There has been a lot of talk about greenhouse gas emissions accounting for companies in recent years. For some companies, accounting is already well known and established. However there are still companies for which emissions accounting is somewhat unfamiliar. One reason for the increased need for emissions calculation is the EU’s Corporate Sustainability Reporting Directive (CSRD). It will make reporting and emissions calculation mandatory, at least for large listed companies.
Following the Omnibus I proposal, the reporting obligations of other companies remain uncertain. However they cannot breathe a sigh of relief just yet. It is likely that, as part of the value chain of another company covered by the CSRD, such companies will also be asked to provide information on their emissions and sustainability.
The Greenhouse Gas Protocol (GHG Protocol) standards, which are used worldwide, enable companies to calculate, report, and monitor their greenhouse gas emissions. The GHG Protocol also serves as the basis for greenhouse gas emissions calculations in accordance with the CSRD and ESRS E1 standard.
Where does the calculation of Scope 1-3 emissions start?
All emission calculations start – or at least should start – with defining the objective and scope of the calculation. What do we want to calculate and why? And what will the results be used for? In CSRD-compliant calculations, the scope is defined according to the company’s operational management. However if CSRD-compliant reporting is not yet relevant, it is also possible to only include the operations of a specific business area or geographical location in the calculation, for example.
The next step is to identify the company’s emission sources. They are divided into Scope 1, 2, and 3 categories in accordance with the GHG Protocol. Scope 1 consists of direct emissions from the company’s own operations. Those are emissions from the company’s own energy production as well as emissions from vehicle fuels and refrigerants. Scope 2 emissions are indirect emissions from the company’s operations and consist of energy purchased by the company, such as electricity and district heating.
Scope 3 is an emission category previously recommended by the GHG Protocol and soon to become mandatory under the CSRD. It includes emissions from a company’s other purchases and the entire value chain. Scope 3 is often the most significant emission category, as for many companies the most significant emissions are caused by purchased products and services. In total, the Scope 3 emission class includes 15 categories. You can learn more about Scope 3 calculations here.
Reliable emission factors ensure the best calculation results
Usually, the most time-consuming part is collecting the initial data and selecting the emission factors, or rather finding them. It is worth setting aside plenty of time for data collection, especially for the first calculation. This is because the data usually has to be compiled from many different sources, like landlords, suppliers, and transport companies. Data collection for subsequent calculations is usually smoother, as you already know where to obtain the data. The data collection process can also be improved and, at least to some extent, automated.
The input data should be as accurate as possible and based on physical quantities rather than Eurodata. However, when calculating emissions for the first time, the calculation is often based on Eurodata. That is the case especially for purchased products and production goods in scope 3. Euro-based factors do not typically take inflation into account. Therefore the results of a company’s emissions calculation can usually be reduced by using physical quantity-based emission factors. Therefore, in terms of calculation accuracy, it would be advisable to collect the source data based on physical quantities as far as possible. According to the GHG Protocol, spend-based emissions calculation is the last resort that can be used when no other data is available.
Companies calculating their emissions should always check with their product and service suppliers to see if they have primary data on the emissions of the products and services they purchase. For example, many manufacturing companies have pre-calculated emission factors for the products they manufacture.
If primary data is not available, the best possible and most reliable emission factors should be used in the calculation. The choice of emission factor is crucial for the accuracy of the results in emission calculations. The internet is full of different emission factors. The challenge lies in determining, for example, the timeliness, country-specificity, and calculation method of the factor. Does the emission factor include only emissions during use, emissions during manufacture, or emissions throughout the entire life cycle?
What happens after scope 1-3 emissions have been calculated?
After performing the calculation, the uncertainty of the calculation must be assessed. The uncertainty of the results is caused by, among other things, the limitations and assumptions made in the emission calculation, the accuracy of the source data, and the reliability of the emission factors. All uncertainties should be recorded in a report, which also reports the results of the calculation. A well-prepared report makes it easier to carry out emission calculations in subsequent years. The report can be used either for internal company purposes or, for example, for external stakeholders. Companies often have the results of their emissions calculations and reports verified by an external party in order to improve the reliability of the results.
Calculations in accordance with the GHG Protocol require emissions monitoring. Therefore, companies must continue to monitor their emissions through emission calculations and, if they wish, set emission reduction targets. One way to set science-based emission reduction targets in line with the Paris Climate Agreement is through SBTi (Science Based Target). We have discussed that in more detail here. Emissions monitoring and setting emission reduction targets are also an essential part of the requirements set by the CSRD Directive.
OpenCO2net’s experts are here to help your company with climate work. We calculate companies’ scope 1-3 emissions as part of our consulting services and offer a comprehensive range of tools to support emissions calculation and monitoring. Our tools are available on our OpenCO2net platform and are based on our comprehensive and up-to-date OpenCO2 emissions database, which has been validated by our experts. The OpenCO2 emissions database provides detailed background information on each emission factor, such as life cycle stages and greenhouse gases included in the factor.
