The Sustainability Buzz

Why Carbon Footprint Matters

Carbon FootprintRecently a client asked for our assistance in expanding his company’s sustainability measurement tool to create a true measure of carbon footprint for the company’s international operations.   That got us thinking about why a company would invest in a carbon footprint measurement.  What’s the business value of knowing your carbon footprint?

Let’s start with some definitions.  A greenhouse gas (GHG) assessment covers the accounting and reporting of the six greenhouse gases covered by the Kyoto Protocol – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulphur hexafluoride (SF6).  The total set of these emissions is called the carbon footprint of any entity.

The Greenhouse Gas Protocol Initiative established the standards for the Greenhouse Gas Protocol, beginning in 1998 and updating it several times since.  This multi-stakeholder partnership of businesses, non-governmental organizations, governments and others understood that global warming and climate change had become a key sustainable development issue.  These disparate groups needed a way to share information on reduction of GHG emissions using a consistent language.  The GHG Protocol therefore created a baseline format for identifying GHG emissions and measuring subsequent reductions.

Businesses in particular use a GHG assessment to manage the risks associated with greenhouse gas emissions and, most importantly, to identify reduction opportunities.  In the spirit of what can’t be measured, can’t be managed, a GHG assessment provides a consistent yardstick against which to measure progress in GHG emission reduction.  What are some of those risks?  Clearly, there is the risk of reduced energy supplies and the subsequent dramatic price spikes as demand outstrips supply.  There is the risk of more strict government regulation of emissions.  There is a demonstrable market risk as customers demand more environmentally-friendly products from more ecologically-responsible manufacturers.  That market risk is evident in Walmart’s recent move to demand proof of improvement in sustainability measures by its suppliers in order to remain on their vendor list.

While a GHG assessment may seem daunting, in fact GHG accounting and reporting stands firmly on five basic principles:  relevance, completeness, consistency, transparency and accuracy.  Let’s consider each one.

Relevance:  The information in the report needs to be useable by both internal and external decision makers.  To that end, companies define the inventory boundaries based on organizational structure, operational boundaries, and business context.  Our current customer has decided that, as the company grows from national to international, its organizational boundaries need to expand beyond the U.S. to include international operations.

Completeness:  Once a company has defined its operational boundaries, the inventory needs to provide a comprehensive accounting of emissions within those boundaries.  Unlike many financial accounting activities where materiality is significant, in emissions accounting every effort needs to be made to include relevant emissions, even if this includes estimating.  As long as the estimations are transparently reported, the reader can evaluate the impact of the estimations.

Consistency:  In order to get accurate period-over-period information, the GHG inventory needs to demonstrate consistent applications of accounting approaches, inventory boundary and calculation methodologies.  Comparing apples one year to oranges the next will not give a true picture of progress made.

Transparency:  Here’s the heart of the matter.  Whatever is reported needs to be accompanied by a transparent “audit trail”.  Honest people may disagree on the methodology used or the approach taken, but a clear understanding of the choices made permits the reader to more accurately evaluate the results.

Accuracy:  To the extent possible, data should be “sufficiently precise” to permit informed decision-making.  Where imprecisions or estimates occur, every effort should be made to improve the accuracy of the measurement over time.

By now you’re thinking, this isn’t for me.  Way too complicated.  Luckily, there’s a good deal of help out there.  The US EPA Climate Leaders program for small businesses offers a variety of tools that you can use to identify your carbon footprint and reduce your emissions.  You can find more information on their website at http://www.epa.gov/climateleaders/smallbiz/index.html.  While the Partners program at Climate Leaders is undergoing restructuring, you can still access their tools.  And the Global Greenhouse Protocol website also offers calculation tools at http://www.ghgprotocol.org/calculation-tools/all-tools.

As always, iSpring can offer substantial help in setting up or modifying an existing GHG assessment.  Give us a call.

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