In this new series, we take a practical look at some of the perhaps controversial topics related to carbon footprint, one of the pieces of the ESG methodology puzzle. In the opening episode, we will focus on the very first step that precedes carbon footprint reporting. We will explain why companies should not be afraid to transparently communicate the results of their carbon footprint audit. While companies often show some of their carbon footprint reduction activities, they are reluctant to publicly disclose the exact numbers. This is because they fear comparisons with competitors, although they often compare “apples with pears”.
Benchmarking on carbon footprint
Benchmarking in the context of carbon footprinting is a process used to compare the greenhouse gas emissions performance of different companies within the same sector. The aim of benchmarking is to get an accurate picture of how companies in a given sector are performing in terms of their carbon footprint. At a higher level, companies can compare their emissions with those of other companies in the same region or country. This allows them to understand how their emissions compare to the regional or country average.
- No number is wrong when measuring a carbon footprint, the aim is to get an overview of the current situation and be able to compare the outputs.
- Calculation methods and data quality often vary. Due to inconsistent data, today’s benchmarks are often hard to read and rankings can therefore be misleading.
- For comparisons to be meaningful, the range and quality of input data needs to be the same. Harmonisation of reporting standards will help to achieve this in the future.
- By publishing carbon footprint audit results, companies can compare the scope of their calculations and clarify where they can expand their calculations and better implement strategies to reduce their carbon footprint.
- By publishing the result of a carbon footprint audit, companies contribute to greater transparency across the industry and set an example for others.
The methodology for calculating emissions may not be the same for the companies being compared
The GHG protocol methodology says that we must make a “best effort” in collecting data for the calculation. If a company is not able to get the best quality data (for fuel-based methods, which calculate the carbon footprint based on the amount of fossil fuel consumed), a secondary calculation method (distance-based, which calculates based on the distance travelled and the coefficient of the vehicle) or a tertiary method (spend-based, where the carbon footprint is calculated from information on the cost of a given product, service, fuel and a given emission factor) can be used. The purpose of this benevolence in the data collection methodology is to ensure that each company is able to obtain complete data for the calculation. The more effort a company puts into data collection, the better the calculation it gets, and the more meaningful the results are for the subsequent decarbonisation strategy and process adjustments within the company. However, far from all companies use the same quality of data for the calculation, making comparisons with competitors meaningless. Many companies are therefore afraid to share their results with others. In the future, the comparison will hopefully be easier thanks to common standards that are emerging at EU and international level, but today the situation is more complex.
There is no such thing as a wrong carbon footprint number
Companies fear that their results will be perceived as inadequate, which could lead to a loss of customers, business partners or credibility. It is important to remember that there is no wrong number. Once you know where you stand on emissions, you can follow up with a decarbonisation strategy and, in the case of an audit process, individual annual results can also be compared, which is the basis for improvement. In addition to the result, you also need to know the scope of the calculation and continually increase it, either through the depth of data collection or by adding relevant categories for tracking. It is also important to see benchmarking not only as an evaluation tool but also as an information tool that helps to find reserves.
So why share your results?
By sharing measurement results, companies are able to compare the scope of the calculation in a given area of the business – they can see whether a given measure goes on the surface or in depth, and then steps can be taken towards more relevant results and thus more effective measures. But it is also important to show examples of good practice across industries. In the end, we are all in the same boat when it comes to protecting nature and reducing emissions, and we are practically at the beginning.