Like most things in life, you can’t improve what you don’t measure. This is especially true for greenhouse gas (GHG) emissions. Just like expenses are tracked to understand a business’s financial stability, GHG emissions are tracked to understand a business’s environmental sustainability stability. Tracking GHG emissions is also a major component of any meaningful Environmental, Social, and Governance (ESG) Report. Undergoing a thorough process to determine a company’s GHG emissions, called GHG accounting, is vital to creating a strategy to decrease energy and operational waste as well as avoid potential future risks.
GHG accounting shows the impact of company-wide changes and measures the change of GHG emissions year over year. When GHG emissions are accounted for, it enables a company to set a decarbonization strategy. With a decarbonization strategy in place, GHG emissions will show a decrease over time. Without a decarbonization strategy, GHG emissions are likely to increase without this dedicated effort.
There are three categories into which GHG emissions are divided, referred to as Scope 1, Scope 2, and Scope 3 emissions. By benchmarking the three different scopes, it is easier to analyze and assign a numeric value to each which will determine where most of the emissions are coming from throughout the company’s entire operation. From the electricity used to power a building to the amount of waste that enters a landfill, all aspects of the company are assessed.
Scope 1: Direct GHG Emissions
Emissions from on-site sources owned and operated by the company that involve the direct combustion of fossil fuels or release of GHGs. Examples included boilers, furnaces, gas burning heaters, gasoline or diesel-powered vehicles, natural gas or diesel generators, and emissions from refrigerant gases.
Scope 2: Indirect GHG Emissions
Emissions from purchased utilities consumed by the company that are generated from off-site sources. Most commonly electricity, but it also includes utilities like the purchase of steam, chilled water, and compressed air.
Scope 3: Other Indirect GHG emissions
Commonly referred to as Value Chain Emissions, scope 3 measures emissions that are not owned or controlled by the company. There are 15 categories in scope 3 that measure upstream and downstream emissions from activities such as employee commuting, business travel, and goods and services that were not accounted for in scopes 1 or 2.
According to the GHG Protocol, scope 3 on average accounts for 79% of a company’s total emissions. Whereas Scope 1 accounts for 11% and Scope 2 accounts for 10%. Having a thorough understanding of scope 3 can lead to the most impactful amount of emissions reductions company wide.
Reducing Future Risk
Throughout the world, numerous cities, states, and countries are implementing new laws to reduce GHG emissions, many of these regulations have components that fit into one of the three scopes. In Denver specifically, the Waste No More Ordinance, Energize Denver, and Colorado Building Performance Standards are all regulations that will require this type of in-depth benchmarking and proof of reduction that meet various milestones. Anyone in a leadership position should be anticipating these changes and plan for future regulations.
Not only are anticipated energy and waste regulations going to affect how a company operates, but the utility companies and supply-chains will have regulations that affect their operations as well to further increase ethical business practices. By understanding GHG emissions in all aspects of company operations, new market opportunities with lower GHG emissions can be identified throughout the supply-chain, daily operations, products, and services.
The Details are in the Data
Knowing which scopes and categories have the most emissions is the first step before a decarbonization strategy to reduce energy and operational waste can be formalized. By giving something (such as GHG emissions) that seems abstract and non-tangible a numeric value, it becomes more real. Once people see numbers that do not seem to add up to what their assumption was, curiosity soon follows. Why is the number so high? Why are these numbers higher than last year’s? What are we doing differently today? What can we be doing differently tomorrow? Is there greenwashing on the supplier’s end and a product was misrepresented as low emission?
This question-asking process is vital to identify the hidden inefficiencies across operations that can be eliminated. More often than not, reducing GHG emissions leads to increasing energy efficiency and cost savings on monthly operations. It is pretty impressive what companies are changing to lower GHG emissions once they realize exactly how high their energy usage is, what their travel habits are, and seeing how many metric tons of trash they are sending to the landfill.
Next Steps to GHG Accounting
Company-wide GHG accounting is becoming more and more popular as a standardized way to calculate GHG emissions. In most cases, financial reports are all that is needed to get started.
Implementing a well-informed decarbonization strategy making good business sense. It also leads to environmentally sustainable business practices that benefit the future generations to come.