How can companies reduce their carbon footprint?

What is a carbon footprint?

A carbon footprint is a calculated value of the total amount of greenhouse gases (GHGs) generated by an individual, business, product or activity. There are seven types of GHGs, the most common being carbon dioxide, nitrous oxide and methane.

Carbon footprints are reported in tonnes of emissions, normally as a ‘carbon dioxide equivalent’ (CO₂e) measurement. A carbon footprint measured in CO₂e goes further than just measuring carbon dioxide, as CO₂e also incorporates emissions from other GHGs. Equating other GHGs to CO₂ using their global warming potential (GWP) gives a more accurate picture of a company’s carbon footprint. For example, as methane is 28 times stronger than carbon dioxide, the quantity of methane emitted is multiplied by 28, to be equivalent to CO₂.

For companies, a corporate carbon footprint represents GHG emissions produced by their business operations, supply chains and products, including direct and indirect emissions relating to Scopes 1, 2 and 3. 

Companies can also calculate a product carbon footprint — normally expressed as a carbon intensity — which represents the GHG emissions generated by a specific product’s supply chain.

Why should companies reduce their carbon footprint?

As companies become more aware of their environmental impact, they are seeking to avoid reputational damage, adhere to carbon legislation and avoid climate litigation risks.

Consumers are becoming more sensitive to products’ climate impacts. Many are willing to pay more for products and services deemed more sustainable, including having a lower carbon footprint.

By calculating a carbon footprint, companies can better understand the climate impact of their operations and supply chains. Measuring your carbon footprint to reduce carbon emissions will also help your business fulfil carbon reporting requests.

CarbonChain automates your carbon accounting and allows you to confidently measure and report your company’s emissions. By choosing our platform, you will receive a comprehensive overview of your business’ GHG emissions on one platform, which will inform your carbon reduction strategies.

How to reduce your company’s carbon footprint

Once a carbon footprint is calculated, there are many steps companies can take to reduce their carbon emissions. Five are outlined below:

1) Reduce the carbon footprint in your supply chain

Supply chain emissions represent a substantial part of a company’s carbon footprint and policymakers are increasingly scrutinizing them. They are also, on average, 26 times higher than operational emissions — for some manufacturers and sectors, they will make up the most substantial part of a company’s carbon footprint.

Working with suppliers to measure and reduce supply chain emissions is a crucial step for a company to decarbonize — however, supply chain emissions are tricky to calculate, and the main drivers causing them are often underestimated. The World Economic Forum found that the majority of emissions are caused through raw material inputs from heavy industries and land use, despite many companies perceiving transport as the biggest driver.

Levers to to impact Scope 3 emissions along the value chain

The Science Based Targets initiative (SBTi) Scope 3 discussion paper suggests key areas of focus at each stage of the Scope 3 supply chain:

• Upstream:
  • Sourcing policies
  • Contractual/cascading arrangements
  • Minimize use of energy-itensive / emissions-intensive materialss and services
  • Shift to zero- or low-carbon materials and services
  • Incentives, capacity building, finance mechanisms
• Midstream:
  • Business travel policies
  • Remote work policies
  • Waste minimization
  • Optimization of energy use
  • Switch to clean energy carriers
• Downstream:
  • Contractual licenses
  • Licensee or franchise arrangements
  • Minimization of direct and indirect energy use in sold products
  • Shift to products that do not release GHGs during use-phase
  • Use of materials that avoid / minimize GHGs at end-of-life
  • Circular business models
  • Maximization of product lifetime

CarbonChain has detailed insight into carbon-intensive sectors and their emissions — and leading companies know that polluting supply chains hide a range of risks. When companies are aware of their products’ embedded emissions, they will be in a more advantageous position, as this will enable them to assess risks and develop more competitive business models, in line with a low-carbon economy. 

With legislation such as the EU CBAM now in play, companies will need to increasingly disclose carbon emissions across the value chain, or face penalties. By choosing CarbonChain for supply chain accounting, you will stay ahead of policy developments, identify risky hotspots and accelerate decarbonization as we move to a low-carbon economy.

2) Invest in renewable energy

Investing in renewable energy benefits companies in a number of ways: it helps reduce their dependence on polluting and increasingly costly fossil fuels, increases the likelihood of attracting sustainably-minded investors and customers, and establishes your business as an industry leader.

