By Angela Nagy, CEO, GreenStep Solutions
With the re-election of a Liberal minority government in Canada, carbon pricing, which is supported by a wide range of academic, public sector, energy executives, and other business leaders, is here to stay and it’s on the rise. If you want to better understand the risks and opportunities that come with an increasing price on carbon, read on as we break down the how and why of measuring your corporate carbon footprint.
Since 2019, every jurisdiction in Canada has had a price on carbon pollution, and currently the federal price for carbon is set at $30 per tonne of carbon dioxide equivalent (CO2e). In 2022, this price will increase to $50 per tonne, and by 2030 it will reach $170 per tonne of CO2e.
To put this into context, by 2030 the carbon tax on fossil fuels commonly used by hotels and other tourism businesses and organizations, including DMOs, will be as follows:
- One gigajoule (GJ) of natural gas ~$8.84/GJ
- One litre (L) of gasoline ~ $0.42/L
- One litre (L)) of diesel ~ $0.47/L
- One kilowatt hour (kWh) of electricity – costs will vary, depending on how electricity is generated – coal and natural gas based grids will see the largest increases.
By 2030 the price on carbon will increase your fossil fuel-related operating costs by 30% to 100%, not including cost increases due to inflation. To get ahead of the carbon risk to your business, it will be important to understand your carbon footprint and make a plan to reduce it.
Measuring your carbon footprint is actually not that complicated, and similar to financial accounting standards, greenhouse gas (GHG) accounting standards exist. Most tourism related businesses will follow the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard published by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). This is the international accounting tool most widely used by global government and business leaders to understand, quantify, and manage GHG emissions.
Based on these standards, there are five key steps to measuring your carbon footprint:
Step 1. Determine Your Organizational and Operational Boundary
Your organizational boundary determines which business entities and facilities will be included in your GHG inventory. In setting the organizational boundary, two consolidation approaches are used to report GHG emissions: control and equity share.
In the control approach, an organization accounts for 100% of the GHG emissions from operations that it controls. The organization does not account for GHG emissions from operations that it may own an interest in but has no control over. Control is defined as either financial or operational.
Financial Control: An organization has financial control of the operation if it can direct financial and operating policies to gain economic benefits from the operation’s activities.
Operational Control: An organization has operational control of the operation if it has the authority to implement operating policies at the operation.
In the equity share approach, an organization accounts for GHG emissions from operations based on its share of equity in the operation. Equity reflects economic interest, which is the extent of rights a company has to the risks and rewards flowing from an operation. The equity share will typically be the same as the percentage of ownership in the operation.
Step 2. Determine Your Reporting Year and Base Year
A meaningful comparison of emissions over time requires that your organization select a performance standard against which current emissions can be compared. This is referred to as a base year.
A base year can be either the calendar year or your organization’s fiscal year. No matter which base year is selected, the same dates should be used for future GHG emissions inventories to ensure consistency. The importance of this consistency is highlighted when tracking progress towards a GHG reductions target and comparing it to the base year.
Step 3. Selecting Emissions Sources that Apply to Your Organization
After setting your organizational boundary, you must set the operational boundary for your business. Note that the operational boundary is different from the organizational boundary, in that you are deciding which emissions sources within the organization that you will track and try to reduce. The easiest way to do this is to consider all the ways that emissions are generated in your organization – i.e. heating, cooling, business travel, employee commuting – before selecting the emissions sources that you will report.
Direct Versus Indirect Emissions
GHG emissions are produced by a variety of business activities – from heating and lighting the office to travelling to meetings. As defined by the Greenhouse Gas Protocol, GHGs from a business are categorized into direct and indirect emissions.
Direct emissions are generated from sources that your organization owns, such as company cars, or a natural gas boiler. For accounting purposes, direct emissions are called Scope 1 emissions.
Indirect emissions are emissions that result from your organization’s activities but the sources are owned or controlled by a separate organization. For example, your organization may own its computers and photocopiers but the electricity used to power the office equipment is generated by the utility company.
Indirect emissions are divided into Scope 2 and Scope 3 emissions. Scope 2 emissions are from the use of purchased electricity, steam, or heat. Scope 3 emissions include all other indirect emissions, such as business travel in non-company-owned vehicles, employee commuting, paper usage, waste disposal, and outsourced activities.
Step 4. Identify Data You Need to Collect and How to Track it Over Time
Two kinds of data will need to be collected in order to calculate your organization’s GHG emissions: Activity Data and Emissions Factors.
Activity data quantifies an activity – i.e. electricity consumed, business trips taken, amount of waste produced – in units that will be used to calculate GHG emissions. One approach to collecting activity data is to keep the information in a central location, similar to bookkeeping for accounting purposes. The following examples identify the types activities for which you will want to collect data:
- Litres of gasoline
- Kilowatt hours of electricity
- Business air miles/kilometers traveled
- Cubic meters of natural gas
When collecting activity data, it is important to keep in mind that your organization may not be responsible for all of the emissions from a particular activity. For example, if you lease an office space that is shared between two companies, this must be accounted for in the calculation. Similarly, carpooling results in reduced emissions for the activity of employee commuting because there is more than one person in the vehicle. Not accounting for these percentages can result in overestimated GHG emissions.
Emissions factors are values that convert activity data to GHG emissions. Emissions factors are source-specific, meaning that there will be a specific emissions factor for the particular activity you are trying to convert to GHG emissions. For example, an emissions factor for electricity produced by burning coal will be higher than an emissions factor for electricity produced by a hydro-electric dam. It is important to get the most detailed activity data possible to ensure that the proper emissions factor is used.
Emissions factors are published by various institutions, including local, provincial/state, and federal governments, and intergovernmental agencies. Emissions factors are frequently updated, so it is important to stay current and use the most recent values. The basic equation to calculate GHG emissions using your activity data and emissions factors is as follows:
Activity Data x Emissions Factors = GHG Emissions
Researching and updating these emissions factors and then doing the math for each emissions source is one of the more challenging aspects of carbon accounting. You can build an Excel spreadsheet to do this, or there are tools available to support you in these efforts, such as GreenStep’s EcoBase Carbon Software which includes the emissions factors for the most common emissions sources. You simply need to confirm what activities you want to enter data for, and then enter this data, to measure your carbon footprint.
Step 5. Report
Once you have measured your carbon footprint, you can simply track it in Excel or through online carbon software, but it is best practice to share your GHG emissions, as well as the progress you’ve made in reducing emissions, internally and externally by preparing a GHG emissions report. A credible report presents information that is accurate, complete, consistent, and transparent. Although various reporting standards exist, your emissions report should be written in accordance with the GHG Protocol Corporate Accounting and Reporting Standard.
Next Steps: Reduce and Repeat
Measuring and reporting on your carbon footprint is just the beginning, and is something that you should plan to do on an annual cycle. In my next article I’ll walk through setting reduction targets, creating a strategy to achieve those targets and reduce your emissions, and how to offset some or all of your carbon footprint on the path to carbon neutrality. In the meantime, feel free to reach out to our team if you have any questions on how to get started with measuring and reducing your carbon footprint.