Carbon accounting is important for all types of companies, and even if it is starting to become mandatory, it is a practice that is still new for most companies, and we often find people are confused by the different carbon accounting standards and regulations. This article is a brief introduction to what we think are the key standards and regulations to be aware of, we have set out in brief how they work and how they are related to each other.
This article will look at the following international standards and UK regulations:
Before getting into too much detail, let’s start with the two core terms that are often referred to in carbon accounting context that we must be clear on – Net Zero Carbon and Carbon Neutral. Many people still use these terms interchangeably because they are similar, but they actually have two distinctly different meanings, so one should not be used/mistaken for the other.
The standards and regulations in this article revolve around achieving Net Zero, which is the recognised minimum carbon status necessary for limiting emissions to 1.5°C.
As with most up and coming terms that are rapidly rising in popularity, there are multiple descriptions available by numerous bodies, which can be confusing in itself. However, we will refer to the definition used by the SBTi for an organisation to meet Net Zero:
In summary, net zero means reducing greenhouse gas emissions in line with limiting global warming to 1.5°C, and to guarantee that emissions that cannot be eliminated, are balanced by removals. The term net zero is crucial because this is the state at which global warming stops.
The definition of Carbon Neutral is subtly different, and we have taken this definition from the British Standards Institute:
To help remember the difference, keep in mind that Net Zero describes a carbon status in relation to limiting global warming to 1.5°C, and it is still possible to be Net Zero and not offset all emissions if the emissions are limited to a 1.5°C trajectory. Whereas a Carbon Neutral status requires all carbon to be limited to zero or completely offset.
Now we will look at the standards and regulations and why we are using them:
When a company or organisation wants to calculate their current contribution to global warming and wants to find out how to reduce their emissions to a ‘climate friendly’ level, deciding what emissions to include and exclude requires a process to be followed. The GHG Protocol is the internationally ‘agreed upon’ method for calculating carbon emissions.
In short, the GHG Protocol is an internationally accepted and standardised method for calculating greenhouse gas emissions arising from organisations' activities.
The Greenhouse Gas Protocol Initiative is a multi-stakeholder partnership of businesses, non-governmental organisations (NGOs), governments, and others convened by the World Resources Institute (WRI), a U.S.-based environmental NGO, and the World Business Council for Sustainable Development (WBCSD), which is a Geneva-based coalition of 170 international companies.
The GHG Protocol arose in the 1990s when WRI and WBCSD recognised the need for an international standard for corporate GHG accounting and reporting. This standard is now the key method required to be followed internationally by governments and voluntary carbon reduction initiatives. It supplies the world’s most widely used greenhouse gas accounting standards.
The GHG protocol standards are the following:
The standards to be applied will vary from one organisation to another, however for most companies, they would need to refer to the Corporate Standard and Corporate Value Chain (Scope 3) which can be applied to companies, NGOs, government agencies and universities, among others.
The Greenhouse Gas Protocol breaks emissions sources down into three categories called ‘Scopes’:
The Science Based Targets initiative
Once the quantity of carbon emissions of an organisation is calculated and identified, a target to reduce the carbon emissions can then be set and one of the most widely accepted voluntary international standards for setting an organisation's carbon emission target is the Science Based Target initiative (SBTi).
The Science Based Target initiative offers a standard and process for organisations to set their carbon emissions targets to accurately limit their emissions to a level that fits within the 1.5°C SBT trajectory.
The SBTi is a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI), and the World Wide Fund for Nature (WWF). The initiative drives ambitious climate action in the private sector by enabling companies to set science-based emissions reduction targets.
To set a Science Based Target companies must follow the SBTi’s 5 step process:
1. Commit: to set a science-based target, by submitting a letter declaring their intent.
2. Develop: an emissions reduction target in line with the SBTi’s criteria (following the GHG Protocol calculation method).
3. Submit: the target to the SBTi for official validation.
4. Communicate: announce the target publicly and to stakeholders.
5. Disclose: report company-wide emissions and progress annually.
Both large and small businesses are setting science-based reduction targets and over two thousand companies worldwide, such as AECOM, Mastercard and PepsiCo have already signed up. The list of all the companies setting targets in your industry can be found here.
In the first few years of implementing an organisation's newly created carbon reduction strategy, and while the organisation adjusts its internal processes and infrastructure to zero or low emission alternatives, there are usually residual GHG emissions that will fall outside the targeted trajectory.
This is particularly relevant for complex organisations, which makes the purchasing of carbon offsets a necessary inclusion in the carbon reduction strategy. However, there exists much controversy over what defines a valid and true carbon offset.