There are a number of ways companies can choose to invest in renewable energy:

• Switch to renewable energy providers: Purchasing renewable energy (which may require switching energy providers) is a decision all companies who are serious about reducing their environmental impact should take, as this switch contributes to the development of cleaner energy solutions and mitigates climate change impacts.
• Invest in on site renewable energy projects: Companies can install renewable energy systems such as solar panels or wind turbines for on-site generation, which would reduce the amount of electricity needed to consume from the grid — and potentially become a new income stream, as you can sell the surplus back to the grid for a profit. This ‘behind the meter’ approach to electricity generation will reduce Scope 2 emissions under either location-based or market-based approaches.
• Enter into a power purchase agreement (PPA): A PPA is an agreement between an electricity generator and a customer who purchases energy at a pre-negotiated price. A company can enter into a long-term contract that outlines purchase of the environmental attribute associated with a specific renewable energy project that exports renewable electricity to the grid. This approach will reduce Scope 2 emissions under a market-based approach only.
• Purchase renewable energy credits (RECs): Companies can buy RECs, which are certificates that correspond to the environmental attributes associated with any renewable energy project that exports renewable energy to any grid. This reduces Scope 2 emissions under a market-based approach only.

Focusing on renewable energy investment will have a substantial impact on a company’s Scope 2 emissions, especially for manufacturers whose sites likely consume a significant amount of electricity, depending on which products they make. The picture may look different for companies who do not process, manufacture or produce goods on-site — for example, commodity traders will usually only have Scope 2 emissions for their office operations.  

As Scope 2 emissions are considered under a company’s operational control — and therefore easier to influence — renewable energy investment should be considered as one of many ways for companies to reduce their carbon emissions. Encouraging your supply chains to invest in renewable energy can reduce your Scope 3 emissions.

3) Educate your company about its carbon footprint

As the adage goes, “you cannot manage what you do not measure” — once a company knows where its carbon hotspots are, they are better able to identify reduction opportunity areas. It is also important to communicate findings to employees who are not in the sustainability or ESG teams, to ensure everyone is aware of your company’s carbon reduction strategies (as well as the commercial opportunities in communicating them).

For manufacturers, carbon hotspots could be situated across the value chain, in the raw materials used to make products, the production process or at products’ end-of-life. This is why it is especially important to calculate a complete product carbon footprint, which includes emissions beyond a company’s immediate operations.

If commodity traders can better understand the source of carbon emissions, this can impact decision-making in trading operations. Products which are more carbon-intensive are becoming increasingly high-risk trades due to carbon pricing and regulations sending shocks through supply chains. With financiers introducing incentives for low-carbon trades, it is important for commodity traders to have access to up-to-date carbon intelligence to accurately measure and manage risks, such as on CarbonChain’s platform.

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4) Promote reuse and recycling strategies

The waste hierarchy outlines a preferred order for waste management: prevention, reuse, recycling, and energy recovery, with disposal as a last resort. A strategy to achieve a circular economy, this approach ensures that products are designed to reduce waste — and it will also help companies conserve resources and boost efficiency. 

Commodity traders should try to shift their energy portfolio towards biofuels to reduce downstream combustion emissions. Biofuels have a biogenic component, such as corn or sugar cane, which releases significantly fewer emissions during combustion and is therefore not accounted for as their sequestration occurred within the last 100 years. For metal products, they should be sourced from sites that have high scrap input rates as this means they are likely to have lower levels of carbon intensity.

Manufacturers in the metals sector should try to source material inputs that have high recycled content such as scrap recyclers. By considering the full waste hierarchy from the design stage, metal products would be prepared for end-of-life, so materials can re-enter the cycle through reuse, recycling and recovery. 

Other ways to reduce downstream Scope 3 emissions include prioritizing biofuels — blending fuels that incorporate biogenic components (e.g. biodiesel and ethanol) will reduce combustion emissions from the use phase of the product’s life cycle stage. 

5) Carbon offsetting

Many companies use carbon offsets to compensate for GHG emissions released across the value chain. However, corporate carbon offsetting has faced criticism in recent years due to transparency and accuracy issues — leading to more and more companies being publicly called out for claiming to reach net zero through offsetting, despite continuing to release high levels of GHG emissions.

The GHG mitigation hierarchy states that climate change mitigation is: 1. Avoid, 2. Reduce, 3. Compensate. To avoid accusations of greenwashing, companies should avoid generating GHG emissions, then reduce unavoidable emissions and only then should residual emissions be offset. 

For credible GHG emissions calculation and reduction, companies should avoid over-reliance on offsetting. As a first step, businesses should prioritize calculating a full corporate carbon footprint as part of their carbon accounting, to enable deep and fast emissions reductions.