Companies which aim to gain a certification for carbon neutrality must recognise that the process of achieving such a credential is complex as well as rewarding. Climate change represents the single biggest threat to our global community, and it is through the efforts of every corporate citizen, large and small, to deliver sustainability that world might avert an irreversible decline.
Since 2006, the phrase ‘carbon neutral’ has grown to become one of the hottest boardroom topics, equal to cyber security and ESG (environment, social, and governance). A company achieves carbon neutrality by first measuring its carbon footprint, and then applying a range of efficiency measures to reduce the amount of energy consumed and waste generated.
The second phase of any carbon neutrality initiative involves supporting external initiatives aligned with the CarbonNeutral Protocol. Such projects enable a company to ‘offset’ its emissions thorough investment in globally accredited schemes, such as reforestation projects. There are many options for such ‘carbon sinks’, which include all structures which absorb carbon. at are Scope 1,2, and 3 Emissions?
Any discussion about carbon neutrality or Net Zero hinges upon the so-called Scope of emissions. In other words, what is the company measuring (what’s ‘in scope’) vs. what is being excluded from its assessment, thus ‘out of scope’.
Any discussion about carbon neutrality or Net Zero hinges upon the so-called Scope of emissions. In other words, what is the company measuring (what’s ‘in scope’) vs. what is being excluded from its assessment, thus ‘out of scope’. It’s not complicated:
Scope 1 Emissions
Scope 1 includes direct emissions from sources that are owned or controlled by the organisation including, for example, the emissions from your facilities, processes and vehicles.
Scope 2 Emissions
Scope 2 includes indirect emissions from the reporting company’s use of purchased power, steam, heating, and cooling.
Scope 3 Emissions
All other indirect emissions that occur in a company’s value chain are included in Scope 3. Scope 3 relates to upstream emissions such as business travel, employee commuting, and transportation and logistics related to bringing goods or services to your business.
Scope 3 downstream emissions relate to the impact your product has upon the environment as a result of its usage, for example. Such factors include any subsequent processing, transportation and logistics to deliver to your client, and how the product will be managed a the end of its life.
In order to attain carbon neutrality, a company must purchase carbon offsets that result in carbon reductions, efficiencies, or carbon sinks. In order to achieve Net Zero, a company must purchase greenhouse gas removals that result in carbon sequestration from the atmosphere.
With net zero carbon, the companies must add no carbon dioxide to the atmosphere. Of increasing importance is that this is being expanded to include the seven gasses defined by the greenhouse gas emissions (GHG) protocol, including nitrous oxide, methane, and hydrofluorocarbons. We cannot be thought of as sustainable if we maintain our current rate of emissions.
The process for businesses to become carbon neutral begins with research to establish a baseline Carbon Footprint report (CFR). Such work is best aligned with the requirements of BSi PAS 2060:2014 (British Standards Institute). This standard is rapidly becoming the most widely accepted model because it ensures comparability of carbon neutrality claims between organisations and sectors.
Verifying your current Carbon Inventory is often the most challenging and intensive part of an engagement with your consultants. You’ll launch your carbon neutral project by defining your own climate change goals, targets, and potential measures. An emission mapping workshop involving key stakeholders from across your company should be your highest priority.
A detailed Options Assessment of viable carbon reduction measures is required. An effective reduction programme drives measurable cost savings across your business through a short, medium, and long-term strategies to reduce your greenhouse gas emissions emissions.
Carbon neutrality doesn’t come with expense, and your advisors will detail investment appraisals for all options. This may include the purchase of renewable energy systems, research and development of new processes to reduce your use of greenhouse gases, selecting suppliers from countries closer to your manufacturing operations, and any number of other measures.
Where capital investment is required, alternative funding sources will be considered as new sources of green funding continue to emerge. The sustainability community globally continues to search for sustainable solutions for natural approaches to achieving low carbon outputs.
Once practical GHG reductions have been identified and agreed, your path to Net Zero will be formulated. This will contain recommendations on governance, mitigation measures, milestones, targets, and carbon offsetting strategies. The goal is to balance the target you seek to achieve, the services which will be affected by your climate action targets, and the benefits which will be achieved.
