Understand the CO2 terms
Emissions calculation includes several different terms such as CO2 equivalent. In this section we have clarified the meaning of the most common terms.
What is a carbon footprint?
The carbon footprint describes the climate load caused by a specific configurable entity. The carbon footprint can be calculated, for example, for a company, municipality, investment, product, or service.
The climate load is caused by the release of greenhouse gases such as carbon dioxide (CO2), methane (CO4), and nitrous oxide (N2O) into the atmosphere. The carbon footprint is expressed in terms of carbon dioxide equivalents, considering the different global warming effects of different greenhouse gases.
When determining the carbon footprint, all direct and indirect emissions during a life cycle associated with a specific entity need to be taken into account. For example, in the case of a company or municipality, the carbon footprint can be determined per selected unit of time, such as a year.
The carbon footprint is expressed in terms of mass, either in tonnes, kilograms, or grams.
What is an emission factor?
The emission factor describes the amount of emissions generated with the quantity of product or service produced. Emission factors are used to determine the carbon footprint.
Emission factors can be of many types. They may describe the use phase or life-cycle emissions, include only carbon dioxide emissions or all greenhouse gas emissions in CO2 equivalents, and may sometimes be average values or represent a specific period of time. For example, the emission factor for electricity generation is often expressed in g CO2/kWh and the emission factor for food in kg CO2eq./kg.
The emission factor of a product or service is often referred to as the carbon footprint. To be precise, this is only the case when the emission factor describes the amount of life cycle greenhouse gas emissions in terms of carbon dioxide equivalents.
What is a carbon handprint?
The carbon handprint describes the positive climate impacts of a particular solution throughout its life cycle. A positive carbon handprint arises from the fact that using the solution provided reduces the carbon footprint of someone else (usually the customer). On the other hand, reducing the carbon footprint of one’s own operations does not increase the carbon handprint.
The carbon handprint of the same product or service may be different depending on the situation, for example, in different markets. Therefore the carbon handprint is always determined in relation to the selected baseline.
VTT and LUT University have developed a carbon handprint calculation methodology and published a guide. According to the guide, a positive carbon handprint can be achieved, for example, by improving material or energy efficiency, replacing non-renewable materials or energy with renewables, extending product lifetime, reducing waste and reducing losses, or capturing and storing carbon dioxide. The carbon handprint can be used, for example, to communicate the climate benefits of a product or service to customers or other stakeholders.
What are greenhouse gases?
Greenhouse gases absorb the thermal energy released from the earth and cause global warming. The atmosphere contains natural greenhouse gases such as water vapor (H2O), carbon dioxide (CO2), and methane (CH4). Human activities, such as burning fossil fuels and industrial processes, also release carbon dioxide and other greenhouse gases into the atmosphere.
What is a CO2 equivalent?
The carbon dioxide equivalent describes the combined global warming potential of different greenhouse gas emissions.
Different greenhouse gases have different global warming potentials (GWPs). The Intergovernmental Panel on Climate Change (IPCC) publishes GWP indices for greenhouse gases in its assessment reports.
The GWPs of other greenhouse gases are proportional to the global warming potential of carbon dioxide, set at 1. For example, the global warming potential of methane relative to carbon dioxide over 100 years is 28.
What does carbon-neutral mean?
A carbon-neutral company, product, or service does not burden the climate. In practice, this means that the carbon footprint of a given entity has first been determined and reduced by usable means. Emissions that cannot be reduced by own measures are offset by participating in emission reduction projects elsewhere or purchasing emission reduction units from the market. When offsetting emissions, it is essential to ensure that the realization of emission reductions is reliably verified.
What is CSRD?
The EU’s CSRD (Corporate Sustainability Reporting Directive) replaces the previous Non-Financial Reporting Directive (NFRD). With the CSRD, more companies are required to report their sustainability data more broadly and in greater detail. The directive applies to all large companies, listed small and medium-sized enterprises (SMEs), as well as small credit institutions and banks.
