Monday, 15 December 2008

Whose Footprint Is It, Anyway?

A longer version of this article first appeared in the December 2007 issue (No. 53) of The Environmentalist.

Public awareness of climate change is at an all-time high, and companies and individuals are under pressure to measure and reduce their carbon footprints. However, we buy goods and services from one supplier and often pass items, whether finished products or waste, on to other people. So how do we know where one footprint ends and another begins? Establishing relevant boundaries around your carbon-emitting activities is a crucial step in calculating your true emissions. Define your activities too narrowly and you offload your rightful carbon responsibilities onto your customers or suppliers. But broaden the boundaries too much and you risk taking responsibility for emissions over which you have little or no control. What is a sensible approach?

A good starting point is the ISO 14064 -1:2006 standard Greenhouse gases- Part I: specification with guidance at the organizational level for quantification and reporting of greenhouse gas emissions and removals. This standard includes formal definitions to help organisations determine where their responsibility begins and ends. Another carbon management standard, PAS 2050 - Specification for the measurement of the embodied greenhouse gas emissions in products and services- can also help an organisation determine where its boundaries begin and end. But before taking a closer look at boundaries, let’s take a step back and think about the overall purpose of carbon footprinting.

Given the recent hype, one might be forgiven for thinking carbon footprinting is simply more corporate “greenwashing”. In reality, developing a reliable and consistent method for measuring greenhouse gas (GHG) emissions helps companies benchmark their performance and identify opportunities to make real reductions in emissions through changes and improvements in business practices and processes. The Carbon Trust outlines the main benefits of carbon management for companies including cost savings, operational efficiency, mitigation of regulatory impacts, capability building, new business opportunities, and enhanced corporate reputation.

In addition, a consistent approach among companies allows customers and other interested parties to make relevant comparisons and use GHG emissions as selection criteria for procurement and purchasing decisions. It also helps companies to evaluate alternative processes for managing GHG emissions and to address corporate environmental targets.

Describing a “Fit for Purpose” Carbon Footprint Report
A credible carbon footprint report is analogous to a credible corporate financial report in that it should give a fair and accurate view of the organisation’s performance and serve as a useful decision making tool for management and other stakeholders. The following principles reflect the thinking that goes into preparing a “fit for purpose” carbon audit report:

a) Relevance - includes emissions sources appropriate to the needs of the intended user
b) Completeness - includes all relevant GHG emissions and removals
c) Consistency - enables meaningful comparisons in GHG-related information
d) Accuracy - reduce bias and uncertainties as far as is practical
e) Transparency - disclose sufficient and appropriate GHG-related information to allow the intended user to make decisions with confidence

When Carbon Clear conducts a carbon audit, the carbon management team applies a 6-step methodology:

1. Identify management’s motivation for measuring the company carbon footprint, and specify key stakeholders
2. Identify organisational boundaries
3. Determine key activities within those boundaries that drive the company’s carbon emissions
4. Measure those activities and apply relevant emissions coefficients to determine the total footprint
5. Identify top-level and detailed recommendations for cost-effective emissions reductions
6. Ensure that carbon footprint results are reported accurately

Without clearly defined, relevant boundaries for GHG emissions, an organisation cannot begin to take meaningful action to measure or reduce their emissions. For example, an office or service-based organisation, which decides to exclude indirect emissions (associated with services and products in its supply chain) might underestimate its footprint by a large factor. For large retailers, the supply chain may generate thirty times the company's own emissions.

ISO 14064 defines four categories of GHG emissions based on management’s control or influence over business activities. These categories are labelled direct emissions, energy indirect emissions, and other indirect emissions.

Direct GHG emissions, as the name suggests, result from activities undertaken directly by the organisation and its staff. These include the operation of company-owned vehicles and on-site power generation, as well as the management of lands and property owned by the organisation.

Energy indirect GHG emissions are the GHG emissions from the generation of imported electricity, heat or steam. The organisation is the direct end-user of the energy, even though the emissions may have occurred at a power station hundreds of miles away.

Other indirect GHG emissions arise as a consequence of the organisation’s procurement activities and other decisions, but arise from sources that are owned or controlled by another organisation. The category of indirect greenhouse gas emissions is potentially huge, and is the most common source of confusion when the organisation attempts to set boundaries for its carbon footprint.

Boundary setting: the ins and outs
A carbon audit is often the initial step in a company’s emissions reduction programme. However, the carbon audit report is also a communications tool, and company representatives may be tempted to set their emissions boundaries as tight as possible in order to produce a smaller footprint. After all, with major institutions basing procurement decisions in part on the bidders’ relative carbon footprints, no one wants to be the biggest polluter.

We argue that this may be a false saving. Many organisations will use their initial carbon footprint as a baseline against which to measure future performance. Exclude too many activities from the baseline and you may lock out a range of cost-effective emissions reduction options throughout the supply chain.

There is a further reason to consider broadening the boundaries of a corporate carbon audit. Much of the pressure to measure carbon footprints comes from investors, customers, and regulators, and they expect this information to be made publicly available. An unreasonably narrow boundary may attract criticism from outside reviewers concerned about potential corporate “greenwash”. In such a case, it is critical that a company clearly states the assumptions and rationales behind its boundary decisions.

Establishing appropriate boundaries for a corporate carbon audit is critical if the corporate world is to do its part to help reduce the severity of climate change. Going beyond direct emissions to encompass indirect emissions can give a company insight into its key emissions sources, and identify a broader range of carbon reduction options. Even better, establishing these broader boundaries can increase the credibility of the carbon audit report itself, and open up new opportunities for engagement with customers and clients.

Suzy Hodgson, AIEMA, is a principal consultant and Jamal Gore, AIEMA is the managing director at specialist carbon management company, Carbon Clear Limited.