Greenhouse Gas Emissions

Key takeaways

  1. When assessing a company’s GHG emissions, make sure to look at the different Scopes (1, 2, and 3), and be critical when evaluating the disclosed information.

  2. Different gases have different effects; therefore, it is essential to evaluate how much of the gas is released into the atmosphere, how long it will last/its persistence, and how strong is its effect.

  3. GHG emissions are an output; however, it is important to include the impact of these emissions in the analysis. This will improve the analysis’ readability and enable readers to rate it easily. For instance, information on how and how much these emissions contribute to climate change, or/and natural catastrophes, or/and biodiversity loss will improve the impact analysis.

  4. Benchmark and compare different companies in the same industry, or, use an industry average to allow the reader to gauge the impact.

  5. Avoid describing a company’s year-on-year emissions, as this leads to analyses about remediation rather than impact.

What are they?

Greenhouse gases (GHG) are gases that contribute to the greenhouse effect on Earth by trapping gases into the atmosphere.

By order of abundance in the atmosphere, GHG are:

  • Water vapour (H2O)

  • Carbon dioxide (CO2)

  • Methane (CH4)

  • Nitrous oxide (N2O)

  • Ozone (O3)

  • Chlorofluorocarbons (CFCs)

  • Hydrofluorocarbons (includes HCFCs and HFCs)


Most of these gases are naturally present in the atmosphere. They are not directly harmful to humans or animals’ health (except ozone (O3) above concentrations of about 0.1 ppm). However, human activity has increased their concentration, and they are creating a warming effect with rippled effects on the environment and society.

Others are pure products of human activity (CFCs, HCFCs & HFCs).

According to the EPA, the impact of these gases on climate change depends on three key factors:

How much is in the atmosphere?

  • Concentration is the quantity of a particular gas in the air—larger emissions of GHG results in higher concentrations in the atmosphere.

  • When measuring GHG emissions, two measures are commonly used:

        1. “CO2 equivalent” units of CO2 (CO2e)

        2. Another measure is the atomic weight, typically as “carbon” 

          However, converting GHGs to kg of carbon is not useful as it does not allow a comparison between different GHGs. 

          Please use CO2e.

How long do they remain in the atmosphere?

  • These gases can stay in the atmosphere for different amounts of time, ranging from a few years to thousands of years. However, these gases remain in the atmosphere long enough to become well mixed, so the amount measured in the atmosphere is equivalent worldwide, regardless of the emissions’ location.

How strongly do they impact the atmosphere?

  • Some gases are more effective than others at warming the planet. For each greenhouse gas, a Global Warming Potential (GWP) has been calculated to reflect how long it stays in the atmosphere on average, and how strongly it absorbs energy. Gases with a higher GWP absorb more energy, per unit of mass, than gases with a lower GWP, thus contributing more to warming Earth.


The IPCC considers 6 GHGs to be relevant for human-caused climate change:

Greenhouse Gas

Global Warming Potential

Carbon dioxide (CO2)

1

Methane (CH4)

25

Nitrous oxide (N20)

298

Hydrofluorocarbons (HFCs)

124 - 14,800

Perfluorocarbons (PFCs)

7,390 - 12,200

Sulfur hexafluoride (SF6)

22,800

Nitrogen trifluoride (NF3)

17,200




Caution
  • “CO2e” (e standing for “equivalent”) takes into account the various greenhouse effects of these gases in terms of warming and lasting. This is a simple unit that agglomerates ALL GHG.
  • Even if the individual warming effect can be mentioned in an analysis, it can be misleading to state that for example, methane (CH4) has 25 times more GH effect than CO2, as this is already accounted for in the CO2e reporting.


Sources:

https://en.wikipedia.org/wiki/Greenhouse_gas

https://www.epa.gov/ghgemissions/overview-greenhouse-gases



SDG choice

Impact assessment

Since the Kyoto Protocol and many mandatory reporting initiatives from governments, most companies disclose their GHG emissions (although not always fully*) in their annual CSR/Sustainability report or sometimes CDP report (you can use it if it is publicly available).

*Often, companies do not disclose their Scope 3 emissions fully. You must be critical in your analysis and go beyond the company’s CSR report. Explain whether their Scope 3 emissions should be higher than reported. For example, a bank reports its Scope 3 emissions as its business travel, commuting emissions, etc. However, it often does not consider the emissions from its investments, which can be carbon-intensive.

💡For fossil fuel companies, Scope 1 and 2 only makes up for 5-10% of their emissions, the rest is their Scope 3 emissions.

When analysing a business’s emissions, you should segment the emissions by the 3 Scopes.

Scope 1 – All Direct Emissions from a company’s activities or under its control. It includes fuel combustion on sites such as gas boilers, fleet vehicles and air-conditioning leaks.

Scope 2 – Indirect Emissions from electricity purchased and used by the company.

Market vs location-based emissions

  • Location-based emissions are calculated through the average of all the emissions from energy production sources that supply the grid a company uses in a specific country or region.

  • Market-based emissions are claimed through certificates to specify what kind of energy the company is buying.
    • It is worth mentioning that these certificates can be from non-renewable sources. For example, a company can make a deal with an energy company that produces energy through coal to buy an x amount of energy for a year at a fixed price. They would then issue a certificate to show the energy the company used was this specific energy that the company supplied to the grid.

    • Market-based emissions can tell us how committed a company is towards reducing energy-related CO2 emissions. If its market-based emissions are higher than location-based, it probably buys non-renewables energy certificates (cheaper in some instances). And if market-based CO2 emissions are lower, that means the company is making an effort to purchase renewable energy.

    • When companies report both location and market-based emissions, please report the market-based emissions.


Scope 3 – All Other Indirect Emissions from activities of the company, occurring from sources that they do not own or control. 

  • These are usually the most significant share of the carbon footprint, covering emissions associated with business travel, procurement, waste and water.




After reporting the company’s overall emissions, you should benchmark these emissions. This will help readers assess the scale and value of the impact.


How can you do that?

  • Translate the company’s emissions to an easier to understand unit by using the EPA Equivalencies calculator or by comparing it to countries, corporations, or households' GHG emissions.

For example:

    • World annual GHG emissions = 50 billion tonnes
    • Switzerland’s annual total emissions = 40 million tonnes
    • A US family annual GHG emissions = 16 tonnes

    Source: https://ourworldindata.org/

  • Then, compare the company’s emissions with the industry average, or a close competitor if that number is not available. Learn more about the types of comparisons in this article.

  • If possible, analyse what share the company’s emissions represent in the overall industry’s emissions.


Caution

Avoid comparing the company’s year-on-year GHG emissions as this leads to writing about remediation measures. Always remember to give the broader impact first.


Sources

https://www.epa.gov/ghgemissions/overview-greenhouse-gases

https://ghgprotocol.org/calculationg-tools-faq

https://www.ghgprotocol.org/sites/default/files/ghgp/standards/Scope3_Calculation_Guidance_0.pdf (image)

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