Carbon dioxide emissions are increasingly worsening our environment. This article delves into the world of carbon accounting; or when businesses have to report and lower their emissions. It explores the GHG protocol – the most widely used framework – and explains the 3 different scopes of emissions used for creating accurate assessments.
I will explore the need for reduction targets, 3rd party verification, as well as covering the 3 ISO 14064 series set out for companies to optimally measure, reduce and record their carbon-reduction journey. I will also cover key frameworks like PCAF, TCFD and the 3 stages of PAS 2060. Finally, it explores the 7 key standards of the GHG protocol and why it is so crucial for companies to follow these.
What Are Carbon Accounting Standards?
As our climate worsens and global temperature rises, the individual consumer must be more and more conscious of their carbon footprint. That being said, even more critical is the responsibility of businesses and organisations, whose larger scale of operations can significantly amplify their environmental impact.
To enforce this, governing bodies are intensifying legislation around greenhouse gas accounting: meaning businesses have to accurately report, monitor and track their emissions with transparency and accountability.
Greenhouse Gas Protocol (GHG)
The Greenhouse Gas protocol is the most widely used framework for carbon accounting, recognized as the global standard. It involves Scope 1 (direct), Scope 2 (indirect) and Scope 3 (value chain emissions).
The tool applies across a range of sectors, allowing for comprehensive data collection that leads to effective sustainability reporting and that can merge with SBTi, CDP (Carbon Disclosure Project), and other standards. It sets targets and methods of tracking the businesswide progress.
Identify GHG Emission Sources
The first step of the GHG Protocol is to identify the many potential GHG emission sources, including everything from the energy used to power office lights, heating and cooling systems, machinery, and even smaller activities like running office equipment or washing your hands.
For example, when monitoring vehicle emissions, the protocol goes into granular detail about each employee’s vehicle type, fuel efficiency, consumption, and age. This data is then used to generate periodic reports (e.g., quarterly) based on representative sampling provided by the staff, ensuring an accurate assessment of the company’s overall emissions.
Classifying Emissions
Secondly, the GHG emissions are classified into three scopes, based on their source:
Scope 1 Emissions
Scope 1 emissions, as defined by the GHG Protocol, includes direct emissions from sources owned or controlled by a company. These emissions, often stemming from fossil fuel combustion, are generally easier to identify, measure, and manage, making them prime targets for reduction or offsetting efforts.
Contributors of Scope 1 emissions could include manufacturing companies (such as cement factories, steel mills, and chemical plants), non-renewable energy companies (like oil and gas extraction firms), plus industries like coal mining, power generation, airlines, agriculture, construction, waste management and more.
Scope 2 Emissions
In contrast, Scope 2 emissions encompass the indirect emissions let off by generating a business area’s electricity, steam, heating or cooling. Instead of direct control over the source, this tends to lie in the hands of the providers and can make smart changes to the greener operators as a way to lower emissions.
They usually acquire regular data from the providers in order to maintain the monitoring processes.
Scope 3 Emissions
Scope 1 is direct, Scope 2 is indirect, and Scope 3 covers everything else. Businesses yield even less control over these than Scope 2. Importantly, Scope 3 can be split into upstream and downstream.
Upstream emissions occur before a service or product reaches the company (such as the mining of metals for architecture) and downstream emissions occur after the product or service leaves the company (such as the emissions from a product’s use or disposal by the end consumer).
Collecting Data
Carbon accounting involves various methods of data collection, such as direct tracking, involving audits, sensors, usage bills or management systems.
Another is collecting information, such as employee surveys to detail commuting behaviours.
The spend-based method can calculate emission levels depending on amounts spent on different services and goods.
Calculating Emissions
There are several ways to calculate emissions, categorised into direct calculation methods and data-driven calculation methods. Direct calculation methods involve using specific activity data, like electricity usage, and multiplying it by emission factors, such as kg CO2e per kWh, to directly estimate emissions. On the other hand, data-driven methods include spend-based calculations, which estimate emissions based on the monetary value of purchases using average emission factors, and activity-based calculations, which use broadly collected data rather than precise measurements. Reporting standards should be met.
Emission Reduction Targets
After establishing a baseline, organisations typically set emission reduction targets to ensure compliance with carbon standards and regulations. These targets should be clear, transparent, and may fall into three categories:
Absolute targets: Focus on reducing overall emissions by a specific amount within a set timeframe.
Net-zero targets: Aim to balance any remaining emissions with carbon removals through methods like offsetting.
Intensity-based targets: Reduce emissions per unit of output, such as emissions per employee, product, or department.
Reporting and Third Party Verification
Beyond accounting and reporting, the data must be verified by a third party for credibility, enhancing data integrity while showcasing accountability to potential stakeholders. The third parties can be independent commercial organisations, such as The Carbon Trust, who check to ensure the data is comprehensive and in line with relevant regulations.
ISO 14064
The International Organization for Standardization (ISO) is a global, non-governmental organisation. ISO’s 14000 series is a family of broader environmental standards, with 14064 focuses on GHG accounting.
In its simplest, ISO 14064-1 helps companies calculate their emissions, -2 guides them in reducing those emissions, and -3 ensures that their reporting is accurate and trustworthy. Note that they don’t have to be used in order, and might not use all 3 if not needed.
ISO 14064-1
ISO 14064-1 enables companies to calculate their carbon footprint by identifying all and any contributors to GHG emissions.