Successful carbon neutrality hinges upon your carbon footprint report having certification through verification. For your data to be accepted in a PAS 2060 verification, the methodology must be exact.
In particular, a PAS 2060 compliant carbon footprint report must include all material emission sources, and most specifically, those within Scope 3. Any process which doesn’t support full Scope 3 carbon footprint measurement may be regarded as inadequate.
PAS 2060 is the internationally applicable specification for the demonstration of carbon neutrality. Verification to this standard will substantiate claims you make that your business is carbon neutral.
PAS 2060 requires the preparation and publishing of a Qualifying Explanatory Statement (QES) which is a templated document containing all the basis for your claim of certified Carbon Neutrality. Businesses use this certification as a significant indicator of commitment to climate action. It should highlighted that offsetting is considered a valid approach.
Carbon offsets represent another strategy to cut emissions and achieve carbon neutrality: you offset emissions from one sector by reducing emissions from another. This can be accomplished by investing in renewable energy, energy efficiency, or other low-carbon technology.
Offsetting is expensive, and the costs are rising. However, to become carbon neutral takes time and businesses may delay expenditure on offsets by a year or two while they direct investment into internal carbon reduction projects. Given the current global energy crisis, it is not difficult to calculate the savings through reduced purchasing of fossil fuels.
Formal verification and offset purchasing can then happen in year 2 or 3, after a meaningful reduction of carbon emissions has occurred. For example, companies with an aggressive program to reduce their reliance on fossil fuels (as well as energy in other areas) are able to lower their greenhouse gas profile immediately.
As a result of forest fires, land use changes, or logging, carbon stored in natural carbon sinks such as forests is released into the atmosphere. With fewer such sinks, unless businesses reduce their carbon emissions, climate neutrality will remain out of reach.
Another method for reducing emissions and reaching carbon neutrality is to offset emissions from one sector by reducing emissions from another. Investing in renewable energy, energy efficiency, or other low-carbon technology can help to achieve this.
To facilitate this shift, we turn to the EU’s own carbon offsetting emissions trading system (ETS) which offers a certified approach. It is the author’s opinion that offsetting is ethical but undesirable, since offsetting does not reduce the amount of greenhouse gases emitted into the atmosphere.
Contrast offsetting with the proposed carbon border adjustment mechanism: this will impose carbon pricing on imported goods from nations with lower climate ambitions. The intent of this design is that it will deter corporations from shifting production from the EU to less restrictive jurisdictions.
Now your company has decided to become carbon neutral, and you recognise the importance of certification, the next step in your process is to form a carbon neutrality steering group. This should comprise the most senior members of your Executive, as well as representatives from across your organisation.
Steering committees must be granted the responsibility, support, and mandate to work towards reducing your carbon emissions. As has been emphasised above, to become carbon neutral requires certification to a rigorous standard which will stand the test of time.
To calculate your carbon footprint, you will require the services of a number of consultants, ranging from financial specialists through to experts in the field of environment, social, and governance (ESG).
Your search for how to deliver a reduction in your carbon emissions may well involve your entire stakeholder community. Because of this, you are encouraged to use your website and other media to inform your clients, whether businesses or consumers, as to how each proposed measure will contribute to your ‘green’ initiative.
The services you purchase have an impact too, and so your supply chain needs consideration. For example, do you source your electricity from companies which feature sustainable power generation? Success demands that every measure is quantified and its impact upon reducing your emissions is documented.
Above all, remember that your reduction of gases released into the atmosphere is the single biggest concern of the modern consumer, as it is of the community in which you operate. Approach your quest for carbon neutrality as adding value to your company, and the rewards will follow.
Leads the daily operations at ESG PRO, he specialises in matters of corporate governance. Humperdinck hails from Bermuda, has twice sailed the Atlantic solo, and recently devoted a few years to fighting poachers in Kenya. Writing about business matters, he’s a published author, and his articles have been published in The Times, The Telegraph and various business journals.
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