Greenhouse gas accounting 101: what is it
How big is your company’s carbon footprint? What impact does your business have on the climate? And how can you start reducing your emissions?
You can’t answer any of these questions without undertaking a greenhouse gas accounting assessment. Also called a greenhouse gas inventory, this is the fundamental first step of any corporation’s climate journey. It sets you up to design a roadmap, set targets, and ultimately make progress towards net zero.
Why should you measure your greenhouse gas emissions in the first place?
The rationale for climate action is familiar: rocketing temperatures, ecosystems under threat, and populations at risk. We have seven years to halve global greenhouse gas emissions before we reach the point of no return, United Nations Scientists emphasise. We must reach net zero by 2050 if we’re to avoid the worst effects of climate change.
How do SMBs fit into this picture? You might think that, as a small business, you’re powerless to do much to change global emissions, but SMBs are a huge collective, making up 90% of global business and forming the foundation of the world’s value chains – together, that’s a lot of emissions to manage!
There’s also a strong business case for taking climate action:
Brand reputation: 73% of millennials would spend more on sustainable products. Companies that embed climate action into their business strategy are seen as more trustworthy and credible.
Supply chain resilience: 49% of the world’s GDP is now under a net zero target. By getting started with some carbon-cutting of your own, you insulate your supply chain.
Access to capital: $54 trillion of assets are managed by investors in the Climate Action 100+ initiative. By committing to climate action, you become more attractive to these investors.
Employee retention: 87% of employees say businesses should take a public position on environmental issues. Motivate your staff by being ambitious in your commitments.
Protection from policy risks: 197 countries have now signed the Paris Agreement. Stay ahead of the regulatory curve by taking action now.
Cost-savings: reducing emissions means money saved. The less fuel you’re burning, the less you’re spending.
What is a greenhouse gas inventory?
The greenhouse gas inventory goes by several names: ‘footprint’, for example, or ‘emissions profile’. Once calculated, it is a comprehensive picture of your business’ climate impact – across all your activities and including the emissions you’re both directly and indirectly responsible for (e.g. because of your energy usage and your suppliers).
While it’s sometimes referred to as a carbon footprint, a greenhouse gas inventory captures emissions from the full spectrum of greenhouse gases that are caused by human activity. All of the following contribute to an increase in global temperatures: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), chlorofluorocarbons (CFCs) and sulphur hexafluoride (SF6).
However, not all greenhouse gases were created equal. Scientists have calculated the global warming potential (GWP) of each gas to capture its warming effect on the atmosphere. The GWPs are used to convert emissions into a standard unit, known as tonnes of carbon dioxide equivalent (or tCO2e). The total sum of your emissions will always be given in this unit.
What makes the greenhouse gas inventory reliable and comprehensive?
The Greenhouse Gas Protocol (often abbreviated to GHG Protocol) is the world’s leading standard for greenhouse gas accounting and the go-to resource for understanding how to translate business activities into robust inventories of emissions data.
Built on a 20-year partnership between the World Resources Institute and the World Business Council for Sustainable Development, the GHG Protocol has developed a best-in-class accounting methodology underpinned by the following principles:
Relevance: the greenhouse gas inventory accurately reflects the greenhouse gas emissions of the company and serves the decision-making needs of the people using it.
Completeness: there are no gaps in the inventory; it reports on all greenhouse gas sources and activities within the chosen boundaries.
Consistency: methodologies are coherent and allow users to make comparisons between the emissions over time. All issues are addressed clearly and there is a clear audit trail.
Transparency: any changes to the data, inventory boundary, or methods are clearly documented. Assumptions that were made are recorded clearly and the accounting methodologies are described.
Accuracy: make sure that the inventory neither over- nor underestimates actual emissions as far as can be judged, and that uncertainties are minimised as much as possible.
To this, some (like South Pole) add the principle of conservativeness – i.e. the choice of assumptions and emission factors for the accounting should always err on the side of caution – so that emissions are never underestimated.
For more information on greenhouse gas inventories and how they’re calculated, see the second blog in this series.