Sustainability, HSE & Social Impact software

View Original

Implementing Carbon Reporting in Your Organisation

Introduction

Australia needs to meet its carbon reduction targets, both nationally and globally. At the national level, the government has mandated the NGER scheme for corporations that meet set thresholds for greenhouse gases (GHG), although the use of the guidance provided by non-mandated corporations is also encouraged. In addition, recognised global standards, such as the Greenhouse Gas Protocol (GHG Protocol) and ISO (and Australian) standards are available to all organisations to help demonstrate climate change action. With only ten years to demonstrate measurable reductions, and thirty years to achieve net zero emissions, now is the time to accelerate carbon management plans.

Commitment

Producing data that is useful for decision-making about climate change risks requires commitment in terms of governance, strategy, risk management and metrics and targets (as recommended by the Taskforce on Climate-Related Financial Disclosures (TCFD)). This means:

  • Governance around climate-related risks and opportunities

  • Actual and potential impacts of climate-related risks and opportunities on business strategy and financial planning (short, medium and long-terms)

  • The processes used to identify, access, and manage climate-related risks (physical, transition and liability)

  • The metrics and targets used to assess and manage climate-related risks and opportunities.

Preparing a carbon inventory is an essential step in this process. For large and complex corporations, establishing an approximate carbon footprint may help to identify materiality for carbon emissions (e.g. an emissions source that constitutes ≥1% of the total inventory) and areas of focus before undertaking a full carbon inventory. This approach is also described as the relevance test, which is used to identify emission sources for exclusion from the inventory and why. It is worth discussing risks and opportunities with stakeholders to define what an organisation’s primary drivers are (see Article A Stake in the Environment).

Carbon reporting is like any other business process requiring a systematic Plan-Do-Review-Improve cycle systems approach.

Planning

The planning stage is important to ensure the effort produces decision-useful information that can be used across a range of platforms, if desired. An organisation should consider which platforms, protocols and initiatives support its strategic direction, including stakeholder perspectives on climate change risks.

Some aspects of the planning process (such as scope, timelines, and methodology) may be shaped by legislative requirements. An organisation that is required to report under NGER, for example, must adhere to the methodology for calculating greenhouse gas emissions and energy data outlined in the National Greenhouse and Energy (Measurement) Determination 2008 (NGER Determination).

The NGER Determination covers Scope 1 and 2 emission sources such as the combustion of fuels for energy (e.g. natural gas) and industrial processes (Scope 1), and the use of purchased electricity (Scope 2). The NGER scheme also operates to important annual dates, which means that facilities must provide their submissions accordingly.

Other organisations seeking to develop and better understand their carbon footprint can follow the guidance provided by the NGER scheme, but other initiatives may be more flexible or relevant.

The GHG Protocol and the National Greenhouse Accounts (NGA) Factors, for example, are voluntary and provide Scope 3 calculation guidance, which is not included in NGER reporting.

Planning must identify the inventory boundary, which comprises an organisational boundary and an operational boundary. The organisational boundary defines the entity that is responsible for emissions from that organisation. NGER, for example, sets the organisational boundary at ‘controlling corporation’ (which is defined by the NGER Act). Under the control approach (GHG Protocol), a company accounts for 100% of the GHG emissions from operations over which it has control. The operational boundary defines the on-site and off-site activities, processes, services and impacts that are to be included in the emissions inventory.

Principles for developing an emissions inventory and, carbon reduction strategy and neutrality, are discussed in the sections below.

Emissions inventory

Greenhouse gas accounting is the process of understanding and quantifying GHGs to produce an emissions inventory for management purposes. One of the earliest established global accounting standards was the GHG Protocol and many schemes, such as NGER and AS ISO 14064 are based on, or derived from it. All inventories should be guided by the GHG Protocol principles of relevance, completeness, consistency, transparency, and accuracy.

For most businesses, this will mean calculation of carbon dioxide and potentially other GHG emissions within the inventory boundary from Scope 1 and 2 emission sources, and potentially Scope 3 (if identified in the planning phase). AS ISO 14064 Greenhouse Gases Part 1 covers the principles and requirements for designing, developing, managing, and reporting organisation, or company-level, GHG inventories.

An inventory may not include all GHGs. Nitrogen trifluoride (NF3), for example, is required for inclusion under the GHG Protocol but is only used in manufacture of specific products (e.g. semi-conductors, LCD panels, some types of solar panels and chemical lasers).

Similarly, if an organisation is reporting its emissions to comply with Australian regulations, it may choose not to include any emissions under Scope 3. If an organisation is reporting for voluntary reasons, it may choose to include as many Scope 3 sources as it can reasonably measure.

The next step is data collation, which can be the most time-consuming part of developing an inventory. Activity data must be collated for each emission source, in the right units, and for the time-period required (usually one year). Commitment at the highest levels and communication throughout the organisation will help to solve data collation problems.

