Calculating an organisation's baseline year carbon footprint

It may surprise you but understanding how to measure an organisation’s carbon footprint can be less daunting than you think when using the GHG (greenhouse gas) Protocol. In this article, we share an overview of this helpful framework and look at how to apply this practically when you embark upon calculating your company’s carbon baseline emissions.

What’s most important is that organisations are doing this for the right reasons: it should not be viewed as a box-ticking exercise. Businesses have an economic imperative and an ethical responsibility to do what they can to ensure a sustainable and equitable world – and we know that sustainability creates value for businesses by improving financial performance, building customer loyalty and attracting and engaging employees.

Once an organisation’s carbon baseline is established, you can build improved systems to acquire data more accurately, set science-based reduction targets and move on to develop progressive decarbonisation strategies to actively reduce your carbon footprint.

What is a carbon footprint?
A carbon footprint is the total amount of greenhouse gases (GHG) that are emitted by individuals and organisations through the production and use / consumption of products and services. These greenhouse gas emissions are measured in units of carbon dioxide equivalent (CO2e) and are used to quantify the impact of human activities on the environment.

What are the carbon emission scope categories?
The GHG Protocol categorises carbon emissions into scopes 1, 2, and 3, providing a standard framework for businesses to classify their emissions. Organisations can analyse their carbon footprint emissions across the entire value chain. Below is a summary of the main greenhouse gas emissions categories within the GHG Protocol:

Scope 1: Direct greenhouse gas emissions originating from sources owned or controlled by the organisation, such as emissions from fuel combustion in vehicles owned by the organisation
Scope 2: Indirect greenhouse gas emissions resulting from the generation of purchased energy (electricity, heat, steam) used by the organisation
Scope 3: Other indirect greenhouse gas emissions associated with the organisation's activities but emanating from sources not owned or controlled by the organisation. These emissions are spread across 15 categories within the GHG Protocol, encompassing both upstream (e.g. raw material production and delivery) and downstream (transportation, distribution, consumption and disposal of goods) emissions.

What are the initial steps to take before calculating carbon emissions?
There are a number of approaches for GHG accounting but the GHG Protocol is currently the most commonly adopted and recognised framework worldwide. To calculate carbon emissions following the GHG protocol, the key steps are:

Define the carbon emission inventory boundary

Define the organisational boundary: identify which companies are under the organisation's control (financial and operational)
Define the operational boundary: determine the relevant emissions linked to the business operations (direct and indirect emissions) and categorise them into scopes 1, 2, or 3
Define the reporting period: establish the base year for initial measurements and comparison of annual results in the future.

Identify carbon emissions sources

Carbon emissions generally arise from the following emission sources:

Stationary combustion: combustion of fuels by stationary equipment such as boilers, furnaces, burners, turbines, heaters, incinerators, engines, etc.
Mobile combustion: combustion of fuels from automobiles, trucks, buses, trains, etc.
Process emissions: emissions from physical or chemical processes arising from production/manufacturing processes, such as the calcination of the stage in cement manufacturing, etc.
Fugitive emissions: intentional and unintentional releases of GHG emissions from equipment leaks from joints, seals, packing, cooling towers, gas processing facilities, etc.

Carbon emissions that make up a very small portion of the total inventory - less than 1% - can be excluded from the total inventory if they do not exceed the materiality threshold set by the organisation. Transparent documentation and justification of these exclusions are important.

Select the carbon emission calculation approach

The various approaches for calculating carbon emissions offer the specific formulas, activity data and emission factors necessary to determine total emissions from different activities. These include direct measurement, stoichiometric calculation and estimate emissions. The estimate emissions approach, which involves multiplying activity data (e.g. fuel consumption records) by the appropriate emission factor is the most widely used and is referenced in this article.

Collect activity data (as per business operations)

Greenhouse gas (GHG) emissions are calculated using the formula: carbon emissions = activity data x emission conversion factor. Activity data refers to data from business activities leading to emissions in scopes 1, 2, and 3, such as electricity usage (kilowatt hours), fuel consumed for owned/leased vehicles (litres), distance travelled (kilometres) etc. Primary records for activity data can be obtained from various sources such as:

Scope 1: Purchase records of fuels (cost of fuel purchased for vehicles or manufacturing plants)
Scope 2: Metered electricity consumption records (from electricity bills)
Scope 3: Activity data like fuel usage, passenger miles, purchases etc.

Choose the emission factors and calculate carbon emission

Entities such as government agencies and intergovernmental organisations (for example the IPCC) publish emission factors in units of kilogrammes / tonnes of carbon dioxide equivalent (tCO2e). Based on the steps above, one can complete the carbon emission equation i.e. carbon emissions = activity data x emission conversion factor.

Organisations can initially focus on scopes 1 and 2 and gradually include scope 3 in subsequent years as, in a number of instances, scope 3 may not be mandatory in the baseline year.
Preference is for actual and complete data but, when actual data is unavailable, estimates can be used, especially for baseline year calculations. In cases where estimation is necessary, clear documentation of assumptions and judgements applied should be documented.
The key reporting principles that form the foundation of carbon emission calculations are: relevance, completeness, consistency, transparency and accuracy. These principles ensure that emission calculations are meaningful, thorough, uniform, transparent and precise.

Final thoughts
This article makes clear that measuring the carbon emissions footprint for an organisation’s baseline year requires both judgement - and a reasonable effort. But the key point is to get started! Establishing your carbon baseline is a critical step towards understanding and mitigating the environmental impact of an organisation’s activities and its greenhouse effect. By following established frameworks such as the GHG Protocol and using accurate data sources, businesses can calculate their greenhouse gas emissions effectively.

As we have seen, factors such as emission calculation methods, activity data collection, emission factors and materiality considerations play pivotal roles in ensuring the accuracy and reliability of emission calculations. Transparency in documenting estimation methodologies for non-material emissions, clear justification for exclusions and consistent re-evaluation of assumptions ensure the credibility and integrity of the emission inventory.

BDO helps organisations by outlining how to embed sustainability practices into their business, as well as offering a range of ESG-related services. Read more on the BDO.global web site about how BDO can help and, specifically, how to activate your sustainability journey. Please also feel free to reach out to the sustainability experts in your local BDO firm.