A corporate carbon footprint refers to the carbon dioxide and other greenhouse gas (GHG) emissions caused by business operations. It is one of the primary indicators used to understand a business's environmental impact. Calculating a corporation's carbon footprint helps it understand where emissions come from in order to create a roadmap to reduce and eliminate them. Building a detailed carbon footprint is the first step towards developing your Net-Zero Strategy. The Science-Based Targets initiative (SBTi) requires all certified organizations to calculate their scope 1, 2, and 3 emissions, covering the entirety of their GHG emissions.
Scope 1 and 2 emissions relate to standard utilities and environmental impacts traditionally reported by organizations (typically natural gas, electricity, and company-owned vehicles), typically compiled by corporations prior to SBTi requirements. Scope 3 emissions reporting is a relatively new and emerging requirement that goes above and beyond standard utilities reporting and is becoming both a priority and a challenge for corporations.
Calculating Corporate Emissions
To produce a robust and credible carbon footprint, organizations of all sizes are required to align with the Greenhouse Gas Protocol (which was prepared by World Business Council for Sustainable Development and World Resources Institute) to address and quantify all emissions associated with their operations. The GHG Protocol is a global standardized framework regarding measuring and reporting GHGs and is the most widely-used international accounting tool. Under the GHG Protocol, emissions are effectively divided into three categories.
- Scope 1 emissions. These are direct emissions from owned and controlled sources – most commonly natural gas and corporate vehicles.
- Scope 2 emissions. These are indirect emissions from the generation of purchased electricity, steam, heating, and cooling the reporting organization consumes.
- Scope 3 emissions. These are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.
Defining Scope 3 Emissions
Scope 3 is the broadest category of emissions covering a corporate's value chain and generally accounts for more than 75% of an organization's overall carbon footprint. Scope 3 emissions result from activities and assets not directly owned or controlled by the reporting organization.
The calculation of scope 3 emissions goes in two directions: upstream and downstream. The former (upstream) refers to the emissions occurring within an organization's supply chain. The latter (downstream) refers to the product use phase. Both of these together constitute a corporation's "value chain."
Upstream and Downstream Emissions
Under the GHG protocol, scope 3 emissions are further divided into 15 categories.
1. Purchased Goods and Services. Emissions from the extraction, production, and transportation (i.e., cradle-to-gate emissions) of goods and services acquired by a company in the reporting year, not otherwise included in another upstream category.
2. Capital Goods. Extraction, production, and transportation of capital goods purchased or acquired by the company in the reporting year. Capital goods are goods, (e.g. plant, property, and equipment) that the company uses to provide its service and includes buildings.
3. Fuel and Energy-related Activities (not included in scope 1 and 2). Extraction, production, and transportation of fuels and energy purchased or acquired by the company in the reporting year, not already accounted for in scope 1 or 2.
4. Upstream Transportation and Distribution. Transportation and distribution of products purchased by a company in the reporting year between suppliers and its own operations (in vehicles and facilities not owned or controlled by the company)
5. Waste Generated. Disposal and treatment of waste generated in the company's operations in the reporting year (in facilities not owned or controlled).
6. Business Travel. Transportation of employees for business-related activities during the reporting year (in vehicles not owned or operated by the company).
7. Employee Commuting. Transportation of employees between their homes and their worksites during the reporting year (in vehicles not owned or operated by the company).
8. Upstream Leased Assets. Operation of assets leased by the company (lessee) in the reporting year and not included in scope 1 and 2 – reported by the lessee.
9. Downstream Transportation and Distribution. Transportation and distribution of products sold by the company in the reporting year between the company's operations and the end consumer (if not paid for by the company), including retail and storage (in vehicles and facilities not owned or controlled by the company).
10. Processing of Sold Products. Processing of intermediate products sold in the reporting year by downstream companies (e.g., manufacturers).
11. Use of Sold Products. End-use of goods and services sold by the company in the reporting year.
12. End of Life Treatment of Sold Products. Waste disposal and treatment of products sold by the company (in the reporting year) at the end of their life.
13. Downstream Leased Assets. Operation of assets owned by the company (lessor) and leased to other entities in the reporting year, not included in scope 1 and 2 – reported by lessor.
14. Franchises. Operation of franchises in the reporting year, not included in scope 1 and 2 – reported by franchisor.
15. Investments. Operation of investments (including equity and debt investments and project finance) in the reporting year, not included in scope 1 or 2.
Addressing Key Issues
Accounting for scope 3 emissions can be seen as a formidable task for corporations embarking on a carbon footprint and decarbonization journey. There are a series of obstacles to overcome, including stakeholder engagement, data collection, and the quantification of emissions.
Organizations need to secure stakeholder engagement from all the key individuals responsible for data collection and make them aware of the data to be collected and why it is relevant for the overall project. The relevance of some data categories may not be immediately apparent if an organization is kickstarting its Net-Zero Journey. An appreciation of how individual data categories contribute to a corporation's carbon footprint will support senior-level buy-in and robust data collection procedures.
Data collection is absolutely essential in understanding a carbon footprint. To ensure this process goes smoothly, a designated person or team should be assigned to track who has access to what data and where data can be found. The compilation of all of this disparate data into a single database is a significant undertaking.
The quantification of emissions should be carried out by specialists with experience in carbon footprinting large organizations. Corporations can help to ensure their emissions are calculated and reported correctly by providing accurate and credible data.
How NUS can Help
Creating a detailed and comprehensive carbon footprint and Net-Zero Strategies can be a difficult task for many organizations to pursue alone. NUS is currently working with numerous businesses worldwide to produce industry-specific decarbonization roadmaps aligned with the SBTi. The specialist in NUS's sustainability division help organizations to better understand scope 1, 2, and 3 emissions, produce baseline carbon footprints and develop bespoke decarbonization targets and roadmaps that align with short and long-term targets and milestones.
More: Research Notes, Carbon, Decarbonization, Greenhouse Gas (GHG), Net-Zero, Science-Based Targets initiative (SBTi), Scope 3 Emissions, Sustainability