Each year, more companies take responsibility for their carbon footprint by making the decision to report on and actively mitigate their greenhouse gas (GHG) emissions. A recent report from CDP, based on 2017 climate change disclosures, confirmed that 89 percent of responding companies have emissions reduction targets. Of this group, 151 innovative companies have committed to set increasingly impactful climate targets in line with climate science. These Science-Based Targets (SBTs) are rooted in data that aligns with the objective of the Paris Agreement: to keep global temperature increase below 2 degrees Celsius.
Crafting an effective strategy to decrease GHG emissions and meet SBTs requires a deep understanding of each of the three emissions categories, or scopes, including how to effectively address and report them. Scope 1, Scope 2 and Scope 3 emissions each impact a company’s GHG profile differently, and call for different emissions-reducing mechanisms.
Each scope has implications for businesses setting SBTs because the targets will differ in type for each class of emissions. Full guidance on GHG emissions reporting can be found in the GHG Protocol Corporate Accounting and Reporting Standard, which is the framework for reporting recommended by the SBT Initiative (SBTi), a joint partnership between CDP, the UN Global Compact, WRI and WWF.
Scope 1 encompasses all direct emissions that result from a company’s operations. These include emissions under a company’s control such as onsite fuel combustion, company-owned vehicles and in-house processing equipment.
Because these emissions are within a company’s direct purview, Scope 1 can be a good place to start when beginning a carbon-reduction journey. Scope 1 can be addressed using a variety of activities. Efficiency upgrades and optimization are a great first step for reducing a company’s controlled emissions on the demand side. Upgrading old equipment to more efficient models, performing LED lighting retrofits and using data-management software that helps monitor and improve the efficiency of operations can reduce the total volume of Scope 1 emissions.
Switching fuels can also be an appropriate mitigation measure, as there may be lower carbon fuels available to replace those currently used. For instance, coal emits more than 200 pounds (90.7 kg) of carbon dioxide per million Btus compared to natural gas’ 117 pounds (53 kg). Biofuels emit even less.
With today's technologies, no company can completely avoid direct emissions. To address those direct emissions that cannot be avoided, companies can use carbon offsets (also known as verified emissions reductions). Carbon offsets are generated from a variety of activities that reduce the volume of GHG emissions entering the atmosphere, prevent emissions from entering the atmosphere in the first place or remove GHG emissions from the atmosphere entirely. Common project types include landfill gas capture, forestry and fuel switching in favor of less carbon-intensive alternatives. When paired in a 1:1 ratio with direct Scope 1 emissions, the carbon offset effectively neutralizes the environmental impact of the GHG.
Scope 2 includes all indirect GHG emissions that result from purchased and consumed electricity, heat, steam or cooling. Though these emissions physically occur at the 3rd-party facility where the electricity is generated, they are driven by (and therefore attributable to) the end user that consumes the energy. Purchased, indirect energy consumption is a distinct category from other indirect emissions because it often represents a considerable portion of a company’s footprint.
Although indirect, Scope 2 emissions are becoming increasingly controllable by companies via green energy procurement and therefore represent a significant opportunity to make reductions.
Companies can use a combination of energy attribute certificates (EACs), onsite renewable energy (sometimes known as distributed generation), power purchase agreements (PPAs), green tariffs, and even carbon offsets in some cases to address Scope 2 emissions. An increasing number of global companies have set aggressive renewable energy procurement targets, sometimes in lock-step with their SBTs, in order to fully mitigate the emissions impact from their purchased, indirect energy.
SBTs for both Scope 1 and Scope 2 emissions should establish concrete emissions-reduction goals tied to what is needed for a company to contribute their proportional share to the less-than-2-degree warming threshold. In addition to setting short-term reduction targets, companies should also project a long-term plan to increase Scope 1 and Scope 2 targets to ensure that they grow with the company over time.
For more guidance on accounting for Scope 2 emissions from electricity use, see this blog.
Scope 3 emissions are more nuanced, as they broadly represent all other indirect emissions from value chain activities. These emissions occur as a result of a company’s operations, but are produced from sources neither owned nor controlled by the company. Examples include emissions generated by suppliers, employee commute and business travel, and landfill waste disposal. Scope 3 emissions are an optional SBT reporting category due to the complexity and difficulty in addressing them. Companies that do, however, have an excellent opportunity to assert leadership in GHG management.
As a result of the additional complexity, when reported on for SBTs, Scope 3 reductions are not required to be science-based, though there are certain criteria set out by the SBTi. Scope 3 reductions can take many forms: replacing business travel with virtual meetings or investing in less GHG-intensive travel options; reducing materials and resources consumed, and sustainably sourcing those that are consumed; implementing zero-waste policies and practices; favoring more sustainable suppliers; and engaging key suppliers on improving their own carbon footprint through efficiency measures, resource reductions, and renewable and clean energy procurement. Like Scope 1, unavoidable Scope 3 emissions may be remedied through the purchase of carbon offsets.
One SBTi signatory that exemplifies innovative GHG management, GSK, uses a custom supplier engagement forum to support over 360 suppliers in improving sustainability and efficiency. The GSK Supplier Exchange delivers informative content and provides a collaborative community to help accelerate emissions-reducing projects. This program will help GSK achieve its goal of a 25 percent reduction in supply-chain emissions by 2020, toward its ultimate goal of reaching carbon neutrality by 2050.
Managing carbon through SBTs and clean energy procurement is not only good for the environment; it is also a way to reduce risks and create new business opportunities. Corporate carbon accounting gives companies a full view of their operations, creates transparency along the corporate value chain, and allows for informed decision making on sustainability matters, while clean energy supply can help companies improve their resiliency and address unavoidable emissions.
To learn more about the process of setting and achieving your company’s own science-based targets, download our new white paper, A New Approach to Climate Leadership: Ensuring Success with Science Based Targets.