Calculating your business' carbon footprint

25 Feb 2008Archived News Energetics in the News

Published: In the Black Magazine - by Deborah Tarrant - Dr Mary Stewart, Principal Consultant; Sustainability, Energetics Pty Ltd talks about how the marketplace will force businesses to get their environmental house in order if regulation doesn't.


Once running an environmentally friendly business was simply a socially responsible way to behave. It was feel-good stuff that enhanced a business’ reputation, warmed the hearts and minds of customers and shareholders and proved a handy promotional angle as well. But it was optional. Not anymore. Climate change and environmental sustainability made a mega-leap over the past year or so. Its urgency was highlighted by a combination of frightening science, heavyweight spokespeople and an alignment of globally powerful governments committed to cutting greenhouse gas (GHG) emissions – in particular carbon dioxide (CO2) – in what may be an uncomfortably tight timeline.

Suddenly environmental sustainability is an imperative for all businesses, biting at their strategic cores with the threat of soaring energy prices, along with the need to be accountable for carbon emissions and to manage the potential risk of not minimizing greenhouse impact. For big business and large emitters, regulation is a matter of months away, with the National Greenhouse and Energy Reporting Act 2007 requiring them to report Scope 1 and Scope 2 emissions from 1 July. But the responsibility doesn’t stop there. Small and medium-sized enterprises (SMEs) in all sectors can’t afford to drag the chain, either.

There’s not only the issue of ensuring a healthy, habitable world for future generations, but also some serious commercial realities to consider. As part of the supply chains of bigger businesses, smaller players will also need to minimise their GHG emissions, if not strive to be carbon neutral. Although regulation is not currently forcing them to get their environmentally sustainable houses in order, the marketplace will, insist the experts.
In a short time, all businesses will need to know their carbon footprints or run the risks of others not wanting to do business with them and putting their shareholders and customers offside. What’s more, companies will need to know not just the impact of their operations but also the carbon footprint of the products and services they are selling as well, so purchasers can factor these into their own carbon calculations.

There’s an uncertain aspect to these footprints right now. While vitally important, they’re a little smudged at the edges. As Australia moves closer to having its own emissions trading scheme, debate continues over the right way to measure a carbon footprint. In other parts of the world, esteemed bodies such as the World Business Council for Sustainable Development and UK-based The Climate Group are still exploring models towards establishing a global standard.

There’s no shortage of calculators, mind you. The number available online is only outstripped by the number of consultants offering to help organizations to calculate and minimise carbon emissions so that they can go carbon neutral – or even positive!

Meanwhile, organizations are left to deliberate the best way to measure and record their vital carbon statistics. “Several methodologies are being used, and while they all talk about the same set of emissions, they differ in their boundary definitions,” explains Dr Mary Stewart, a former chemical engineering academic who is now principal consultant with Energetics, a firm that consults to government and business.

There is life-cycle assessment, which takes the cradle-to-grave approach (covering the emissions impact of a product and the function it is designed to perform for its entire life). Economic input/output analysis focuses more on the emissions immediately within a business’ control. Most commonly used is the integrated input/output method. This includes some of the life-cycle approach but makes some of the bigger picture emissions, which prove more challenging to quantify, optional.

An advocate of the first method, Stewart recommends looking at the entire carbon footprint. “You can’t be selective about what you are looking at because you might leave out the really big bits,” she insists. Driving her rationale is the fact that different business sectors are dominated by different types of emissions. “For example, those in services industries, such as accounting firms and other consultancies, will find most of their greenhouse gas emissions come from taxis, transport, flights and outsourcing – what the Greenhouse Gas Protocol calls its Scope 3 emissions – which are not associated directly with how they do business.” On the other hand, manufacturing businesses are dominated by Scope 1 and Scope 2 energy emissions. (See box on page 33.)

Gavin Pereira of the Sydney-based Carbon Reduction Institute says calculation of a footprint generally runs over a financial year. “Essentially it’s carbon accounting,” he says. Although carbon footprints typically have fallen under the umbrella of a business’ corporate social responsibility or sustainability department, they naturally rest with accounting departments with other risk management responsibilities, he argues.

On the surface, the task of calculating looks easy enough. However, there are immediate complexities such as the fact that greenhouse gas emissions actually differ between Australian states and territories due mainly to the fuel types and sources used to generate electricity. Total GHG emissions vary depending on where operations are located. For example, Tasmania has comparatively low electricity emissions factors because most of its electricity is sourced from hydro-electric power – a relatively low GHG-emitting power source.

