Corporate Carbon Footprint, Explained

Is your company looking to report its greenhouse gas (GHG) emissions for CDP, Ecovadis, TCFD, GRI, or SBTi purposes? Or has an investor requested an emissions disclosure? Then you might need a corporate carbon footprint.

Developing a complete corporate footprint enables companies to understand their full emissions impact both on-site and across the value chain, and to focus decarbonization efforts where they can have the greatest impact.

What is a corporate carbon footprint?

A corporate carbon footprint is the total amount of greenhouse gas (GHG) emissions produced by a company’s operations, supply chains, products, and services. This includes direct and indirect emissions across three Scopes (1, 2 and 3).

By regularly calculating their corporate carbon footprint (a process known as carbon accounting), businesses can understand and analyze the carbon impact of their operations and supply chains, fulfill carbon reporting requests, and identify opportunities to reduce emissions.

How to calculate a corporate carbon footprint for your business

There are five overarching steps to preparing a corporate carbon footprint, in line with the Greenhouse Gas Protocol (the international standard for carbon accounting and reporting).

Before undertaking the steps, you need to select a year of calculation (usually the most recent 12-month period).

Step 1: Establish the organizational boundary

Firstly, an organization needs to select a consolidation approach, to define the businesses, subsidiaries, entities and operations that constitute ‘the company’ for the purpose of corporate GHG emissions accounting and reporting. Companies can choose from the following consolidation approaches:

• Equity share approach: a company accounts for emissions from a given operation according to its share of equity in the operation
• Control approach, which means either
  – Financial control (a company accounts for 100% of emissions from a given operation if it has the ability to direct the financial and operating policies of the process with a view to gain economic benefits from the company) or:
  – Operational control (a company accounts for 100% of emissions from a given operation if it has the full authority to introduce and implement its operating policies to the process. It does not account for emissions from an operation where it owns an interest, but lacks operational control).

The operational control approach is the most common method. Only one party can have operational control of an entity or activity. If there’s ambiguity, CarbonChain helps companies use a scorecard approach to determine which party has the highest % of influence or control.

It’s critical to review and update your organizational boundary year on year, and to record any changes in your carbon reporting.

Step 2: Set the emissions reporting boundary

Establishing the reporting boundary involves two stages:

i) Identifying all existing emissions sources across Scopes 1, 2 and 3 and categories from all entities identified within the organizational boundary;

The most challenging part of this step is setting out Scope 3 reporting boundaries. This involves mapping out all of your business’s Scope 3 emissions sources according to the GHG Protocol’s categories.

➡️ Download our guide to Scope 3 scopes and categories for commodities traders

ii) Conducting relevancy testing of Scope 3 sources to determine whether or not they should be included in the reporting boundary.

A Scope 3 emissions source is deemed relevant if two or more of these criteria are triggered:

Step 3: Collect and analyze emissions data

For your year of calculation, collect activity data (the level or amount of activity that generates GHG emissions) and emissions data (normally in the form of emissions factors) across Scopes 1, 2 and 3, and conduct data quality checks.

A screening of your Scope 3 sources can help prioritize data collection efforts from suppliers.

There is a hierarchy of best practice when it comes to data collection. In order from best to worst:

1. Prioritize primary activity data (specifically from activity under your company's operations) and collect supplier-specific primary data where proportional to emissions (using the screening to guide data collection efforts)
2. Model activity data to represent emission sources
3. Estimate activity data using industry or process benchmarks

It’s important to improve data quality over time. For example, if you need to rely on estimates to meet a reporting deadline, then start putting the process in place to gather supplier emissions data before your next reporting deadline.

Where available, emissions data from direct emissions measurements should be collected (e.g. from a device measuring the emissions from a chemical reaction or industrial process).

Step 4: Calculate CO₂e emissions

For a corporate carbon footprint, generally all greenhouse gas emissions are represented as carbon dioxide equivalent (CO₂e) and should be calculated using the formula:

activity (unit) * emissions factor (tCO₂e/ unit) = emissions (tCO₂e)

Emissions factors represent emissions per activity e.g. for electricity grid intensities, fuels, transport, and water supply, waste disposal. Emissions factors can be activity-specific, supplier-specific or higher-level spend-based emissions factors.

In general, mapping the best available activity data with the best available activity-specific emissions factor will result in the most accurate and robust calculations.

Step 5: Report emissions

Reporting emissions is frequently the next step after calculating them, whether to fulfill internal and external requests for your business’s carbon information, or to comply with carbon reporting regulations and legislations.

By following Steps 1-4, you can submit your corporate carbon footprint information for any GHG Protocol-aligned request. For example CDP, Ecovadis, TCFD, GRI, SBTi, or your investors, suppliers, and other regulatory bodies.

➡️ As an accredited CDP solutions provider, CarbonChain makes your most complex supply chain emissions calculations easy

Why is it important to calculate emissions?

Calculating your corporate carbon footprint brings a range of business benefits such as:

• Supercharge your emissions reductions. What gets measured properly, gets done. Decarbonization efforts are only as strong as the information that populates them.
• Track progress to net zero. A corporate carbon footprint is an important metric for tracking progress towards science-based net-zero targets, and for reporting to investors, customers, and regulators.
• Fulfill customer and shareholder requests. Expectations in the business landscape are tightening. Companies worth $6.4 trillion in purchasing power requested suppliers to disclose their emissions last year and 81% of financial institutions assess their portfolio’s exposure to climate-related risks.
• Future-proof your business. Leading companies know they must take responsibility for their emissions, including Scope 3 emissions, and tackle the climate risks hidden in their supply chains, if they are to succeed in the transition to a net-zero economy.

Calculate your corporate carbon footprint with CarbonChain

Leading businesses use CarbonChain for accuracy and automation in their corporate carbon footprint.

CarbonChain's software provides manufacturers and commodity traders with their corporate footprint broken down into Scope 1, 2 and 3 (across 15 categories) to easily report into key sustainability reporting frameworks (regulatory or voluntary).

Our team of carbon accounting experts also offers support defining your organization’s reporting boundary (i.e. identifying entities, relevant emission sources, justifications for exclusion) for transparent documentation.