- Your carbon footprint is an important first step to understanding your corporate’s impact on the climate but it’s not a well-understood concept.
- We answer some of the questions surrounding carbon foot-printing and how companies can reduce their carbon footprint.
Businesses across the globe are getting on-board in the fight against climate change. We’re seeing some positive trends with companies setting ambitious targets to use 100% renewable energy or even remove carbon from the atmosphere! Some businesses may not be that far along in their sustainability journey and wonder how they can play their part in moving to a low carbon world. There are many ways to go about this but the answer will always start with your corporate carbon footprint.
What is a carbon footprint?
It's always good to start with a definition! The Oxford Dictionary defines a carbon footprint as “the amount of carbon dioxide released into the atmosphere as a result of the activities of a particular individual, organisation, or community.” At its basic level, the definition works. But it could be a bit more comprehensive. A carbon footprint includes both direct and indirect emissions and generally, it’s given that other greenhouse gases such as methane are included in the footprint as well – when converted to a CO2 equivalent amount.
Why is carbon footprinting important?
Footprinting is an important first step to reducing emissions within a company. Before a company can set targets for carbon reduction, they need to know how much carbon emissions they produce and where they come from. Once a corporate carbon footprint is created, it can be monitored and updated on an annual basis to track progress.
As to why it's important, there are several reasons why it’s a good idea to do this:
- The current climate crisis – We can’t continue with business as usual. We need to take action now to reduce our collective impact on the climate and protect future generations.
- Cost savings – Calculating a carbon footprint can provide some effective metrics for a business and will usually identify areas for cost savings. Changes in carbon emissions from year to year can also provide insight into what is happening on the ground in a business.
- Mitigate Regulatory Risk – Governments around the world are making legislative changes to fight climate change. This means increased potential for higher carbon taxes or the introduction of taxes where there was none before. Companies need to be aware of the financial risks associated with increased carbon taxation, which makes corporate carbon footprinting essential.
- Public Image – The world is waking up to the issue of climate change. People are distancing themselves from companies that lag behind with climate change ambition, and are siding with companies that are more sustainable. There is a growth in interest for Environment, Social and Governance (ESG) financing highlights and this trend is expected to continue in the future. Companies that don’t monitor their carbon footprint and take actions to reduce it, risk being left behind by their customers and investors.
In our eBook, Measure, manage, and reduce your organisations' carbon impact, learn how FutureproofedBusiness can help your business’s sustainability goals, how our cloud-based tool works, how to develop your carbon reduction roadmap, and more. Download the ebook.
How is a carbon footprint calculated and how can it be reduced?
The calculation of a carbon footprint will involve gathering data from a variety of sources. To make it easier, several organisations created carbon standards to help calculate emissions but the most used and internationally acknowledged standard is the Greenhouse Gas (GHG) Protocol.
Under the protocol, a company’s carbon emissions are divided into three categories (or scopes). Each scope accounts for a different set of emissions. The graphic below gives an idea of what is counted in each scope.
To understand this better, let's take a simple example using the GHG Protocol methodology. Assume a carbon footprint is being calculated for a pharmaceutical company. They’re in the news a lot lately so it seems appropriate! We’ll also look at some measures that can be taken to reduce a corporate carbon footprint in each example.
Scope 1 - Direct
Scope 1 emissions are direct emissions originating from sources owned or controlled by the reporting company. It includes:
- Company Facilities: This covers emissions at a company’s sites including offices, plants, and other buildings that they may own. For a pharmaceutical company, the main emissions here will relate to the combustion of fuel on-site at its manufacturing plants. The burning of natural gas for steam or process heat will likely account for the majority of emissions. Fugitive emissions from some manufacturing processes or refrigeration equipment may also need to be tracked.
Action Examples: i) Reduce fuel usage by implementing on-site energy efficiency measures or electrifying some heat loads. ii) Investigate for fugitive emissions leaks in equipment and complete repairs.
- Company Vehicles: This covers emissions as a result of a company’s fleet transporting goods or employees travelling in company owned cars. For a pharmaceutical company, emissions could come from the transport of products using the company owned fleet. The company could also have a significant sales fleet that will be burning gasoline or diesel on their journeys.
Action Examples: i) Switch to a fleet of electric vehicles if renewable power is available. ii) Make greater use of digital technology to conduct business reducing the need for travel.
Scope 2 - Indirect
Scope 2 is a special category that includes indirect emissions originating from the production of purchased electricity, steam, heating, and cooling, from sources not owned or controlled by the reporting company.
