Sustainable Business Solutions: Tracking GHG Emissions with Software
Greenhouse gas (GHG) emissions has been a sustainability buzzword for the last decade. As a result, reporting on emissions is becoming more common for businesses of all sizes. This translates to more public, investor, and policy pressure for all businesses to follow suit. This pressure can seem daunting for any company that does not already have GHG Reporting practices in place.
But it is essential to understand GHG emissions before developing emissions accounting and reporting policies. GHG emissions are the emissions that a company directly or indirectly produces as part of its operations. These are further broken down into Scope 1, 2, and 3 emissions.
1. Scope 1 emissionsare direct emissions from business operations – like onsite manufacturing or vehicles owned by the business.
2. Scope 2 emissions are indirect emissions that result from energy purchased from a utility.
3. Scope 3 emissionsare value chain emissions – the emissions from upstream and downstream activities such as the extraction and transportation of raw materials, or the sale and use of products.
With this basic knowledge, a company can start developing a strategy to account for, report, and implement policies to reduce their emissions.
A Snapshot into Emissions Reporting
Depending on why your company is starting the journey to create an emissions report may inform the difficulty to do the task. Compliance-driven strategies may be more difficult to start because the work requires cross-functional collaboration. For companies eager to understand and reduce their emissions profile, creating the baseline report may be a team-building experience. Either way, emissions reporting requires patience, and the work builds upon itself year after year.
Year 1: Create a Baseline
The main goal is to create a baseline on the existing emissions of the business – and the first step is to define what will be in the baseline report. Without baseline emissions data, it is impossible to effectively implement emissions reduction policies and see the impact of those policies over time. Companies will likely have more access to Scope 2 emissions data because it is usually shown on utility bills. Scope 1 may be easier for service companies than manufacturers, or those without fleets compared to those with fleets. The key to year 1 activities is clearly defining what scopes will be included in the baseline report and compiling related data.
Our recommendation is to start with Scope 1, 2, and company-controlled Scope 3 data in year one unless otherwise required by stakeholders.
Creating a baseline report is a time-consuming, yet critical process. Building the team to do the work, and creating processes for reporting and tracking, are key steps in baselining emissions.
Year 2: Setting Goals
With the baseline data, you can begin setting emissions reduction goals and take the initial steps to target high-emitting parts of your business. Additionally, it’s a good idea to continue building out your internal emissions inventory and data-gathering processes.
For example, if your baseline report did not include company-controlled Scope 3 emissions, such as grey fleet (employee cars driven for work engagements) or purchased materials, that may be a great place to expand reporting in year 2.
Year 3+: Getting Strategic
In years three and beyond, there are strategic decisions to make that inform future reporting. For example, the expansiveness of your reporting will be dictated by internal and external stakeholders. A compliance strategy may limit reporting to only what major customers/ stakeholders require. A strategy rooted in minimizing environmental impact may cause your company to expand its scope 3 reporting, include embodied carbon analysis, and add targets to direct emissions reduction strategies.
Cracking the Code: Simplifying GHG Reporting through Software Solutions
The first step is to decide if you will use a consultant to spearhead the baseline emissions inventory development or do the work in-house. Either way, you may decide to leverage the assistance of GHG Reporting software to facilitate the process.
GHG Reporting software provides a system to help organize and quantify emissions data. It often has built-in functionality for common emissions categories, highlights key points to consider when collecting emissions data, and outputs final emissions totals. With the right reporting software, companies can accurately collect and track emissions data over time to make strategic decisions on reducing their emissions.
Not all Greenhouse Gas Reporting software is the same. There are many types of GHG Reporting software available, and understanding how they differ will help your company choose the right option for your business.
What Scopes Will You Track?
There are several different protocols used for reporting carbon emissions. A few of the most common are the Greenhouse Gas Protocol (GHG Protocol), The Task Force On Climate-Related Financial Disclosures (TCFD), and The Partnership For Carbon Accounting Financials (PCAF). Software options are built around a specific framework. Decide which protocol you are using and choose software that meets those requirements.
Another consideration is which scope of emissions you want to track. While tracking all three is the goal, maybe you want to start with Scope 1 and 2. Perhaps you know Scope 3 is a high-emitting part of the business, and so you want to be sure to have help reporting Scope 3. Reporting software can specialize in different scopes – particularly for Scope 3, which is the broadest.
A robust Scope 3 reporting software can help you look at different segments individually. For example, breaking transportation-related segments into the grey fleet or customer travel categories is a straightforward concept many companies understand. Some software specializes in complex vendor reporting protocols whereas others are limited to simple Scope 3 tracking.
How Big Is Your Portfolio?
Considerations around the number and uses of your properties are important. Along this same line, you need to consider the size of your business. For example, if you are a private equity firm with several subsidiaries, it can be useful to separate the data for each portfolio and then be able to “roll up” the results into a final report.
In this case, enterprise-scale software is probably the right option for you, but it might not be necessary if you are a small business. The price difference and functionality of different types of software can vary greatly.
Will You Purchase Carbon Offsets?
Carbon offsets are a viable way to reduce your emissions, particularly for challenging segments to decarbonize. However, not all offsets are equal and major companies like Disney, JP Morgan, and BlackRock have been accused of purchasing “worthless” offsets.
Not only does this reduce the value of the offsets, but it opens up companies to claims of greenwashing and poor public image. If you plan to purchase offsets as part of your sustainability strategy, choose software that will verify that offsets are valid and have the appropriate third-party certifications.
What Else Do You Want to Track?
Robust sustainability reporting doesn’t stop with GHG emissions. It also includes criteria like waste generation and water use, which are requirements for green building certifications. LEED is the most widely recognized green building standard and one of the best ways for companies to show that they consider sustainability in their operations.
Software that tracks several sustainability criteria is an excellent way to centralize data collection and reporting for a business’s entire sustainability program.
Do You Need Integrations?
Your company may have been tracking energy use for years in efforts to reduce costs and plan for capital improvement projects. Your building automation software or instance of Energy Start Portfolio Manager may have already-stored data about your utility use that would be helpful to your first report. If so, you may want to choose GHG Reporting software that integrates with this type of standalone platform to track Scope 1 and 2 emissions.
Other considerations for integration are whether reporting software connects with your chosen finance software and allows for uploading individual spreadsheets for detailed Scope 3 tracking.
What About the Costs?
As with all business considerations, cost will play a factor. Less robust, cheaper software can be a good starting point for the first few years. Then, as your business or sustainability reporting grows, you can upgrade to more encompassing options. On the other side, if your company footprint is rapidly growing or you have targets for emissions reductions, it can be helpful to buy “up” from the start to ensure all data and reporting are integrated from the beginning.
Does the Software Include Consulting?
If you need help in the reporting process, some software includes “support” through the platform. This can help fill in knowledge gaps while you complete the process.
Some software includes built-in consulting. When considering this option, there may be some limitations including:
It will often require you to take training for the platform before it is available.
Typically, it only includes GHG Reporting, not additional sustainability areas you track.
It will increase the price of the software.
A better alternative is to work with an outside consultant to facilitate your entire sustainability program and rely on their expertise to fill in gaps with the GHG Reporting sections.
Software Is Not the Only Solution
If you have just started understanding your emissions profile, you may need help to launch your GHG Reporting and interpret the results of annual reports. Additionally, Scope 3 reporting can be complicated.
At Emerald Built Environments, this is where we thrive. We will use our expertise to help you set realistic goals to reduce emissions as part of a broader sustainability strategy. Wherever you are in the process, we are ready to help.