How to calculate the carbon footprint of a company

While company carbon footprints have been part of the sustainability landscape for many years, they have become even more important as consumers, investors, industry bodies, governments and legislators demand greater transparency and commitments to action from the businesses they support.

As such, organisations of all sizes and all industries are asking themselves the same questions: how do we become more sustainable? What are our greenhouse gas emission? Where do we begin?

Below, you’ll find a step-by-step guide that answers this challenging question. Using our 20+ years of expertise and established frameworks, we’ll help you build your first (or next) carbon footprint step by step, highlighting the tools you can use, the expertise you may need to call on, and what to do when your first carbon footprint is complete.

What is a business carbon footprint?

Sustainability journeys often begin with an organization assessing its greenhouse gas emissions (GHG emission), what is commonly referred to as a company carbon footprint.

A business carbon footprint, also known as a greenhouse gas inventory, offers comprehensive insights into the largest emissions sources for a business, highlighting opportunities for improvement as well as potential risks.

In essence, it is a summary of how an organisation is impacting the climate through its business activities.

A carbon footprint for a business, depending on industry, may include the emissions generated by:

• The production of electricity used to power a building’s lights, temperature control, appliances, and machinery.
• The burning of fossil fuels used in company vehicles or industrial machinery.
• The escape of refrigerant gases used in fridges, chillers and freezers.
• The use of air travel for business purposes.
• The operations of supplier companies and subsidiaries.

This is just a small selection of possible emissions sources.

Carbon footprints don’t just include carbon dioxide emissions. There are multiple greenhouse gases that impact our climate, such as N20, CH4, and so on. To simplify, the different greenhouse gases are typically described in terms of common unit, the ‘carbon dioxide equivalents’, or CO2-e.

Experts have developed several reporting protocols to provide a shared language and enable comparisons between different organizations. This includes the GHG Protocol and ISO 14064-1:2018, which are the most common in New Zealand, and form the basis of this guide.

In short, a business carbon footprint categorises emissions sources, translates their impact into a single understandable number, and provides a baseline from which a business can better understand their next steps towards sustainability.

Step 1: Setting boundaries and measurement periods

To begin their carbon footprint, an organisation must agree on what emissions they’re measuring and what period they’re measuring it over. This is key to ensuring that your carbon footprint represents your company’s actual emissions accurately.

Measurement periods are relatively simple, typically being either a calendar or financial year. Organisational and operational/reporting boundaries i.e. what emissions you’re considering to be “your” emissions is more complicated.

• Organisational boundaries draw a line in the sand around what emissions your business is directly responsible. GRESB provides a good guide to methods on setting these boundaries (hint: most NZ businesses use an operational control approach).
• Operational/reporting boundaries define what whether an emissions source is considered direct or indirect for your business.

This is also where scopes come in, which provide more detail on what kind of emissions you’re tracking. There are 3 primary scopes:

• Scope 1 emissions are direct emissions for your business, such as fuel used for boilers and industrial machinery.
• Scope 2 emissions are indirect emissions from purchased energy, most commonly electricity used to power lights, appliances, computers, and so on.
• Scope 3 emissions are indirect emissions from an organization’s value chain. This varies widely by industry and/or company, but typically includes business travel, employee commuting, freight transport, waste, and other upstream or downstream emissions.

Many businesses have completely different categorisation for the same emissions source. For example, a transportation business would typically consider the fuel for their fleet as a scope 1 emission. However, the businesses employing that transportation business to move their products would consider that same fuel as scope 3.

Step 2: Collecting carbon emissions data

Once the boundaries have been defined, you can move onto actual collection and categorisation of the data. This can be the most challenging part of building a carbon footprint. It can be quite challenging to not only find appropriate data, but to also aggregated this data into consistent formats when working with a broad range of sources.

Typically, the first place to begin is with scope 1 and 2 emissions. Utility bills, invoices for fuel, and building management systems can usually provide data for the largest emissions sources in these categories.

Scope 3 (indirect emissions from your supply chain) can be significantly more complex, as it typically requires engagement with your suppliers and providers on their own individual carbon footprints.

