Carbon dioxide and other greenhouse gas emissions make our planet warmer by trapping heat and causing climate change, which has many catastrophic effects. Rising temperatures can result in increased flooding, habitat loss, higher sea levels, and more.
As a business, it’s up to you to make changes and reduce your business carbon footprint. You can make a difference, but first, you must understand how to calculate your carbon footprint.
In this guide, we’ll teach you the biggest problems in terms of emissions, why you should take ownership, how to calculate your carbon footprint, and much more. Start making a difference today by taking these steps.
The SEC and Risk Information for Investors
The Securities and Exchange Commission (SEC) now wants companies to disclose information about any climate-related risks that likely will have an impact on their business. Additionally, the proposed rule would require companies to disclose their climate goals and any plans they have to reduce risk. Finally, businesses should report their greenhouse gas emissions.
The purpose of this proposed disclosure is to inform investors and provide them with reliable information that can help guide their investing decisions.
Climate-related risks can affect your company’s performance, financial situation, and reputation. However, a transition to a lower carbon business can improve your reputation and make your company more appealing to investors.
Compliance would be based on a phased-in approach, including implementing proposed rules for mandatory reporting of scope 1, scope 2, and scope 3 emissions according to the standards of the Greenhouse Gas Protocol.
How to Calculate a Carbon Footprint
First, what is a carbon footprint, and how can you begin to calculate it? Transitioning to a lower carbon business requires knowing where you currently stand.
A corporate carbon footprint is a measurement of a business’s greenhouse gas emissions (GHG). Larger carbon footprints have a bigger impact on the environment.
The primary greenhouse gasses include:
- Carbon dioxide
- Nitrous oxide
- Methane
A corporate carbon footprint is also defined by how much control a business has over a particular source of emissions. There are direct greenhouse gas emissions and indirect. There are also emissions across the business value chain from upstream suppliers to downstream distributors.
Scope 1: Direct GHG
Scope 1 or direct greenhouse gas emissions are any sources of emissions that are owned or controlled by a business. That could include office buildings, manufacturing facilities, vehicle fleets and more. For example, a business generates carbon dioxide when it burns natural gas in its furnace to heat its office building. Or a factory releases carbon dioxide as a byproduct of its manufacturing process.
Scope 2: Indirect GHG
Scope 2 emissions occur when a business uses energy that is provided by another company where greenhouse gas emissions are generated. Electricity is the most common Scope 2 emissions. This also includes heat, cooling, or steam that is delivered to the business by another company.
Scope 3: Emissions Across the Value Chain
Other indirect emissions can come from sources the business doesn’t control but are related to its activities.
This primarily relates to the business’ supply chain, such as upstream transportation of raw materials to a manufacturing plant or downstream distribution of products to customers. However, it can also include employee commutes, business travel, and outsourced jobs.
Here are some more examples:
- Waste generated by upstream activities
- Emissions from use of products sold
- Product end-of-life disposal
- And more
It might surprise you to find out that most of a company’s greenhouse gas emissions fall into this category. That’s because the combined activity of employees, suppliers, partners and customers driven by the business can have substantial carbon emissions.
Using a Carbon Footprint Calculator
Now that you know more about where emissions come from and what direct and indirect GHGs are, you can take the next step—using a carbon footprint calculator.
It’s difficult to calculate emission numbers on your own. Using a professionally managed carbon footprint tool is much easier.
Why Take Ownership of Emissions?
Reducing your business carbon footprint is a journey that takes time and commitment. It means establishing a yearly process to collect data, calculate emissions, reduce emissions over time and offset what you can’t eliminate. So why should companies disclose their carbon emissions? How do climate-related risks and strategies affect a business anyway?
For one, market participants and investors understandably have concerns about climate-related risks, and greenhouse gas emissions are the primary cause of climate change. As the world learns more about climate change and more people move to take action, eyes will be on your company.
What are your plans, and how are you taking steps toward achieving a carbon-neutral business?
Carbon emissions are a hidden risk for investors. When companies don’t disclose this data, investors have no way of knowing if a business has an underlying carbon emission issue.
How to Reduce Your Carbon Footprint
Once you have estimated you carbon footprint and you understand the importance of disclosing this information, what now?
Next, companies must create a plan to reduce carbon emissions over time. For most businesses, emission reduction involves operational changes over many years. This includes things like making energy efficiency improvements (LED lighting, building envelope, building systems), installing solar, converting to an electric vehicle fleet, etc. Carbon emission reduction is the most important step a business can take to reduce its footprint.
Unfortunately, there are limitations to how much and how quickly a business can reduce. In some cases, there are technology limitations. Some manufacturing processes can only use natural gas. Most business need to travel but there is no carbon-free way to fly.
This is where offsetting comes in. Carbon offsetting is the process of neutralizing your remaining emissions by funding projects that reduce carbon in the atmosphere. These projects range from protecting forests so they absorb carbon, to installing systems that prevent methane from leaking out of landfills, to installing solar energy that displaces the need for fossil fuel power generation. When you buy carbon offsets, you ensure that these projects continue to operate and you support the construction of new projects.
How Can Companies or Products Be Carbon Neutral?
Achieving full carbon neutrality for a company or a specific product is an extensive effort. If you want a product to be carbon neutral, you need to complete a full cradle-to-grave lifecycle assessment of that product, reduce emissions wherever possible and then offset all remaining emissions across the product lifecycle. That includes everything from raw materials extraction to manufacturing to distribution and final disposal.
Achieving carbon neutrality for an entire business is even more challenging. It involves a full Scope 1, 2 and 3 accounting of all carbon emissions for the entire business.
Carbon reduction is a journey that takes time. The end goal is carbon neutrality but the steps to get there must be incremental and practical. For instance, many companies start by achieving carbon neutrality for Scope 1 and 2 emissions only. Or some companies start by addressing their largest single source of carbon emissions. The most important achievement is to take a new step forward every year.
Let Us Calculate and Reduce Your Carbon Footprint
Understanding emissions is one thing, but taking steps toward reducing your carbon footprint is another. You can do so by calculating your emissions, pinpointing areas that need addressing, starting to conserve, and then offsetting emissions that remain.
Why use Terrapass? We only purchase carbon offsets that have been certified and verified by the industry’s top independent registries, and our calculators align with GHG protocol methodology.
Get started with our calculator today, or reach out to us with questions. We’d be happy to tell you more about what to expect during the process and how we can help.
