An Introduction to Corporate Greenhouse Gas (GHG) Accounting and Strategies for Decarbonization

Greenhouse gases (GHG) play a vital role in regulating Earth’s climate by trapping heat from the sun and keeping conditions habitable. However, due to human activities, greenhouse gas concentrations now exceed balanced levels, posing threats to ecosystems and communities worldwide.

Carbon dioxide (CO2) makes up the largest share of GHG emissions from human activities at 76%, followed by methane, nitrous oxide, and fluorinated gases. To enable comparison, emissions from non-CO2 gases are commonly converted into carbon dioxide equivalents (CO2e) based on their relative warming potential.

While GHGs sustain life by insulating the planet, restoring balance is now imperative to avoid the harms of uncontrolled warming. By understanding the properties of key climate drivers and monitoring emission trends, we can work collectively to stabilize our climate and forge a more sustainable path.


Decoding Your Emissions Footprint: An Intro to Carbon Accounting.

When it comes to GHG emissions, not all carbon is accounted for equally. That’s where the Greenhouse Gas Protocol comes in to assist in grouping Scope 1, 2, and 3 emissions. This categorization provides a universal framework for companies to inventory and report their climate impacts.

  • Scope 1 covers direct emissions from sources you own and control, like vehicles, production facilities, and generators. If your fleet of vehicles runs on fossil fuels, you’re directly in control of emissions.
  • Scope 2 addresses indirect emissions from the energy you purchase. The generation of purchased electricity, steam, or heating can vary widely in carbon intensity based on the energy source.
  • Scope 3 comprises the largest share of emissions for most companies. This indirect category includes the entire value chain outside a company’s control – from suppliers to product use and disposal. For example, if a company purchased a component shipped via airplane, those transportation emissions would be Scope 3 for the company but Scope 1 for the airline. While the company doesn’t own these emissions, it can still influence them through supplier contracts, logistics modes, product design, and more.

Robust carbon accounting examines emissions across all three Scopes to provide a complete picture. This “Scope triple crown” approach enables targeted reduction initiatives and drives accountability across the full emissions lifecycle. By leveraging this universal classification system, companies can benchmark progress and transparently disclose their total climate impact.


Crunching the Numbers: A Beginner’s Guide to Calculating Greenhouse Gas Emissions.

When it comes to measuring a company’s carbon footprint, it all comes down to a simple formula:

Greenhouse Gas Emissions = Consumption Activity Data x Emission Factor

“Consumption Activity data” represents the consumption related to an emission source. For example, if an organization purchased electricity, the activity data would be the number of kilowatt-hours (kWh) of electricity consumed. For a company vehicle, the activity data would be the amount of fuel burned by that vehicle.

“Emission factors” represent the amount of greenhouse gases released per unit of activity data. For example, if the emission factor for grid electricity is 0.2 kg CO2e per kWh, it should be multiplied by the electricity consumption activity data to determine the total emissions. Therefore, the consumption of 10,000 kWh would result in 2,000 kg CO2e emitted.

In summary, multiplying activity data by the matching emissions factor results in total emissions for that source, and summing up all direct and indirect activities provides a company’s comprehensive carbon inventory.


Demystifying Greenhouse Gas Calculations: Leveraging Credible International and Domestic Emission Factors.

Reliable emissions factors are vital for accurate carbon accounting. International organizations like the Intergovernmental Panel on Climate Change (IPCC) provide global default factors. Many countries also publish localized coefficients tailored to their energy mix, like the UK’s Department for Environment, Food & Rural Affairs (Defra). While emissions calculations may seem daunting, breaking them down into activity data and emissions factors simplifies the process. Consistent application of reputable factors enables the rigorous carbon accounting needed to benchmark progress in reducing climate impacts.


The Carbon Accounting Challenge: Consumption Data and Emission Factor Gaps.

While conceptually straightforward, challenges can arise in executing the emissions formula in practice.