A simplified example of activity data is how much electricity is used over a year (data might be accessed monthly, for example). The activity data units must match the emission factors used to calculate the quantity of GHGs. For example, the NGA emission factors for consumption of purchased electricity (Scope 2) are 1.02 kg CO2-e/kWh in Victoria and 0.15 kg CO2-e/kWh in Tasmania. Note that GWP (Global Warming Potential) is built into the emission factor for individual GHGs (CO2 = 1).

Good data management, including format, quality, completeness, accuracy, and authenticity, is key to the usefulness of the emissions inventory (apart from regulatory requirements). It may even be possible to obtain data directly from the supplier to minimise data handling. If there is missing data, then it may need to be interpolated. If the required information is unavailable, then it may be possible to estimate emissions. Data accuracy for Scope 3 items may be lower than Scopes 1 and 2 but the completeness of the inventory is improved.

In all cases, it is necessary to document any deviations from the methods or procedures adopted, any assumptions or limitations, any data gaps, and any areas of data uncertainty. It is also important to maintain an audit trail from the inventory to the original data sources. This will assist in continuous refinement of the inventory as it is updated (i.e. on an annual basis or if there is a major change). AS ISO 14064 Greenhouse Gases, Part 3 covers the principles and requirements for verifying GHG inventories and validating or verifying GHG projects.

Good data collection and management produces a useful emissions inventory so that an organisation can identify key emission sources and set and measure progress on targets (compared to a base year), whether they be carbon reduction or carbon neutrality. It also allows tracking the performance of facilities and impact of improvements year on year.

What do you do with the information gained from an emissions inventory?

This information is used to develop a carbon management strategy, which may include avoidance, reduction, and/or offsetting. There are many platforms for evaluating and reporting on these initiatives as discussed, whether it be to meet a reduction target (e.g. AS ISO 14064, Science Based Targets initiative (SBTi), provide assurance through climate-related financial disclosures and/or achieve climate neutrality (e.g. the Australian government endorsed Climate Active certification scheme).

The carbon/GHG emissions inventory can be used to set, and track progress against, emissions reductions targets and inform strategic investment in emissions reduction measures. The ACT government, for example, has set science-based reduction targets. The types of reduction measures recommended to achieve these targets were to shift to renewable energy supply, increase energy efficiency in current and new building stock, electrify (or use green hydrogen-fuelled) private and public transport and transition from gas to electricity (provided by renewable energy).

Identifying carbon reduction measures may require expert assistance. Research and development in this area is ongoing by institutions such as the CSIRO and Australian universities. Much information can also be gleaned from the administration of carbon emissions reduction and offsetting schemes by the Clean Energy Regulator (CER) and Climate Active. The Public Disclosure Statements published on the Climate Action website include details of carbon reduction measures implemented by the certified organisation. In addition, advocacy groups such as the Climate Council provide an evidence and information (problems and solutions) base for use by the Australian public.

While carbon reductions are necessary and possible, the transition to low carbon energy will multiply the demand for certain minerals, especially for infrastructural improvements and electrification. This means that while you have a carbon reduction within the organisational boundary of the supply chain, there may be an increase upstream in the supply chain. Therefore, the supply chains of the raw materials required need to make a low-carbon transition too (in addition to operating within broader societal expectations).

Carbon neutrality is achieved by measuring, reducing, and offsetting emissions. Carbon offset units are generated from activities that prevent, reduce, or remove greenhouse gas emissions from being released into the atmosphere (see the Aboriginal Carbon Fund discussed in the article Destination Net Zero Emissions.

While it is preferable to avoid or reduce GHG emissions, offsetting can deliver other social, cultural, economic, or environmental benefits in addition to reducing measures. Some of these benefits include increasing biodiversity, providing local employment, providing opportunities for living and working on country and facilitating the flow of income from the sale of offset credits to project communities for improved infrastructure, technology transfer and increased economic activity.

It is important to document the carbon/GHG inventory in such a way that it is transparent and easily maintained, particularly with the increasing trend of public disclosure. Good data quality and reporting builds confidence in the usefulness of the information for strategic planning and investment in carbon reduction measures.

——————————————————————————————

Shelley Anderson is a freelance certified Environment Practitioner and Sustainability professional with experience in Australia and the UK. Her expertise includes pollution and fate, biodiversity creation, sustainability reporting, environmental risk management, and due diligence, across a broad range of market sectors. She was also a Director of the Cotswold Canals Trust (UK) where she applied her skills to charity governance and impact.

Jenni Mulligan is Co-Founder and a Principal Consultant @ iSystain .

—————————————————————————————-

Click here to read about iSystain’s Sustainability and Carbon Reporting solutions module or contact us directly to speak to an iSystain consultant.