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Calculate your GHG: Why Is It Important?

A factory power plant emitting plumes of white smokes

As explained in our previous blog (GHG: Current State and Future), greenhouse gases (GHGs) that trap heat in the atmosphere are increasing due to human activity. The amount of Carbon Dioxide (CO2) has increased by 50% since the industrial revolution (NOAA, 2022), which makes our atmosphere warmer and leads to many environmental issues.


Besides Carbone Dioxide (CO2), other greenhouse gases such as methane and nitrous oxide (N2O) are also increasing due to our agricultural activity, fossil fuel extraction, and other human activities. Additionally, a report by CDP (2017) shows 71% of the global GHG emissions are contributed only by the world's top 100 big companies in the world. The demand for businesses' actions to reduce GHG emissions has become important, considering only 100 big companies can significantly increase GHG emissions. But, how do companies measure their GHG emissions, and what should businesses do with their current GHG emissions?


GHG Calculation Tool to Help You

GHG Protocol Scope 1, 2, and 3


GHG Protocol, a widely known international standard for corporate accounting and reporting emissions, released a Corporate Accounting and Reporting Standard that categorized GHG Emissions into Scope 1, 2, and 3 (The Greenhouse Gas Protocol, 2015).


To better understand the different Scopes of GHG Emissions, let’s take a look at a hypothetical case of John.


John works in the car manufacturing industry and drives his car to work. At his office, he powers his laptop with electricity provided by a state-owned enterprise sourced from a nearby coal power plant. One day, he approved the delivery of raw materials by the vendor’s trucks, and the export delivery of some luxury cars by a container ship. He also visited the production line to check the paint and coating process. He asked the company’s driver to buy some painting material with the company’s car. A luxury car produced by John's company was sold to the customer with an expected lifespan of 10 years.


From this example, we can classify the processes of John’s activity and the car production processes into GHG Emissions Scope 1, 2, and 3:

  • Scope 1 is any emissions sourced from an organization's own facility or anything it controls directly. For example, the company's facilities, company's vehicles, resources to produce the company’s products, and the company’s fuel combustion activity. From John’s example, we can consider the transport of raw materials from a vendor and the usage of the company’s car to buy painting materials as Scope 1.

  • Scope 2 is indirect GHG emissions that an organization emits indirectly by purchasing energy for its owned or controlled equipment or operations. Scope 2 is usually associated with the purchase of electricity, steam, heat, or cooling. From John’s example, the electricity purchased from the state-owned enterprise to power his laptop and the company’s painting and coating process is considered Scope 2.

  • Scope 3 is indirect emissions that are not emitted by the organization itself, but by those above and below its value chain. In John’s example, we can consider that John’s commute to work by car, the export delivery by container ships, and the emissions emitted by the customer’s bought car for its 10-year lifespan are considered Scope 3.


A better understanding of GHG Emissions Scopes 1, 2, and 3 can be seen in the diagram below.

Infographics about GHG Protocol Scope 3 in green and purple scheme
(Source: GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard, page 5)

GHG Calculation Tool


Once we know how to classify GHG Emissions, there are GHG calculation tools that can help determine our GHG emissions. These tools help us calculate the usage of our electricity, the total distance of our transportation, and many more to convert it to the total amount of GHG emitted. The GHG calculation tool released by the GHG Protocol can be accessed here. The GHG Protocol has also produced several calculation tools based on sectors and countries. For a more detailed GHG calculation formula, this resource from Minnesota Pollution Control Agency does a good job of explaining it.


Importance of GHG Calculation


Having an understanding of your own GHG emissions not only helps in protecting the environment by reducing carbon emissions, but it also creates economic benefits for businesses.


According to GHG Protocol, the three GHG emissions scopes provide a comprehensive framework for managing and reducing GHG emissions. By understanding our own GHG Emissions, we can understand which of our activities emit the most GHG Emissions. We can plan our actions more accurately, targeting the activities with the most amount of GHG emissions, and giving the possibility for cost saving.