On the emission factor side, gaps emerge when activity data lacks a direct matching factor, which forces reliance on estimations and reduces accuracy and credibility.

However, tracking activity consumption poses even greater hurdles. Scope 1 emissions under a company’s control are most transparent. But Scope 3 almost always contains major data gaps given the complexities of supplier operations and logistics.

Supply chain tracing to the source and transportation modes across sub-suppliers represents a vast data mining effort. Even the most sophisticated sustainability teams struggle to capture complete activity data across their value chain. This chronic Scope 3 consumption data deficit results in incomplete inventories that hinder reduction initiatives. Bridging data access barriers through technology and collaboration is crucial to empower comprehensive corporate emissions management.

However, by understanding common challenges around emission factors and activity data, companies can focus efforts on the highest-impact data improvements to enable quality carbon accounting.


Strategic Steps: Overcoming Greenhouse Gas Accounting Challenges.

Once companies have quality emissions data, targeted reduction strategies become possible.

The priority is identifying major activities driving carbon impacts and then exploring lower-footprint alternatives. For purchased energy, this may mean switching from coal-powered to wind-powered electricity despite potential cost premiums.

Equipment upgrades present another route – replacing aging, inefficient factory gear with state-of-the-art, energy-saving systems. While capital-intensive is timed to natural replacement cycles, these upgrades enable major efficiency gains.

Moreover, supplier contracts can drive reduced footprints by incorporating sustainability requirements into purchasing standards. This propagates emissions accounting and reductions through the value chain.

Ultimately, accurate carbon accounting illuminates the most impactful opportunities. It enables building step-wise reduction plans reflecting budget realities while honoring climate imperatives.

With smart strategies rooted in quality data, companies can overcome accounting challenges to optimize their contributions to global decarbonization efforts.


Policy Pathways: Government Solutions to Reduce Emissions.

With the climate crisis intensifying, governments are deploying a mix of policies and regulations to drive corporate decarbonization.

Reporting requirements and emissions pricing apply financial pressure through soft or direct economic levers. Mandating measurement transparency highlights corporate footprints while carbon taxes and trading schemes add costs to emissions.

Regulations enact more forceful change by prohibiting carbon-intensive activities outright. Bans on fossil fuel vehicles, as enacted in the EU by 2035, severely curb future emissions growth from transport.

Renewable power standards are another direct intervention, requiring utilities to provide set ratios of electricity from solar, wind, and other clean sources. This transitions energy grids off fossil fuels.

Government strategies often combine measurement, financial levers, and regulation for synergistic impacts. For example, reporting baselines enable optimizing emissions pricing, while rising costs from taxes can motivate industry support for regulatory limits.

With coordinated policy action, governments can enable corporate climate responsibility and drive the urgent systemic change needed to secure a net zero future.


The Fork in the Road: Diverging Climate Futures Based on Action Today.

The authoritative Intergovernmental Panel on Climate Change (IPCC) periodically models potential global emissions trajectories and resulting climate impacts. Their latest forecasts paint a worrying picture.

Under current policies and pledges, the world remains on track to surpass 1.5°C of warming – a threshold that scientists warn will trigger catastrophic and irreversible climate shifts.

Yet more ambitious scenarios that rapidly curb emissions this decade can still avoid the worst impacts. The IPCC makes clear that keeping any temperature rise below 1.5°C remains viable if unprecedented systemic change starts now.

With updated emissions data annually highlighting how much farther there is to go, the IPCC provides an indispensable barometer on the state of climate action. Their findings spotlight the divergence between dire outcomes if business continues as usual versus a livable climate future if we collectively mobilize.

The data is clear – deep decarbonization worldwide this decade is essential to secure a 1.5°C trajectory. As the IPCC warns, this profound shift will require urgent effort from every government, company, and institution. The time for incrementalism has passed. Only by working together can we make ambitious climate action the new normal and steer our planet toward a bright future.

Alyasar Holou
Business Development Manager

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