Victoria has higher electricity emissions factors because most of its power is derived from brown coal. Businesses that have operations in more than one state need to calculate for each jurisdiction. For businesses opting for the DIY approach, the AGO offers verification (on a user-pays basis) from a list of accredited independent consultants.
However, given the potential for confusion, error and complication, many are making expert consultants their first stop. There’s the risk of double counting on your footprint, for instance, or the question of what happens when a business is part of a joint venture. There’s also the issue of where suppliers have begun and ended their calculations.
Ian Porter, a former Victorian government policy analyst through the pioneering years of environmental sustainability who now consults with The Nous Group, suggests despite the plethora of options out there, using a calculator that draws on AGO methods workbooks makes sense because inevitably measuring carbon emissions will hark back to international protocols. In terms of compliance at least, they provide assurance that emissions are measured correctly.

Apart from reputable methodology, another selection criterion for a carbon calculator, suggests Porter, is choosing one that allows data to be changed. That way, if you wanted to change the premises you work in or switch vehicles from petrol to LPG, you can see the emissions impact, he says.

A deterrent for those working with the more extensive life-cycle model, which has been an integral part of policy development in the European Union, is that insufficient data is currently available in Australia.

Under life-cycle assessment if you are, for example, a soft drink manufacturer, beyond your own immediate energy use, inventory and emissions, you need to calculate the emissions associated with growing and transporting the fruit and other ingredients, keeping it cold on the way and those associated with producing the bottles, caps and labels. Then there’s shipping and distribution and retrieving the bottle through a recycle network or waste management. The mind boggles, which is why the tendency to limit the boundaries has found favor.

Porter believes SMEs should draw a line around their own operations to calculate their footprint. Using the soft drink example, he says the manufacturer’s responsibility starts when the fruit and other ingredients come through the soft drink factory door, includes the energy used turning them into soft drink and the fuel to deliver it to vendors. “But what of the refrigerator they supply to the vendor to keep it chilled, whose responsibility is the energy used in that?” he ponders.

There are still grey areas, Porter admits. “Although, if a manufacturer is buying apples and oranges from a grower or distributor in the Riverina then they should be reporting their carbon footprint.”

Stewart argues there is significant risk in under-reporting that’s being increasingly recognized. Drawing the boundary for calculations is a value judgment, she says. “The challenge for companies when choosing a consultant is in understanding those boundaries because that’s an expert judgment call.”

Many companies already have made sweeping statements about going carbon neutral without realizing what’s involved, she reports. And it’s no small task. Stewart puts a ballpark figure for calculating carbon footprints and achieving the changes required to become carbon neutral at around three years for larger organizations, and two years for smaller ones. The inherent message is to move fast. The period of time required depends on the maturity of the company’s systems.

At the end of the process, it pays to have something to show for it. A carbon footprint may be delivered in emissions-per-employee, turnover or product. Opportunities to show carbon credentials are plentiful. Consider product logos and Greenhouse Friendly certification through membership of the federal government’s Greenhouse Challenge Plus program, certificates for carbon neutrality or offsetting emissions through private consultants such as the Carbon Reduction Institute, with specialist certification in some sectors, where tourism is leading the way. Certificate or not, independent verification is advised.

A stumbling block in self-audit, cautions Porter, is that it doesn’t consider what can be changed. There’s a case for bringing in energy auditors who have an engineering background, he says. “While there are tools that will allow office managers to calculate GHG emissions – and it could be as simple as taking energy and gas bills and multiplying greenhouse emissions by kilowatt hours – that doesn’t provide advice to the management team on improving the status quo,” he says. “The carbon footprint is a powerful tool to jog the thinking of senior management teams about business strategy.”

Businesses should be thinking about whether their GHG emissions are sizeable enough to cause them – and the environment – damage and may need a combination of consultants to deal with the ramifications. The strategy to reduce emissions or go carbon neutral may mean not only changing energy sources, but also the products manufactured and the processes used. A business strategist may be required to put that in context in the marketplace.

If calculating and evaluating the impact of the carbon footprint seems a substantial undertaking, it’s wise to keep in mind that it’s just one of the adjustments required to maintain a competitive edge in the new climate change revolution. Broader ecological footprints cover the entire environmental impact of a business, carbon and beyond, and are already on the way.

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