors, and civil society stakeholders. This lack of consistency can even jeopardize the accountability and effectiveness of cities’ emission-reduction efforts.
The Global Protocol for Community-Scale GHG Emissions
As the GPC begins its pilot-testing phase, city leaders may wonder about the specific benefits of using a standardized GHG accounting method. Let’s take a look at GHG reporting trends in cities and the risks of using inconsistent methods.
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.
WRI has calculated the greenhouse gas (GHG) emissions from our own operations since 1999. This report provides a comprehensive description of WRI’s 2010 greenhouse gas (GHG) inventory and introduces our new GHG reduction targets.
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.
Last week’s Rio+20 conference failed to yield strong sustainability commitments from corporations. As Manish Bapna, interim president of the World Resources Institute (WRI) stated earlier this week, companies in Rio didn’t “grasp the fundamental recognition that the planet is on an unsustainable course and the window for action is closing.” The gap between where we need to get to avoid climate change’s worst effects and the actions companies are willing to take to get us there have never been further apart. While governments have an important role to play in setting policies to reduce emissions, legislation on its own will never be enough to put us on a development trajectory that is sustainable. Leadership from business is urgently needed.
In January 2010, two WRI-recommended features were incorporated into the U.S. Environmental Protection Agency’s (USEPA) regulations for implementing the new Renewable Fuel Standard (RFS). These regulatory features will help minimize the negative impacts of biofuels by ensuring comprehensive accounting of their lifecycle greenhouse gas (GHG) emissions.
The 2007 expansion of the RFS program required the EPA to set lifecycle GHG threshold standards to ensure that biofuels being used to meet the RFS emit fewer greenhouse gases than the petroleum fuel they replace. The framework the EPA would develop to calculate the GHG emissions factors of biofuels was critical. A framework that was less than comprehensive could end up creating incentives for U.S. biofuels that would actually lead to more GHG emissions than the traditional fossil-based fuels they replace. Two accounting factors were particularly important:
How to account for carbon dioxide emissions that occur in the future. WRI recommended applying a zero discount rate over a shorter time horizon, rather than the more popular proposal of a two percent discount rate over a 100 year time horizon. Our recommendation was more consistent with prior research and would minimize the risk of artificially inflating the emissions reductions benefits of bio-fuels.
Whether or not to include the emissions associated with indirect land-use changes. For example, a shift from soybean to corn farming in Iowa to make ethanol can result in a ripple effect that drives land conversion for soya in the Brazilian Cerrado. This land conversion may result in significant emissions of carbon dioxide. The uncertainty of indirect land use impacts does not render them insignificant. WRI recommended that emissions associated with global indirect land-use changes be included in the framework, along with approaches for refining the estimates as the science improves.
EPA adopted both our recommendations. In particular, the adoption of an accounting methodology that accounts for the emissions associated with global indirect land use impacts of domestic policy sets a precedent that has significant implications well beyond the biofuels sector.
WRI was the pioneering voice on the zero discount rate. WRI’s Biofuels and the Time Value of Carbon was the first and, to the best of our knowledge, only publication to address the issue of how to choose a discount rate for physical carbon in the context of biofuels accounting. WRI’s Liz Marshall was selected as one of five professional peer reviewers for the time parameters portion of the RFS rule. WRI’s perspective on indirects, set forth in Biofuels, Carbon, and Land-use Change and Rules for Fuels, also provided the analytical foundation for advocacy NGOs during the course of this debate.
In January 2010, the U.S. Securities and Exchange Commission issued new guidance clarifying that publicly-traded companies need to disclose financially material impacts related to climate change. Material impacts may range from compliance costs related to emissions regulation, to the physical impacts of changing weather patterns on operations.
The SEC ruling creates more incentives for capital to flow to sustainable businesses, while also improving awareness of the importance of climate change among the financial community. Companies are expected to improve GHG emissions accounting and reporting - an important stepping stone to managing and reducing corporate carbon footprints. WRI plans to continue engagement with the SEC, companies, and other advocates to help develop more specific rules, methodologies, and guidance relating to environmental disclosure.
