How to calculate the carbon footprint of a company

6 minutes07/28/2022

By Sandra Gottschall (ConPlusUltra)

Entrepreneurial responsibility is currently undergoing a challenging process of transformation. This ranges from the EU taxonomy – part of the European Green Deal – to the upcoming revisions to sustainability reporting (set out in the EU CSRD) and legislation on due diligence in relation to supply chains. One thing is certain: companies have a key role to play in driving forward the sustainable transition in the society as a whole. They must become increasingly transparent to their stakeholders by scrutinizing themselves and their supply chains in accordance with the ESG criteria. Some of the relevant methods, standards and criteria for such reporting are still being developed, while further challenges such as the war in Ukraine, supply bottlenecks, and skyrocketing energy prices force the companies to make ad hoc strategic realignments.

Yet, despite the wide-ranging challenges in relation to entrepreneurial responsibility, there is one topic that connects these various issues: the climate crisis. When it comes to evaluating the highest risk – and greatest responsibility – of our time, methods to assess and optimize greenhouse gas emissions have made such strides forward in recent years that we now have detailed and valid calculation methods as well as internationally applicable databases at our disposal. This means that in this large-scale transformation process, there is one stable parameter that the companies can build on: their carbon footprint.

Calculating a company’s carbon footprint

A corporate carbon footprint is calculated on the basis of measured or estimated consumption data (natural gas, oil, biomass, electricity, fuel, paper, materials, etc.) and emissions factors known as CO2 equivalents. These consist of CO2 (the most widely emitted greenhouse gas by volume) as well methane and nitrous oxide, which are converted into CO2 equivalents. Calculating a corporate carbon footprint is not just a one-time task. Instead, this data is updated every year with the goal of progressively reducing emissions through emission abatement measures, with constant monitoring of actual emissions. The entire process of calculating a carbon footprint is a cycle of continuous improvement, making it an optimal tool for long-term management of operational climate protection measures.

A corporate carbon footprint is composed of all direct and indirect emissions generated by the entire organization. It therefore requires comprehensive recording and analysis of the company’s emissions within clearly defined system boundaries. The analysis calculates emissions using available data such as consumption figures (e.g. annual electricity consumption, annual fleet mileage) and allocates them to organizational units (e.g. headquarters, production sites, external service providers), processes, products and services. The foundation for carbon footprint calculations is the international ISO 14064 standard, while the three scopes of the GHG Protocol are used to make distinctions between different emissions sources:

There are various methods of converting consumption data into CO₂ equivalents. The main principle is that companies should make improvements every year in terms of data quality and result validity, and should also focus on the main details. The following table outlines some of the options:

In addition to correctly applying the standards mentioned previously, it is particularly important to observe the basic principles set down in the GHG protocol – namely relevance, completeness, consistency, transparency and accuracy – which follow the principles of financial reporting.

The big picture: Carbon footprints and professional climate protection management

In the future, carbon footprints will be subject to stringent audits. With this in mind, a key long-term target must be to develop a sound, unobjectionable data collection and calculation method. Companies should therefore establish a professional approach to climate protection management in order to meet these future requirements.

The general approach to footprint-based corporate climate protection management can be divided into the following steps:

Your voyage of discovery with the carbon footprint

Experts agree that, in addition to conventional financial indicators, CO2 emissions will soon become the key environmental indicator for climate protection, for banks, auditors, investors, customers and, last but by no means least, regulators and legislators. The good news is that methods to calculate this indicator exist and have been widely tried and tested.

Carbon footprints highlight emissions hotspots and potential optimizations – and take companies on a voyage of discovery to explore their own activities, their suppliers’ operations and their customers. This process does not create data graveyards and instead generates useful information for product developers as well as procurement, production, marketing and sales specialists. Eco-friendliness and sustainability are the key standards of the future and will generate massive competitive advantages.