Hint: The Carbon Neutral Government Programme provides a good overview of the most common emissions sources and their scopes.

At this stage, you may find you’re collecting emissions in a wide variety of different units of measurement. This may include:

• Weight (such as kg of coal used in a boiler or freight weight)
• Distance (such as kilometres travelled by car or plane)
• Time (such as number of days employees spent working from home)
• Volume (such as m3 of wastewater produced)
• Power quantity (such as kilowatt hours of purchased electricity)

The key is to gather as much information as possible at this stage so that this use can be translated into CO2-equivalents in the following step.

Pro-tip: Data management during this step is challenging, with potentially thousands of individual emissions sources that must be tracked. If you’re working within a complex business, it may be worthwhile investing in a carbon emissions management system, such as ESP’s enterprise carbon account software, to reduce the time spent navigating this step.

Smaller businesses with more simple profiles may be able to use spreadsheet software or use the New Zealand government’s Climate Action Toolbox instead.

Step 3: Applying emissions factors to your data and generating a carbon footprint

Time to bring it all together. The information you gathered in step 2 must be translated into a standardised unit to create a complete, single summary of your business’ carbon footprint.

Under the GHG Protocol, you can do this by multiplying the quantity of your emissions source by the appropriate emissions factor to create a standardised measure of emissions AKA carbon dioxide equivalents (CO2-e). This final figure aggregates all major greenhouse gases (CO2, CH4, N2O, and so on).

Example: An organisation uses 700,000kWh of electricity in its latest reporting period. Its indirect emissions (scope 2) from this source are:

• CO2 emissions = 700,000 x 0.117
• CH4 emissions = 700,000 x 0.0028
• N2O emissions = 700,000 x 0.0002

This results in a total of 84,000kg of CO2-e.

Hint: The Ministry of the Environment has guidance on the different emissions factors for each source category and how to apply them appropriately.

Apply these emissions factor calculations to each of your emissions sources, tally them up, and you will have a final figure for your carbon footprint.

Step 4: Producing a GHG inventory or report

At this stage, you will have a full and complete overview of your business’ carbon footprint for the given period. Congratulations!

The final step is formatting this inventory into an established and/or officially recognised framework. Here is an example of a GHG inventory provided by the Ministry of Environment that should get you started.

The specifics of this will depend on what your business is trying to accomplish with a carbon footprint. If you are mandated to report by regulation, industry body standards or corporate guidelines, your individual report may vary from this example.

What’s next?

Using your new carbon footprint, you can:

• Establish a baseline for your business’s future carbon footprints.
• Review your business’ performance against any previous inventories or against industry benchmarks.
• Identify the areas with the largest impacts and biggest opportunities for carbon reductions.
• Refine or set meaningful, achievable and ambitious carbon reduction goals for the next reporting period.
• Plan new sustainability projects and provide hard data to support business cases to further your journey towards net zero.
• Publish your inventory as part of your online sustainability strategy if you have chosen to commit publicly.

This carbon footprint (or carbon inventory) is also the basis for any formal greenhouse gas report.

Hint: A greenhouse gas report is different from a greenhouse gas inventory. An inventory is a simple statement of your business’ carbon footprint, typically broken down into scopes, business activities, source categories, and so on. A report, on the other hand, includes information about the organisation, comparing previous results, discussing changes to the emissions, listing any excluded emissions, and stating methods and reference for calculations.

Summary

To calculate the carbon footprint of a company according to the framework of the GHG Protocol, you must:

1. Decide what emissions you’re reporting, what scope they are, and over what time period.
2. Gather emissions data across the breadth of your business activities.
3. Apply emissions factors to the data gathered to generate CO2-equivalents.
4. Format your findings into a cohesive GHG inventory AKA carbon footprint.

Calculating the carbon footprint of a company is a long and often challenging process, especially if it’s your first time doing it. However, this process is well worth the effort if done correctly, as it provides a clear, comprehensive and accurate overview of your business’s next step to meet your sustainability goals.

Ready to begin your journey towards carbon zero? Download our free eguide that lays out exactly how to build a Carbon Roadmap that works.