For the past decade, WRI’s Markets and Enterprise Program (MEP) has been working to analyze material impacts of climate change on companies. MEP’s publication, Coming Clean, was one of the first reports identifying the need for improved corporate disclosure and providing specific recommendations for the SEC that were grounded in detailed financial analysis. Since then, WRI has worked closely with the investment community, as well as businesses, to foster support for better financial analysis and climate change-related reporting.
Meanwhile, WRI’s GHG Protocol team has worked over the last six years to build the foundation, constituency and the accounting infrastructure for companies to engage in corporate emissions disclosure and prepare for exactly this type of requirement. The GHG Protocol’s Corporate Accounting and Reporting Standard in particular is an important precursor to the SEC requirements. The SEC guidance refers to three business programs – the Carbon Disclosure Project, The Climate Registry, and the Global Reporting Initiative - that illustrate increasing corporate disclosure of climate change impacts and risks. All three of the programs’ greenhouse gas emissions reporting components are based on the GHG Protocol’s Corporate Standard.
Since 2007, both the Markets and Enterprise Program and the GHG Protocol Team have also been working through an international collaborative effort – the Climate Disclosure Standards Board (CDSB), which includes the Carbon Disclosure Project (CDP), The Climate Registry (TCR), CERES, and the World Economic Forum (WEF) to inform and guide SEC and other national financial accounting regulatory boards to address the issue of climate change reporting in the financial statements.
Rio de Janeiro is a leader among the Brazilian cities aggressively promoting low-carbon development. In 2011, the city passed a landmark climate change law with a target to reduce greenhouse gas (GHG) emissions 8% below the business-as-usual (BAU) emissions scenario by 2012, 16% by 2016, and 20% by 2020.
Now Rio is conducting a GHG inventory for 2012, the first target year under its climate change law. The inventory will measure the city’s emissions against its 8% reduction target for 2012, and assess the effectiveness of GHG mitigation actions implemented so far.
On July 2, the city government of Rio invited me and my colleagues from the Greater London Authority and the Federal University of Rio de Janeiro (COPPE) to a seminar to share our experiences in conducting GHG inventories and to discuss Rio’s 2012 inventory. At the seminar, Nelson Moreira Franco, Director for Climate Change Management and Sustainable Development for the City of Rio, stressed that GHG inventories help identify emission sources and provide scientific evidence on GHG levels, so it is extremely important that the city gets it right. To me, the seminar covered four important items:
In October 2009, President Obama signed Executive Order (EO) 13514 on Leadership in Environmental, Energy, and Economic Performance, requiring the federal government to lead by example towards a clean energy economy and measure, report and reduce, direct and indirect greenhouse gas emissions. The EO also set an important precedent by mandating that a national government reduce GHG emissions from its own operations.
“Every year, the Federal Government consumes more energy than any other single organization or company in the United States,” said President Obama. “That energy goes towards lighting and heating government buildings, fueling vehicles and powering federal projects across the country and around the world. The government has a responsibility to use that energy wisely, to reduce consumption, improve efficiency, use renewable energy, like wind and solar, and cut costs.”
The collective emissions reduction targets established by the EO (a 28% total reduction in scope 1 (direct emissions) and scope 2 (indirect emissions associated with purchased electricity) below 2008 levels by 2020 and a 13% reduction in scope 3 (other indirect emissions)) will ensure significant reductions in the U.S., while demonstrating that ambitious reductions are achievable by other large U.S. entities and corporations. By including scope 2 and 3 emissions, the EO will also drive important shifts throughout the government’s vast supply chain.
To comply with the EO, agencies will conduct GHG inventories based on the GHG accounting principles articulated in the newly developed GHG Protocol for the US Public Sector, which outlines how government agencies in the U.S. – whether federal, state or local – should develop a GHG inventory. WRI coordinated a large stakeholder process to develop this protocol that included over 50 U.S. agencies, ensuring its relevance and utility to the government. This extensive engagement during the process also built capacity within the federal agencies for effective emissions measurement and management. The federal government also drew upon the principles in the draft of the GHG Protocol Corporate Value Chain (Scope 3) Standard in developing rules to account for Scope 3 emissions.
