Carbon emission reduction and climate change mitigation show increasing prominence in corporate strategy and sustainability initiatives. Companies addressing their carbon footprint, i.e. the quantum of carbon emissions generated measured in terms of Global Warming Potential (GWP), identify opportunities to bolster their bottom line, address climate risks and discover competitive advantages. Governments are expected to set new policies and provide additional market-based incentives to drive significant reductions in emissions. These new policy and market drivers will direct economic growth on a low-carbon trajectory. Thus, companies which show proactive approach in reduction of their carbon footprint benefit from the first mover advantage as well as develop in-house capability in risk mitigation and abatement strategies.

As an effective climate change strategy requires a detailed and accurate idea of the company’s Green House Gas Protocol (GHG) impact, a carbon mapping initiative assumes great significance in developing a baseline. This baseline is used to quantify the significance of abatement strategies through the corporate GHG inventory maintained by the company. Through the Corporate Value Chain Accounting and Product Life Cycle Accounting reporting standards developed by GHG Protocol, there is now an established framework to account for the GHG inventory generated from a product’s or service’s life cycle.

This report introduces the GHG Protocols for Corporate Value Chain Accounting and Product Life Cycle Accounting and gives a perspective of how to apply these protocols for a carbon mapping initiative.

Introduction

In the area of global warming abatement, there are numerous organizations and frameworks which outline the path to be followed for industry to be aligned to future developments and mandates. The Green House Gas Protocol (GHG) is such an initiative which has outlined robust practices which can be tailored to suit the specific business that a company is in. It provides the framework, methodology and the tools required for carbon footprint calculation and determining a company’s carbon inventory (a term used to signify the virtual inventory of carbon emissions which a company emits while doing business). A well-designed and maintained corporate GHG inventory can serve several business goals, including:

• Managing GHG risks and identifying reduction opportunities

• Public reporting and participation in voluntary GHG programs

• Participating in mandatory reporting programs

• Participating in GHG markets

• Recognition for early voluntary action

The following sub-sections will look at the GHG protocol specifically the Corporate Value Chain Accounting and Product Life Cycle Accounting protocols which are of relevance to this project.

Global Protocol – GHG Corporate Value (Scope 3) Chain Accounting

The GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (also referred to as the Scope 3 Standard) provides requirements and guidance for companies and other organizations to prepare and publicly report a GHG emissions inventory that includes indirect emissions resulting from value chain activities (i.e., scope 3 emissions). The primary goal of this standard is to provide a standardized step-by-step approach to help companies understand their full value chain emissions impact in order to focus company efforts on the greatest GHG reduction opportunities.[1]

Figure 1: GHG Protocol scopes and emissions across the value chain^[2]

As can be seen from the figure above, the various economic and productive activities of a company are classified into Scope 1, Scope 2 and Scope 3. Scope 1 mainly refers to the carbon emissions from the production activities taken up within the company premises. Scope 2 refers to the carbon emissions which have taken place to produce the electricity, steam, heating and cooling needed for operation of the company. Finally, Scope 3 refers to the supply chain activities of the companies which stretch beyond the organizational boundary to the operational boundary of the company. This typically involves a cradle-to-grave analysis of the end to end carbon emissions which have gone into the final operation of the business.

Global Protocol – GHG Product Life Cycle Accounting

The GHG Protocol Product Life Cycle Accounting and Reporting Standard (referred to as the Product Standard) provides requirements and guidance for companies and other organizations to quantify and publicly report an inventory of GHG emissions and removals associated with a specific product. The GHG Protocol Scope 3 Standard and GHG Protocol Product Standard both take a value chain or life cycle approach to GHG accounting. The Scope 3 Standard builds on the GHG Protocol Corporate Standard and accounts for value chain emissions at the corporate level, while the Product Standard accounts for life cycle emissions at the individual product level.[3]

As defined in the Product Standard, the combined use of the protocols would be done in this project to use product-level GHG data based on the Product Standard as a source of data to calculate scope 3 emissions associated with selected product types.

Figure 2: Relationship between Corporate Standard, Scope 3 Standard and Product Standard[4]

The Product Standard primarily differs from the other standards in the treatment of the emissions. It stresses on the attribution of end to end emissions occurring from material extraction to end of product life. This attribution process makes it different from the Corporate Value Chain Standard which includes many non-attributable processes which cannot be assigned to a product emission but are important to show the overall emission pattern and carbon inventory of the organization.

[1] Source: Corporate Value Chain (Scope 3) Accounting and Reporting Standard

[2] Source: Corporate Value Chain (Scope 3) Accounting and Reporting Standard [Page 5]

[3] Source: Product Life Cycle Accounting and Reporting Standard

[4] Source: Product Life Cycle Accounting and Reporting Standard [Page 7]

Nabarun Sengupta

MBA Batch of 2012