How to measure your company’s current emissions?

Key takeaways

1. Carbon accounting is crucial for establishing reliable emissions baselines and benchmarks and is essential for measuring progress toward decarbonisation goals.
2. Baseline emissions provide a snapshot of a company's emissions at a starting point, allowing for the measurement of the effectiveness of emission reduction strategies over time, and play a key role in creating a Net Zero Pathway for your company.
3. Regular calculation and comparison of a company's carbon footprint against its baseline emissions are key for tracking progress and adjusting strategies toward achieving Net Zero.
4. Knowing your carbon footprint offers insights into direct and indirect emissions, aiding in strategic planning, compliance, and demonstrating commitment to sustainability.

In this chapter, we will define carbon accounting and its role in net zero journeys, before diving into the two key concepts of baseline emissions and company carbon footprint. We will analyse why these two terms are important in their own right, and how they count towards reaching net zero.

What is carbon accounting?

Carbon accounting refers to the process of measuring and documenting the amount of greenhouse gas (GHG) emissions produced by an organisation, a process, or a product.

Accurate carbon accounting and reporting are the critical first step for establishing reliable emissions baselines and benchmarks to measure your company's progress. Without these, setting targets for decarbonisation is near impossible, and runs the risk of being discredited by anyone who looks into your company's net zero commitments.

Beginning the net zero journey without these baselines and targets would be like setting financial goals and sales targets with no previous record of your company's financial performance.

Key concepts in carbon accounting

When it comes to calculating a company's emissions, it is crucial to have a clear understanding of the fundamental concepts that make up a company's carbon accounting and how to use them correctly. The most significant concept to consider is the Baseline Emissions, which is used to measure a company's carbon footprint.

Baseline Emissions: This refers to the amount of greenhouse gases (GHGs) a company emits at a specific starting point in time. This baseline is established to measure the effectiveness of the company’s emission reduction strategies over time. It is a snapshot of a company's emissions before any specific actions are taken to reduce them.

Companies often select a baseline year before the implementation of significant emissions reduction measures to demonstrate the impact of their efforts over time. Moreover, the baseline year for calculating baseline emissions is also influenced by:

• Availability of Data: The baseline year is often selected based on the year from which reliable and comprehensive emissions data is available for the company.
• Significant Changes in Operations: If a company has undergone significant changes in operations, such as expansions, acquisitions, or divestitures, it might choose a baseline year that reflects its operations before or after these changes.

The choice of the baseline year is influenced by:

• Historical Emissions Data Availability: Entities choose a year for which they have complete and accurate emissions data.
• Operational Stability: A year that reflects the entity's typical operations without significant anomalies (like major expansions or contractions) makes for a good baseline.
• Commitment to Reduction Initiatives: The baseline should precede the implementation of significant GHG reduction initiatives to effectively measure their impact

Establishing baseline emissions

1. Select a Base Year: Choose a specific year or period as your baseline for emissions. This should be a recent year where reliable data is available.
2. Scope Definition: Clearly define the emission scopes within your company:
3. Scope 1: Direct emissions from owned or controlled sources (e.g., fuel combustion, company vehicles).
4. Scope 2: Indirect emissions from the generation of purchased electricity, heat, or steam.
5. Scope 3: All other indirect emissions (e.g., business travel, supply chain, waste disposal).
6. Gather Data: Collect data on all sources of greenhouse gas (GHG) emissions related to your company’s operations. This includes energy consumption (electricity, heating), company vehicle usage, business travel, and any other activities that result in GHG emissions.
7. Emissions Factors: Determine emissions factors or conversion factors for each activity. These factors translate activity data (e.g., fuel consumption, electricity usage) into emissions data (e.g., CO2 emissions). Emissions factors can be obtained from various sources like government agencies, industry associations, or carbon accounting tools.
8. Emissions Calculation: Use emission factors to convert collected data into CO2-equivalent emissions. There are various tools and protocols, like the Greenhouse Gas Protocol, to guide this calculation.
9. Documentation and Verification: Document your methodology and findings. Optionally, have them verified by a third party for accuracy and credibility.
10. Continuous Improvement: Implement systems for ongoing monitoring and management of emissions to track progress, identify areas for improvement, and adjust strategies to reduce emissions over time.

An example of how to establish baseline emissions

1. Select a baseline year

Let's consider a hypothetical manufacturing company, "EcoManufacture Inc.," that produces consumer goods and wants to start reducing its carbon footprint as part of its commitment to sustainability.

In 2020, EcoManufacture Inc. decided to seriously tackle its carbon emissions. The company has comprehensive emissions data starting from 2018 and chooses 2018 as its baseline year because:

• It has complete data for this year.
• There were no significant operational changes that would skew future comparisons.
• It's the year before they started exploring emissions reduction initiatives.

2. Calculate baseline emissions

In 2018, EcoManufacture Inc. conducted a thorough GHG inventory and found that it emitted 50,000 tonnes of CO2 equivalent. This figure includes:

• Scope 1 emissions from their operations (e.g., fuel combustion in company-owned boilers and vehicles): 20,000 tonnes.
• Scope 2 emissions from purchased electricity for their manufacturing facilities: 15,000 tonnes.
• Scope 3 emissions from upstream and downstream activities in their value chain, like the production of purchased materials and waste generated in operations: 65,000 tonnes.

Why baseline emissions are essential in the net zero journey:

• Reference Point: Baseline emissions establish a clear reference point against which all future reductions are measured. This is essential for setting realistic and achievable targets.
• Target Setting: Knowing the baseline emissions allows a company to set informed targets for reduction. For instance, if your company’s baseline emissions are determined for the year 2020, it might set a target to reduce these emissions by a certain percentage by 2030.
• Strategy Development: Understanding the baseline helps in identifying the major sources of emissions within the company’s operations, guiding the development of focused and effective reduction strategies.
• Progress Tracking: By comparing current emissions to the baseline, companies can track their progress toward their Net Zero goal. This is important for internal assessment and external reporting.
• Compliance and Reporting: For regulatory and voluntary reporting on climate initiatives, such as the Carbon Disclosure Project (CDP) or in line with the Science-Based Targets initiative (SBTi), having a clear baseline is necessary.