Managing carbon is not just good for the environment. It’s also a way for business to save money, cut risks, and create new business opportunities.
The Greenhouse Gas Protocol (GHGP), created by WRI and the World Business Council for Sustainable Development (WBCSD), is the leading international standard for companies to measure their carbon emissions so they can manage, report on, and reduce them.
In 2011, the GHG Protocol launched two new standards in response to demand from both the market and stakeholders for greenhouse gas emissions information across a company or product’s value chain. The Corporate Value Chain Standard can help a company identify which parts of its value chain it should target to reduce emissions. The Product Life Cycle Standard may be used to develop new low-carbon product lines that can give companies a competitive edge or pinpoint climate-related risks in a product’s life cycle.
The new standards took three years to develop. Close to 2,500 partners worldwide participated and 60 companies from 17 countries road-tested the standards. Even before their release, two major initiatives – The Sustainability Consortium and the Consumer Goods Forum – committed to use the standards. Their endorsement is a breakthrough and a clear signal that the new standards will be widely adopted by companies globally. The Consumer Goods Forum, for example, represents over 400 companies and retailers with a combined three trillion dollars in sales.
By enabling corporations to reduce their use of carbon, the new GHGP standards can play a role in significant global GHG emission reductions.
Legislation by national governments to curb greenhouse gas (GHG) emissions is essential to achieving a low-carbon economy and improved public health worldwide.
In 2012, Mexico took the historic step of enacting a comprehensive climate change law. The groundbreaking legislation commits Mexico to cut its GHG emissions by half by 2050 and prominently features sustainable transport initiatives.
EMBARQ Mexico played a major role in shaping the law, proposing measures for mass transit, fuel efficiency, pedestrian and cycling infrastructure, and restrictions on high-polluting vehicles—all of which the government included.
Setting a Precedent for Global Climate Action
When a government signals its seriousness about combating climate change by passing legislation, it promotes the country’s transition towards a competitive, sustainable, and low-carbon economy. It provides a precedent for other countries to follow suit, and gives a boost to the U.N. international climate negotiations.
Mexico’s groundbreaking law makes it one of the first countries to adopt ambitious and comprehensive legislation on climate change. Enacted by President Felipe Calderón, the General Law of Climate Change seeks to guarantee citizens’ right to a healthy environment. The law will unlock substantial federal funds for low-carbon development and will prompt new regulations to mitigate GHG emissions.
In a major departure from the international climate negotiations, the bill’s measures for reaching the 2050 emissions goal include transforming transportation systems and infrastructure. Mexico’s president worked across party lines at the federal, state, and city levels to win agreement on the policies needed to meet the bill’s ambitious targets.
Making Change Happen: WRI’s Role
EMBARQ Mexico was designated as the transport expert to review the draft bill when it went before Mexico’s Senate and make specific policy recommendations.
We proposed key sustainable transport measures that were included in the final law, including the development of sustainable mass transport systems and improved infrastructure for pedestrians and bicyclists. The bill also includes our recommendations to develop new fuel-efficiency standards for light and heavy-duty vehicles, as well as regulations restricting imports of high-polluting vehicles.
EMBARQ’s prominent role in the legislation stemmed from our work in helping Mexican cities to introduce sustainable transport systems, as well as our national policy research demonstrating the importance of sustainable transport as a climate-mitigation strategy.
By 2030, 221 Chinese cities will have at least one million residents. These fast-growing urban areas present an unprecedented opportunity to create global models for the sustainable, low carbon cities of tomorrow.
China’s 12th Five-Year Plan strongly promotes sustainable cities, and the coastal city of Qingdao is leading the way in translating this principle into action on the ground. WRI helped generate Qingdao’s blueprint for sustainable development, and brought its pioneering efforts to national attention.
Sustainable City Blueprint
In developing their growing city, Qingdao’s leaders sought to pursue economic growth while avoiding urban sprawl and the environmental problems such as air and water pollution that have plagued many Chinese cities.