To tackle this fuzzy area, the PAS 2060 standard has been written and it is an internationally accepted standard for demonstrating, and verifying carbon neutrality.
PAS 2060 applies to organisations of all sizes and sectors and can be used to demonstrate carbon neutrality of any uniquely identified subject, such as specific activities, products, services, buildings, or events and it specifies a four-stage process to do this:
1. Assessment of GHG emissions based on accurate measurement data (GHG Protocol calculation method complies with PAS 2060)
2. Reduction of emissions through a target-driven carbon management plan (This would be covered in when setting a science-based target)
3. Offsetting of excess emissions, often by purchasing carbon credits (This and number 4 below are the steps that PAS 2060 uniquely addresses)
4. Documentation and verification through qualifying explanatory statements and public disclosure.
In addition to the carbon accounting being expected of by their stakeholders, the UK Government requested all applicable organisations to start publishing their Carbon Reduction Plans from the 30th September 2021, in line with the Procurement Policy Note (PPN) 06/21 published on 5th June 2021. The procedure requires the calculation process to follow the GHG Protocol carbon accounting standard, and the target setting is very similar to the SBTi process, although not entirely the same.
The PPN 06/21 requires organisations to complete a short form (downloadable here) declaring their current and targeted GHG emissions arising from Scope 1, Scope 2 and Scope 3 (categories 4 -7 & 9 only). It also requires a minimum target of net zero carbon by 2050 and for a description of the planned measures to be included.
Applicable organisations are described as ‘In-Scope Organisations’ which generally apply to all contract values of £5 million per annum and above (excluding VAT). Further downloadable information and guidance on the PPN06/21 is available on the UK Government website here.
The UK Government has recently announced it will be requiring applicable organisations to begin disclosing their climate-related risks and opportunities following the TCFD standard. This is not target setting but rather a formal review of the progress, risks and opportunities related to an organisations carbon reduction strategy.
The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) to improve and increase reporting of climate-related financial information, and for industry to benefit from the following:
The UK will become the first G20 country to make it mandatory for Britain’s largest businesses to disclose their climate-related risks and opportunities, in line with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations.
Thanks to the voluntary organisations leading the path in reducing their emissions, and also rising expectations within industries to respond to climate change proactively, carbon accounting will soon be a common practice for businesses. It will no longer be an activity that gives companies an edge over their competitors, but rather it will be as necessary as maintaining the company books.
This looming reality means it is critical for the survival of a business to be able to grasp the basics of what carbon accounting entails. This article is an attempt to ease the learning process and shed some light on what the key standards and regulations to take note of are, how they reference each other and where they overlap.
The Paris Agreement is a legally binding international treaty on climate change. It was adopted by 196 Parties at COP 21 in Paris, on 12 December 2015 and entered into force on 4 November 2016. Its goal is to limit global warming to well below 2, preferably to 1.5 degrees Celsius, compared to pre-industrial levels. To achieve this long-term temperature goal, countries aim to reach global peaking of greenhouse gas emissions as soon as possible to achieve a climate-neutral world by mid-century. The Paris Agreement | UNFCCC
Gases that trap heat in the atmosphere are called greenhouse gases. The most common ones are Carbon Dioxide (CO2), Methane (CH4), Nitrous Oxide (N2O) and Fluorinated gases. Each gas’s effect on climate depends on its concentration or abundance, how long they stay in the atmosphere and how strongly they impact the atmosphere. Overview of Greenhouse Gases | US EPA
Operational carbon is the term used to describe the emissions of carbon dioxide and other global warming gases during the in-use operation of a building. Operational carbon - SteelConstruction.info
Embodied carbon is the total greenhouse gas (GHG) emissions (often simplified to “carbon”) generated to produce a built asset. This includes emissions caused by extraction, manufacture/processing, transportation and the assembly of every product and element in an asset. In some cases, (depending on the boundary of an assessment), it may also include the maintenance, replacement, deconstruction, disposal and end-of-life aspects of the materials and systems that make up the asset. It excludes operational emissions of the asset. UK-GBC-EC-Developing-Client-Brief.pdf (ukgbc.org)
What is Whole Life Carbon?
Whole Life-Cycle Carbon (WLC) emissions result from the materials, construction, and the use of a building over its entire life, including its demolition and disposal. A WLC assessment provides a true picture of a building’s carbon impact on the environment. Whole Life-Cycle Carbon Assessments guidance | London City Hall