It’s a comprehensive instruction manual that organisations purchase and use; outlining a framework of the highest standard as to monitor and report emissions against.
This process results in a detailed business inventory of all emission sources, which acts as a foundation for setting reduction targets and contributing to environmental sustainability.
ISO 14064-2
ISO14064-2 then focuses on the project-side. If a cement company monitors its high-CO2-releasing process, they can use ISO 14064-2 to design a counteractive project, such as a carbon capture and storage project (CCS). 14064-2 provides guidelines on how to accurately report and monitor the projects, with frequent data collection to ensure targets are being met.
ISO 14064-3
The third standard focuses on validating and verifying both the reduction projects and the emission reports, using a third-party framework. The verification stage reviews the reported emission inventory in line with established ISO 140640-1 standards, and the validation stage tests and confirms whether a project is likely to succeed and built upon sound data.
Partnership for Carbon Accounting Financials (PCAF)
The Partnership for Carbon Accounting Financials is a global initiative established by Dutch bank ASN Bank; a framework used by financial institutions across the world to measure and report greenhouse gas emissions linked to investments, loans and the financial sector.
Banks, asset managers, insurance companies amongst others have free access to PCAF’s resources with steps for implementation.
TCFD: Enhancing Climate-Related Financial Disclosures
While PCAF is a framework for financial institutions, Task Force on Climate-related Financial Disclosures (TCFD) is a framework for the financial operations of any organisation.
With it they can recognise climate-related financial risks. It then guides them to combat these with smart investments, and then disclose this formally, strengthening their reputation and attracting climate-conscious investors.
In the UK, TCFD-aligned reporting is mandatory for large private companies (over 500 staff or £500 million turnover) as well as publicly listed companies.
PAS 2060
Released by the BSI (British Standards Institution) in 2010, PAS 2060 is a globally-used standard for companies across many sectors to hit carbon neutrality and demonstrate this.
Adopting PAS 2060 is a voluntary choice made by companies to announce a marketable statement on carbon neutrality.
Its sequence is calculating the emissions, lowering them where possible, offsetting what can’t be reduced, then declaring carbon neutrality.
Doing so showcases sustainability commitments, sharpens brand image and can hugely attract customers as well as forward-thinking stakeholders.
Sky, for example, went carbon neutral in 2006 and became the world’s first carbon neutral media company, and adopted PAS 2060 after its release in 2010 to maintain and verify their carbon-neutral status.
Stage 1: Assessing GHG Emissions
The first stage of PAS 2060 is the measurement stage where the company can determine its carbon footprint by identifying all sources of direct, indirect and other emissions.
A baseline year sets out the company’s starting point, which all future emission reductions will be measured against to track progress.
Stage 2: Reducing Emissions
After finding all emission sources, Stage 2 aims to reduce these. A Carbon Management plan uses methods and strategies to improve the carbon footprint of the business, like adopting renewables or energy-efficient appliances.
The progress is monitored and tracked in this stage with adjustments if targets are not being met.
Stage 3: Carbon Offsetting
After making all possible reductions, some emissions, such as those from transport or manufacturing processes, will remain unavoidable. Stage 3 involves offsetting all remaining emissions with external projects.
At Gaia, we are releasing a carbon accounting software that allows you to calculate, report, and directly offset your carbon emissions through projects in our Natural Capital Exchange. As the largest marketplace for BNG units in England, we will soon include carbon credits, as well as other forms of natural capital.
Stage 4: Third Party Verification
In Stage 4, the company’s calculations, reductions, offsets and carbon neutral status must be verified, so they must hire an independent auditor or accredited verification body.
They produce a formal report of verification which proves all claims of carbon neutrality and can be marketed to investors, stakeholders, customers, and the entire public to effectively demonstrate commitments to fighting climate change.
GHG Protocol Standards (https://ghgprotocol.org)
While there are various frameworks and standards to follow, the GHG protocol remains the most widely adopted framework for lowering business emissions. The protocol contains multiple standards, and companies in different sectors can choose one or multiple depending on their needs. These 7 are the most commonly used by different companies.
- Corporate Standard – The most widely used, the Corporate Standard, allows companies to measure emissions, covering Scope 1 and 2 with guidance on 3.
- GHG Protocol for Cities – For companies in cities, the GHG Protocol for Cities focuses on managing and measuring emissions in urban environments, such as buildings, waste and transportation.
- Mitigation Goal Standard – This framework is for organisations and governments to track their progress and ensure goals are being met in order to meet GHG reduction targets in line with the outlined date.
- Corporate Value Chain Standard – With a focus on Scope 3, the Corporate Value Chain Standard records all indirect emissions from the corporate value chain scope to provide a comprehensive overview.
- Product Standard – Focusing on the life cycles of products, this standard is for manufacturing or product-based companies, recording emissions from the extraction of the raw material all the way to its end of life disposal.
- Policy and Action Standard – The Policy and Action Standard measures how effective certain policies and actions have been on GHG emissions, allowing governing bodies to see how successful certain initiatives have been and make adjustments where needed.
Why These Standards Must be Followed
These standards must be followed because our global temperature is rapidly changing, harming wildlife around the planet and causing instability around the world. Standardised measurement and reporting requirements of these emissions is critical for companies to achieve carbon neutrality and net zero emissions; operating sustainably and not contributing to climate change.
More Information
https://ghgprotocol.org/standards
https://www.iso.org/standard/66453.html
https://www.bsigroup.com/en-GB/capabilities/environment/pas-2060-carbon-neutrality