The city government has developed a low-carbon strategy that includes more efficient energy and waste water use, transport systems that reduce congestion, and sustainable urban design. The blueprint lays the foundation for Qingdao to meet its target of reducing carbon intensity by 45% by 2020. To guide development, the city government has set specific emission reduction targets for each energy-intensive sector.
Qingdao has signed an agreement with French company Suez to upgrade its inefficient waste water system and with China Everbright Bank to improve Qingdao Harbor’s energy efficiency. The U.S. company, AECOM, is set to invest in developing a sustainable design blueprint for the city.
In December 2012, Qingdao was selected as a National Low-carbon Pilot City, which is initiated by the National Development and Reform Commission (NDRC); and National Low-carbon Transport Pilot City, initiated by the Ministry of Transport (MOT).
Making Change Happen: WRI’s Role
WRI’s work in China focuses strongly on low carbon cities. We work with China’s NDRC, MOT, Ministry of Housing and Urban-Rural Development, Ministry of Industry and Information Technology, and Ministry of Environmental Protection to design models that focus on efficient energy and land use, sustainable transport, and reliable, clean water supply.
In Qingdao, along with partners including the Asian Development Bank (ADB), we played a critical role in helping the city prioritize low-carbon development. Specifically, we generated an inventory of the city’s energy use, collected traffic data, developed sector scenarios, drew a technology roadmap, and recommended policies that the authorities adopted.
We also introduced Qingdao’s Development and Reform Commission (DRC) to the major companies now helping develop the city. In addition, WRI’s close ties with NDRC and other ministries helped bring Qingdao’s pioneering efforts to central government attention.
WRI will use the city’s lessons learned and best practices in seeking to scale up sustainable urbanization both in Chinese cities and other emerging countries.
More than half the world’s population lives in cities, and they contribute more than 70 percent of global carbon dioxide emissions. Therefore, city leaders are key players in global efforts to reduce greenhouse gases (GHGs) and curb climate change.
While many urban centers around the world are already taking action, until recently there was no broadly accepted, standardized guidance to help officials measure and report emissions from cities. This situation changed in 2012 with the release of the pilot Global Protocol for Community-Scale GHG Emissions, a comprehensive, easy-to-use pilot GHG accounting and reporting protocol jointly developed by WRI, C40 Cities Climate Leadership Group, and ICLEI - Local Governments for Sustainability.
The protocol is based on consensus built among key stakeholders, including WRI, C40, ICLEI, the World Bank, United Nations Center for Human Settlements (UN-HABITAT), and United Nations Environment Program (UNEP). More than 30 other expert international organizations also provided inputs.
Enabling Cities to Take Climate Action
Launched during the international climate talks in Bonn, Germany in May 2012, the protocol marks a major step forward for city-level GHG accounting. It guides municipal authorities through gathering comprehensive data on emission sources, tracking performance, responding to local GHG regulations, and building effective, low-carbon strategies. Cities can customize their results for local reporting needs while being compatible with a common international standard.
Besides the above expert international organizations, the protocol drew on practical experience from city officials from Buenos Aires; Eugene and Portland, Oregon; Mexico City; Paris; Taipei; Toronto; and others. The final protocol will be released in 2013 and will incorporate lessons learned by 15-20 pilot cities around the world.
Making Change Happen: WRI’s Role
WRI’s GHG Protocol standards are the prime tool used for measuring and reporting corporate GHG emissions worldwide. In developing the cities protocol, our partners agreed to adopt GHG Protocol’s “scope” approach to emissions counting, which treats direct and indirect emissions separately and avoids double-counting. Drawing on lessons we learned in providing technical assistance to cities in China and Brazil, together with C40 and ICLEI, WRI—together with C40 and ICLEI—successfully developed a comprehensive framework, which includes all urban emission sources and six types of GHGs.
During 2013, we will work with C40 and ICLEI to pilot test the draft protocol on the ground. Our GHG Protocol team is already working with cities in India, Brazil, and China.
A growing number of countries and companies now measure and manage their emissions through greenhouse gas (GHG) inventories. Cities, however, lack a common framework for tracking their own emissions—until now.