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Paris Agreement, Net Zero targets and EU Green Deal, the goal is clear: corporate climate protection, effective and in accordance with legal regulations. But in the jungle of eco-labels, EU regulations, national laws and global initiatives and their abbreviations, it is difficult to keep track.
If the climate hotspots are not under the direct control of your own company, that doesn’t make things any easier. So where should you start, which rules should you follow and which guidelines should you use?
Scope 1-3
According to the GHG Protocol (Greenhouse Gas Protocol), greenhouse gas emissions caused by company activities are divided into three areas, so-called scopes 1, 2 and 3 emissions. Scope 1 includes all CO2 emissions that result directly from our own activities, for example in offices or production facilities. Scope 1 emissions are primarily due to the consumption of fossil fuels. Scope 2 created a separate category for emissions from purchased energy and Scope 3 includes all indirect emissions.
Scope 1 and 2 emissions are relatively easy to understand and quantify because obtaining data is relatively straightforward. For example, the electricity used on site can easily be found on the electricity bill of the buildings to be included. How high the emissions in Scope 2 ultimately are depends heavily on the type of energy purchased. Green electricity or renewable energies have a significantly lower emission factor (i.e., CO2 per kilowatt hour) than energy from non-renewable sources.
The largest and most complex part of the company’s CO2 footprint is summarized in Scope 3. This includes all indirect upstream and downstream emissions that are not included in Scope 2 and arise in the value chain. For a better overview, Scope 3 includes various subcategories: The first eight categories relate to upstream emissions, for example from purchased goods and services, business trips and rented property, plant and equipment. The last seven categories relate to downstream greenhouse gas emissions and include, among other things, downstream transport and distribution, further processing of sold products, their use and end of life, and leased fixed assets.
Industry-dependent CO2 hotspots in practice
The Corporate Climate Responsibility Monitor examines the climate reports of multinational companies. A consistent picture emerges from the reports of the last few years: the absolute majority of corporate emissions in all sectors are in Scope 3, with “Purchased goods and services” being the front runner in the subcategories. In the automotive and electronics sectors, the usage phase of the goods sold also plays an important role. The following overview breaks down the main drivers of the company’s CO2 e-footprint with one company per sector as an example and can be used to classify the industry-specific hotspots:
- Management consulting, example Accenture: 80 percent in Scope 3, including purchased goods and services 48 percent and business trips 31 percent
- E-commerce, example Amazon: 77 percent in Scope 3 and a total of 20 percent in the purchased goods subcategory, whereby only private label products were taken into account
- Electronics, example Apple: 95 percent in Scope 3, of which ⅔ are purchased goods and ⅓ are the use of the products sold
- Logistics, example DHL: 82 percent in Scope 3, not surprisingly due to upstream transport and distribution by subcontractors
- Information technology, example Google: 59 percent in Scope 3 and 41 percent in Scope 2 due to the energy consumption of data centers
- Furniture, example Ikea: 99 percent in Scope 3, largely through the extraction and processing of materials
- Textiles, example H&M: 93 percent in Scope 3, mainly through purchased textile goods and their use
- Automobile, example Mercedes-Benz: 99 percent in Scope 3, with the usage phase having the greatest relevance, followed by the use of goods
Looking at the climate footprint of other companies in the same industry helps to identify your own key topics and even compare specific key figures. Learn more about a materiality assessment.
Specific regulations and initiatives help with implementation
The EU’s CSRD (Corporate Sustainability Reporting Directive) sets accounting requirements and gradually obliges more and more companies to measure and disclose their CO2 emissions based on the ESRS (European Sustainability Reporting Standards).
In addition to an increasing variety of digital tools that help with collection, analysis and standards-compliant reporting and ideally offer industry-specific configurations, there are some cross-sector and sector-specific initiatives and guidelines that are helpful:
- The GHG Protocol (GHGP)
Even though reading this standard set of rules can be challenging, it is full of step-by-step instructions and checklists for corporate climate protection. It is considered a standard work for the accounting and reporting of greenhouse gas emissions and forms the basis for many other guidelines.
- Science Based Targets Initiative (SBTi)
The SBTi helps companies set science-based emissions reduction targets that are in line with the Paris Agreement and based on the UN’s Sustainable Development Goals (SDGs). Companies will receive technical support and a range of guidance and tools will be provided to measure and report on impacts. The Net-Zero standard in particular is viewed by experts as ambitious and goal-oriented and is therefore considered best practice for companies.
- Pathfinder Framework (PACT)
These guidelines are intended to make more complex regulations such as the GHG Protocol more understandable and accessible. It contains a set of sustainability goals and indicators based on the SDGs and other goals, as well as tools that companies can use to set and track their progress.
- Sector specific initiatives
Sector-specific initiatives such as the EU’s Product Environmental Footprint (PEF) Guidelines, Together for Sustainability (TfS) in the chemical industry or the EN 15804 standard for the construction industry provide further valuable tips on how CO2 emissions are measured, reported and then effective reduction measures initiated can be.
Start today to be prepared for tomorrow
In summary, the direction that companies should now take is clear: roughly understand the climate hotspots of their own business model and then go into specific depth there, using digital tools like Greenly and existing regulations. This usually involves achieving initial successes in the short term in Scope 1 and 2 by switching to renewable energies and, in parallel, concentrating on the more complex emissions along the value chain, i.e., in Scope 3. Depending on the industry, there are different focuses, but the area of purchased goods and services is emerging as a central driver of climate change across all industries. The regulatory authorities are also recognizing this and are increasingly tightening regulations and laws.
