Measuring your company's greenhouse gases (GHG) has become a common activity over the last 5 years. Many of my clients have embraced green reporting because their customers are favoring green suppliers. Surprisingly, in the United States, this factor is a greater motivator than legislation; in fact, the United States has very little GHG legislation compared to that of many other countries.
If companies want to say they are green, they need to document their GHG inventory and other environmental performance measures (volume of recycling, etc.). From a competitive strategy standpoint, there is another benefit for those companies who choose to implement GHG measurement early. If future legislation affects them, these companies will be in a better position to manage GHG emissions if they have already been measuring them for some time.
Some industries are now required to report their GHG emissions, and the first reports covering 2010 emissions will be filed in 2011. In addition to emissions-heavy industries, the EPA is requiring reports from any facility that emits over 25,000 tons of “Direct, Stationary Emissions,” which are those that occur when a company combusts fuels on-site (such as boilers and coal- or natural gas-fired electricity generators). According to EPA estimates, roughly 15,000 U.S. facilities will be affected by this new regulation.
How Can You Measure?
Several tools from different organizations are available to quantify your GHG emissions. Because all of these tools must comply with the Kyoto Protocol, they are very similar regardless of which organization supplies them.
Examples include the ISO Standards and the General Reporting Protocol guidelines from TheClimateRegistry.org. These guideline documents are analogous to Internal Revenue Service guidelines for reporting your taxes. In essence, if you follow the guidelines (or have a consultant do it for you), you should be able to satisfy the reporting requirements.
If your concern is with the current EPA regulations alone, then you need only worry about your emissions from stationary combustion sources. However, if you want to report a complete GHG emissions inventory, you will have to include emissions from your fleet (Mobile Source Emissions), as well as emissions from refrigerant leaks and other “process emissions.” All such “Scope 1” emissions involve assets that your company owns.
In any GHG inventory that is Kyoto-compliant – and Kyoto is the primary compliance model worldwide – a category of emissions called Scope 2 is also typically included. These Scope 2 emissions are not created directly by assets that your firm owns but rather are “indirect emissions,” often from the electricity your facility uses. In this case, the emissions occur at the electric generator, which is typically owned by your utility. For many offices and light commercial businesses, Scope 2 emissions will comprise more than 75 percent of the GHG inventory.
A final category of emissions known as Scope 3 involves emissions from activities that are related to your firm but from assets that you don’t own and may have no control over. For example, if your company assembles a product that has parts manufactured by other companies, the emissions from these companies would be called Scope 3. Another example would be the emissions from private cars that are driven by students to get to a university campus. These emissions occur because the university exists, but the university really has no control over the emissions of its students’ cars.
Should You Report?
Unless your company is a large utility or has enough emissions to exceed the EPA limit, most formal reporting is voluntary. As a result, companies seeking a strategic advantage may measure their emissions but not report them in a formal and public procedure, looking instead to analyze the emissions data for internal improvements.
If a company wants to report its emissions but is not required to do so, it can report its GHG inventory to a “registry,” a nonprofit entity, or even a trading platform that keeps the data. A verification step performed by a third party is usually required. An analogy is when a company reports its income and a third-party accountant checks the books to make sure that they are accurate
Once a firm is providing formal reports about its emissions, it may choose to communicate annual improvements as part of its marketing efforts. In addition, by incorporating reporting data into the decision-making process, a firm can have better accounting for future regulations. Many clients have added “emissions impact” to criteria like financial impact and ROI when evaluating future projects. In other words, a future project’s approval may depend on the impact on emissions.
It is hard to predict future requirements for emissions reporting, but it is likely to become more extensive. The Securities and Exchange Commission, several states, and some industry associations have asked some companies to begin reporting so that consumers can better identify risks associated with these companies.
Once you have quantified your emissions, your next step is to manage or reduce them. This will be the subject of next month’s newsletter.
Eric Woodroof, Ph.D., is the Chairman of the Board for the Certified Carbon Reduction Manager (CRM) program and a board member since 1999 of the Certified Energy Manager (CEM) Program. He is a strategic advisor, corporate trainer, keynote speaker, and founder of ProfitableGreenSolutions.com.