In the future, sustainability reporting will follow the ESRS standards prepared for the directive. There are 12 European Sustainability Reporting Standards, and among these, ESRS 2 General disclosures is a mandatory standard for all companies subject to the CSRD. For other standards, companies assess which standards are relevant to their operations using a double materiality analysis. In addition to the standards on general company information, there are five environmental impact standards, four social impact standards, and one governance-related standard.
What is ESRS E1?
ESRS E1 Climate Change is a European Sustainability Reporting Standard prepared for reporting under the CSRD directive. ESRS E1 Climate Change is the first of the environmental standards and is material for many companies according to the double materiality analysis. The standard includes reporting requirements related to climate change mitigation and transition, as well as emission accounting requirements covering the company’s entire value chain, including scope 1, scope 2, and scope 3 emissions.
Greenhouse gas emission accounting according to the standard is based on the GHG Protocol standards but it also introduces some clarifications and additional requirements. Scope 2 emissions must be calculated using both market- and location-based approaches. Additionally, the calculation of scope 3 emissions will become mandatory for all companies subject to the CSRD. Total emissions must be reported using both market-based and location-based approaches, and the company must also report its emissions intensity, meaning the total emissions in relation to its revenue.
What is SBTi?
SBTi (Science Based Targets initiative) is an international initiative that aims to help companies set science-based climate targets in line with the Paris Agreement and reduce their emissions. The CSRD also sets requirements for companies to establish emission reduction targets, and emission reduction targets in line with the SBTi also meet the requirements of the CSRD.
When a company commits to the requirements of the SBTi, it can choose either a short-term target or also commit to a net-zero target. The short-term target covers the next 5-10 years, during which the company commits to reducing emissions in line with the 1.5-degree target. For the net-zero target, the target year is typically between 2040 and 2050, depending on the industry in which the company operates. With the net-zero target, the company commits to reducing its emissions by more than 90% compared to the base year. The SBTi and emission reduction targets vary slightly by sector, and specific guidelines and targets exist for certain energy-intensive industries. For SMEs, committing to the SBTi initiative is simpler and faster than it is for larger companies.
What is LSME?
ESRS LSME or in its shorter form LSME is a specific sustainability reporting standard for listed small and medium-sized enterprises, small banks and captive insurers. The LSME standard was developed by EFRAG and is a simplified version of the ESRS developed for the CSRD. The LSME standard is in draft form and the final version will be available in 2026 at the latest, when listed SMEs and small banks and captive insurers will be covered by the CSRD.
From an GHG emission calculation perspective, the requirements of the LSME standard are similar to those of the ESRS E1 standard for emissions calculation for larger companies. SMEs covered by the CSRD will report scope 1 and 2 emissions from their own activities and scope 3 emissions from their own value chain, in the same way as other companies covered by the CSRD. In addition, scope 2 emissions should be calculated with market- and location-based method and total emissions should be reported using both methods.
What is VSME?
VSME is a separate, voluntary reporting standard for SMEs and micro-enterprises that are not covered by the CSRD. The VSME is a simple standard framework, and its content was adopted at the end of 2024. The VSME standard is designed to enable smaller companies that are not covered by the CSRD to respond to the growing demand for sustainability information. The VSME standard consists of two modules, for which companies should report at least according to the Basic module. In addition, a Comprehensive module can be added to the reporting, which includes data points that may be required by banks, credit institutions and corporate clients.
In terms of GHG emissions calculation, the VSME standard requires companies reporting under it to calculate the scope 1 and scope 2 location-based greenhouse gas emissions of their own operations. In addition, the standard also recommends companies to identify their own scope 3 value chain and calculate these emissions if possible.
What is a residual mix?
A residual mix represents the share of an energy supplier’s energy portfolio after the renewable and zero‑emission electricity sold with Guarantees of Origin has been removed.
Is using Guarantees of Origin the same as carbon offsetting?
No. The Guarantees of Origin system is an official EU‑approved mechanism that allows a company to demonstrate the purchase of renewable or zero‑emission energy and therefore report zero market‑based Scope 2 emissions. Carbon offsetting, by contrast, is based on the carbon credits purchased from voluntary carbon markets, and the GHG Protocol does not allow offsets to be counted in a company’s Scope 1, 2 or 3 emissions.
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