Understanding GHG emissions could also push businesses to build a climate-resilient business as the climate change risk is growing to affect businesses. The World Economic Forum (2020) identified that climate-related disasters and extreme weather heavily impacted businesses. 215 out of 500 world’s biggest corporations, including Apple, JPMorgan Chase, Nestle, and 3M reported climate-related financial risk of around $1 trillion in 2018. Climate change also impacted the infrastructure that companies rely on for their supply chain.


The World Economic Forum’s Global Risks Report 2020 shows that younger generations are considerably more concerned about climate change and environmental issues. As the Millenials and Generation X demographic are increasing, businesses that have initiatives to tackle environmental issues could attract more customers, investors, and talents which lead to an increased competitive advantage for the company. Additionally, Goldman Sachs' recent report, Making Cities Resilient to Climate Change, views climate resilience as an opportunity to create new business products.



How Carbon Consultancy Can Help to Reach Net Zero

Achieving Net Zero Target


All of this might feel complicated, especially if you are measuring a big company's carbon emissions. But thankfully, many carbon consultancies are popping up to help businesses and corporations calculate their emissions and determine solutions to achieve the collective target of a net zero world.


Net zero is reducing greenhouse gas emissions to as close to zero, with any remaining emissions fully absorbed from the atmosphere by carbon ecosystems (oceans and forests). As part of the Paris agreement to keep global warming to no more than 1.5°C, emissions must be reduced by 45% by 2030 and net zero reached by 2050.


Carbon Consultancy way to reach Net Zero


Most carbon consultancies focus on the process of calculating, understanding, disclosing, and sequestrating. The carbon consultancies will help companies to calculate the company’s emissions as explained in the previous part by classifying scope 1, 2, and 3 emissions and measuring the total amount of emissions from each scope, it also helps the company understand its emissions and recommended actions to achieve net zero.


Next, the carbon consultant will help the company to disclose the carbon emissions and help the company to sequestrate their carbon emissions. Carbon sequestration is done by giving recommendations on possible actions to reduce carbon emissions within the company, ecosystem conservation, or carbon offsetting.


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As you can see, calculating your businesses’ GHG emissions does not have to be complicated. But it is understandable how it can be the case when you are calculating at a bigger scale. You can find out more about CarbonEthics’ own Carbon Consultancy Services here.


Writer: Fendy Wiedardi Limtara

Editor: Howen Jayawi


References:

Crawford, V., & Prowse, L. (2020, January 16). Climate Resilience is Make or Break for Businesses. Here's Why. World Economic Forum. Retrieved March 22, 2023, from https://www.weforum.org/agenda/2020/01/climate-resilience-is-set-to-make-or-break-businesses/


The Greenhouse Gas Protocol. (n.d.). Overview of GHG Protocol Scopes and Emissions Across the Value Chain [Graph]. https://ghgprotocol.org/sites/default/files/standards/Corporate-Value-Chain-Accounting-Reporing-Standard_041613_2.pdf


Griffin, P. (2017). The Carbon Majors Database. CDP. https://cdn.cdp.net/cdp-production/cms/reports/documents/000/002/327/original/Carbon-Majors-Report-2017.pdf?1501833772

PricewaterhouseCoopers. (n.d.). Carbon Footprint Calculation. Retrieved March 22, 2023, from https://www.pwc.com/sk/en/environmental-social-and-corporate-governance-esg/carbon-footprint-calculation.html


United Nations. (n.d.). For a livable climate: Net-zero commitments must be backed by credible action. Retrieved March 22, 2023, from https://www.un.org/en/climatechange/net-zero-coalition#:~:text=What%20is%20net%20zero%3F,oceans%20and%20forests%20for%20instance


United States Environmental Protection Agency. (2022, September 9). Scope 1 and Scope 2 Inventory Guidance. Retrieved March 22, 2023, from https://www.epa.gov/climateleadership/scope-1-and-scope-2-inventory-guidance


World Resources Institute. (n.d.). Greenhouse Gas Protocol. Retrieved March 22, 2023, from https://www.wri.org/initiatives/greenhouse-gas-protocol

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