1, 2, 3... scopes: the carbon footprint of companies
December and Santa's ESG blunders already seem a long way off - and after several changes, investors have returned and Santa Inc. shares have soared.
In case you don't understand the link, back in December we talked to you about the influence investors can exert, by buying shares in companies that take into account ESG criteria - environmental, social and governance.
Today, we're looking at the first of these three aspects: how can companies measure their environmental impact, and how can they communicate this to their stakeholders?
First, what are we measuring?
Discussions of environmental challenges often focus on climate change.
As the IPCC recognized in its latest report, global warming is caused by human activity. It can therefore only be slowed or stopped by adapting our production and consumption habits.
A little less nuggets and a little more green beans on our plates, then.
Climate change is caused in particular by the greenhouse effect, which human activities have deregulated by their excessive emissions of gases (known as "greenhouse gases") such as carbon dioxide (CO2), methane (CH4) and many others.
The 3 scopes: a reporting perimeter
The Greenhouse Gas Protocol (GHG Protocol) was set up in the late 1990s by the World Resource Institute and the Word Business Council for Sustainable Development, with the help of governments, companies and NGOs, to make organizations, which are responsible for a large proportion of our emissions, more accountable.
Indeed, to face up to a global challenge, it's easier to speak the same language.
In 2001, the first GHG (greenhouse gas) accounting and reporting standard was published, providing companies with a common reporting framework.
This standard has three perimeters, or "scopes", which focus on the different sources of emissions produced by companies: these are known as scopes 1, 2 and 3.
- Scope 1 measures direct emissions linked to the combustion of fossil fuels from resources owned (or controlled) by the company. For example, the gases emitted by your cows, the fumes from your industrial furnaces, etc.
- Scope 2 measures indirect emissions linked to the purchase or production of electricity. For example, electricity produced by a third party and consumed by your company to print magazines, or to run your servers.
- Scope 3 measures all other indirect emissions from the extended value chain - upstream and downstream - which often account for the bulk of emissions. For example, a company that buys steel from a supplier will include the emissions relating to that steel in its reporting.
Overview of value chain perimeters and emissions according to the GHG Protocol.
Source : sami.eco
And how does it work?
Now that we know how to categorize our measurements... how do we measure them?
A round of applause for the Bilan Carbone method developed for ADEME by Jean-Marc Jancovici.
This method expresses direct and indirect GHG (greenhouse gas) emissions in carbon dioxide equivalent (CO2e) over one year.
Whenever possible, we first try to estimate GHG emissions using physical ratios: we multiply the quantity consumed (kilometer traveled, liter of gasoline, kilo of meat, m² of surface area) by the unit quantity of CO2 emitted.
For example, taking the TGV emits 1.73 gCO2e per passenger (= unit quantity, the passenger), per kilometer (= quantity consumed). So on a 750 km journey from Paris to Marseille, that's 1298 gCO2e, or more than 1kg of CO2e.
When physical data is lacking, a monetary ratio, expressed in CO2e per euro or dollar spent, is used to estimate the carbon footprint of a product or service based on its purchase price. This method is often simpler to implement for scope 3, but less accurate than the physical data approach.
For example, a pharmaceutical company purchasing $1,000 worth of paper packaging would have to take into account the emission of 1.8 tonnes of CO2.
Sounds complicated? Don't worry!
Most large companies call on in-house experts or specialist service providers to draw up their carbon footprint.
In France, an annual carbon footprint has been mandatory for all companies with over 500 employees since the Grenelle 2 law (2010), and must be updated at least every 4 years.
However, this law limits the obligation to scopes 1 and 2, whereas scope 3 is known to be the most generous in terms of GHG emissions...
Including scope 3 in reporting obligations would therefore represent a major step towards a more realistic representation of companies' carbon footprint.
System limits
Some of you will say, "It's not just the shows that are a problem", and you'd be right.
But let's stop you right there: the GHG protocol and its 3 scopes are not intended to cover all aspects of sustainable development. Rather, it aims to provide a clear, quantified view of the impact of companies on global warming.
For each sustainable development theme, there are relevant indices. So how do you get a global view of environmental performance? More and more companies are turning to environmental rating agencies such as CDP, MSCI or Ecovadis. Another fascinating subject we'll be talking about next time.
To help companies tackle the issue of sustainable development, we have developed a training program, also available in English. It covers the business opportunities of a sustainable company, how to facilitate the transition, and how to become an agent of change.
Let's talk about it over coffee?