- Purchased Electricity, Steam, Heating & Cooling: This covers energy resources that are purchased from a third party such as a power and gas utility. The fuel to create the energy has been combusted by the third party and delivered to the company. Using our example again, the main emissions covered here for a pharmaceutical company will be due to electricity delivered to its sites from the power grid. Some companies will also outsource the delivery of steam, heating and cooling to third parties so those emissions are also covered here as well.
Action Examples: i) Switch your electricity use to renewable power in the form of a Power Purchase Agreement (PPA), green supply contract or by purchasing renewable energy certificates. ii) Reduce fuel usage by implementing on-site energy efficiency measures or electrifying some heat loads.
Scope 3 - Indirect
Scope 3 emissions are all other emissions that happen as a result of the reporting company's activities, but from sources that are not owned or controlled by the company. They are divided into upstream emissions, related to purchased goods or services by the company, and downstream emissions, related to the handling and use of the products and services sold by the reporting company.
To keep things simple, we’ll just look at the top 3 areas in both upstream and downstream where emissions could occur for a pharmaceutical company.
Scope 3 - Indirect (Upstream)
- Purchased goods and services: This covers emissions related to raw materials and services that are procured by a company in order to produce a final product. For a pharmaceutical company, this will be a significant contributor to Scope 3 emissions. Examples would be chemical raw materials procured from a third party for use in medicines or in packaging.
Action Examples: i) Source lower carbon raw materials from suppliers. ii) Partner with suppliers with strong climate ambitions and carbon reduction goals.
- Capital goods: This covers emissions from the production of capital goods purchased or acquired by the company in a given year. For example, if a pharmaceutical company purchases and installs a new chiller, it will need to account for the emissions created in the manufacturing of the product.
Action Examples: i) Reduce the need to regularly replace capital goods by keeping equipment maintained to a high standard.
- Employee Commuting: This covers emissions related to the use of fuel when employees are commuting to and from work. This will largely be as a result of gasoline or diesel fuel combustion in cars and trains.
Action Examples: i) Encourage employees to walk, cycle or use public transport for commuting, where possible. ii) Install EV charge points at offices and plants to encourage employee uptake of electric vehicles.
Scope 3 - Indirect (Downstream)
- Transportation and Distribution: This covers emissions related to the distribution of a company’s products to their final destination. This could be through courier and logistics companies using rail, road, and sea transport to move goods.
Action Examples: i) Use low-carbon couriers and logistics companies to transport your goods to the end consumer. ii) Identify ways to reduce the transport cost of goods such as using less or light forms of packaging.
- Use of sold products: This relates to the use of products sold by a company. A pharmaceutical company could be selling products such as medicines, vaccines, inhalers, and consumer goods that will all have a carbon footprint attached to their use. For example, vaccines might need to be kept chilled by the user once purchased which will require the use of energy.
Action Examples: i) Create innovative low carbon ways for consumers to use your products. ii) Set high energy efficiency standards for products sold.
- End of life treatment of sold products: This covers emissions related to the end of life treatment of products sold by a company. For example, when products are used, emissions can be saved through the recycling of components within the product.
Action Examples: i) Setup easy to use recycling schemes for customers to avail of. ii) Ensure that materials used and products are designed with recycling in mind.
What companies are reducing their carbon footprint?
The number of companies planning to reduce their carbon footprint is growing. Companies are voluntarily signing up to global initiatives such as the Science Based Targets initiative (SBTi) – whereby a company sets carbon targets that align with the goals of the Paris Agreement. Over 400 companies have now committed to Business Ambition for 1.5°C and the number signing up is growing each year. Companies are also committing to initiatives related to the Sustainable Development Goals (SDGs) outlined by the UN.
Corporate giants like Apple are leading the way in the reduction of their carbon footprint. And Futureproofed Business customers like Recticel, Deme Group, Van Hoecke, Torfs and Colruyt have also made strong progress.
The extent of carbon footprinting that a company may need to do can be intimidating. Scope 3 emissions can be especially difficult to quantify and navigate. To make things easier, we developed the Intelligent Carbon Management Tool.
The platform makes it easy for a company to track and monitor their carbon footprints on a regular basis, identify areas to reduce emissions, and ultimately achieve their sustainability goals - with Futureproofed’s expertise and guidance at their side.
Interested in our early bird program? Get in touch.
Stef is our Futureproofed Business Sustainable Strategy consultant, involved in the development of new tools and methodologies to help companies seize the opportunities sustainability offers. He is one of the many enthusiastic cyclists on our team, and has caught the outdoor bug, and loves to travel.
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