Scope 1 and 2 GHG Footprinting
Carbon footprinting for Scope 1 and Scope 2 is an essential business process for companies of all sizes. Scope 1 emissions are the direct emissions from owned or controlled sources. Scope 2 emissions are indirect emissions from the generation of purchased energy. The benefits of accounting for GHG emissions are to improve environmental performance, comply with regulations, drive cost savings, and share the responsibility with the supply chain. Companies may also see an enhanced reputation, increase in consumer loyalty, investor interest, and employee engagement.
Scope 3 GHG Footprinting
Corporate value chain (Scope 3) accounting allows companies to assess their entire supply chain emissions impact and identify where to focus abatement activities. Scope 3 emissions account for the goods a company purchases to the end of use of products the company sells. The GHG Protocol released the Scope 3 Standard in 2011 and it is the only internationally accepted method. Both upstream and downstream channels are accounted for via 15 categories. Benefits of measuring Scope 3 emissions are identifying which suppliers are leaders, locating hotspots across the value chain, and encouraging product innovation to create energy-efficient products.
Target Setting
Scientists and other experts forecast dangerous climate conditions and humanitarian crises stemming from drought, rising sea levels, and extreme heat. The 2015 Paris Agreement commits countries to limit the global average temperature increase to well below 2°C above pre-industrial levels, and to aim for 1.5°C. Companies have a pivotal role in mitigating climate risk by setting targets and achieving them over the next two decades. Multiple target-setting methodologies exist but the most accepted approach is the Science Based Targets initiative (SBTi). Though most companies around the world are setting targets voluntarily, the European Union has mandated targets via various regulations.
Abatement Planning
After companies measure their emissions and establish reduction goals, the next step is to assess how the company will achieve its reductions over time. The most common methodology for analyzing the impact and cost options is known as the marginal cost curve. To evaluate and prioritize actions such as solar water heating, HVAC energy efficiency, and lighting controls, companies need to weigh the abatement cost (the cost of an intervention that will reduce GHG emissions by one ton) versus the reduction in emissions. Other methodologies may be better for long-term planning and Net Zero scenarios.
Supplier Engagement
Supplier engagement plays an essential role in addressing Scope 3 emissions and achieving climate targets. Collecting GHG inventory data from suppliers can be a daunting task for any company. Software solutions offer some relief; however, strategy, communication, education, and procurement engagement are also critical for success. A best practice for tackling supplier engagement is collaborating with competitors, as shared value chains are common in most sectors. Companies will achieve considerable progress if they can define a win-win relationship with their competitors and suppliers, provide methodologies and support, certify data quality, and highlight benefits to the bottom line.
Climate Risk
Climate risk assessments identify the likelihood of future climate events and their potential impacts for companies, cities, and communities. Scenario analysis is an enhancement that explores the plausible future outcomes based on different assumptions and drivers. The gold standard methodology was the Task Force on Climate-Related Financial Disclosures (TCFD) created in 2017. As of January 2024, the International Sustainability Standards Board (ISSB) standards, IFRS S1 and IFRS S2, have incorporated TCFD recommendations and will be the new standard moving forward. These new standards provide a global baseline of disclosures.