6 Steps for corporates to achieve decarbonization via GHG Accounting

What is Decarbonization?

A process of reducing or removing Greenhouse Gas (GHG) emissions from the atmosphere. This process aims to mitigate the impact of climate change by transitioning to a low-carbon economy. It involves various projects, processes and strategies such as Energy Efficiency (EE), Carbon Capture, Utilization and Storage (CCUS), Sustainable practices, etc.

Decarbonization is a critical component of global efforts to combat climate change and achieve international targets such as those outlined in the Paris Agreement, which aims to limit global warming to well below 2°C above pre-industrial levels, with an aspiration to limit the increase to 1.5°C ensuring climate resilient development pathways.

Decarbonization and GHG accounting

Decarbonization and greenhouse gas (GHG) accounting are closely intertwined concepts critical for addressing climate change.

• Decarbonization involves reducing carbon dioxide and other GHG emissions across various sectors, aiming to transition to a low-carbon economy.

• GHG accounting, on the other hand, is the process of measuring and reporting these emissions to track progress and identify areas for improvement. It provides a systematic approach to quantify a company's carbon footprint, covering direct emissions(Scope 1)  from owned sources and indirect emissions from energy consumption (Scope 2) and supply chains (Scope 3).

Accurate GHG accounting is essential for setting realistic decarbonization targets, developing effective strategies, and demonstrating transparency and accountability to stakeholders. Together, these practices enable businesses to mitigate their environmental impact, comply with regulations, and contribute to global efforts to combat climate change.

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Why do corporates need to decarbonize?

• Corporates need to decarbonize due to following key reasons:

  • mitigate climate change impacts,

  • comply with regulatory requirements, and

  • meet stakeholder expectations

• Decarbonization helps reduce their greenhouse gas (GHG) emissions, which is crucial in limiting global warming to 1.5°C as per the Paris Agreement.

• Regulatory frameworks proposed climate disclosure rules demand transparency in emission reporting and reductions, pushing companies to adopt sustainable practices such as:

  • the European Union’s Emissions Trading System (EU ETS) and

  • the U.S. SEC's (Securities and Exchange Commission)

• Furthermore, investors, customers, and employees increasingly favor companies committed to sustainability, influencing corporate reputation and financial performance.

GHG accounting is essential in this context as it provides a systematic approach to measure, report, and manage emissions. By accurately tracking their carbon footprint through GHG accounting, companies can identify major emission sources, set realistic reduction targets, and monitor progress. This data-driven approach not only aids in compliance and transparency but also helps in optimizing operations, reducing costs, and driving innovation towards low-carbon solutions. Ultimately, decarbonization aligned with robust GHG accounting practices enables corporates to contribute to global climate goals while enhancing their competitiveness and long-term viability.

Steps to achieve decarbonization

Here are the steps to achieve decarbonization through GHG accounting:

Step 1: Establish a GHG Accounting Framework

1. Choose a GHG Accounting Standard

   1. Select a widely recognized standard, such as the Greenhouse Gas Protocol or ISO 14064.

   2. Ensure the chosen standard aligns with the goals and scope of your organization or project.

2. Define Boundaries Operational Boundaries determine which sources of emissions to include, such as direct emissions (Scope 1), indirect emissions from purchased electricity (Scope 2), and other indirect emissions (Scope 3).

Step 2: Identify and Quantify Emissions

1. Data Collection 

   1. Gather activity data related to energy use, fuel consumption, industrial processes, and other sources of emissions.

   2. Use metered data, purchase records, and other reliable sources.

2. Emission Factors Apply appropriate emission factors to convert activity data into GHG emissions. Emission factors can be obtained from databases like the IPCC, EPA, or national inventories

3. Calculate Emissions

   1. Use the formula: Emissions = Activity Data × Emission Factor

   2. Sum emissions from all sources to get total GHG emissions for each scope.

Step 3: Set GHG Reduction Targets

1. Baseline Emissions: Establish a baseline year for comparing future emissions reductions.

2. Set Targets: Define short-term and long-term GHG reduction targets. These can be absolute reductions or intensity-based reductions (e.g., per unit of production).

3. Align with Science-Based Targets: Consider aligning targets with science-based targets to ensure they are consistent with climate science and the goals of the Paris Agreement.

Step 4: Develop and Implement Reduction Strategies

Few strategies are mentioned below but are not limited to the same:

1. Energy Efficiency (EE)/ Renewable Energy (RE): Implement energy efficiency measures in buildings, processes, and transportation. While, transition to renewable energy sources such as solar, wind, and biomass.

2. Process Optimization: Optimize industrial processes to reduce waste and emissions.

3. Carbon Capture, Utilisation and Storage (CCUS): Invest in technologies that capture and store carbon emissions.

4. Sustainable Practices: Adopt sustainable agricultural practices, waste management, and circular economy principles.

Step 5: Monitor and Report Progress

1. Continuous Monitoring

   1. Regularly monitor GHG emissions to track progress against targets.

   2. Use automated systems and sensors where possible.

2. Reporting:

   1. Prepare regular GHG emissions reports following the chosen standard.

   2. Ensure transparency and accuracy in reporting.

3. Verification: Consider third-party verification to ensure the credibility of GHG data and reports.

Step 6: Engage Stakeholders

1. Internal Engagement: 

   1. Educate and engage employees and management on the importance of GHG reduction.

   2. Foster a culture of sustainability within the organization.

2. External Engagement:

   1. Communicate GHG reduction efforts and progress to customers, investors, regulators, and the public.

   2. Collaborate with suppliers and partners to reduce emissions across the value chain.

Conclusion

GHG accounting empowers corporations to achieve decarbonization by providing a systematic approach to measure, report, and manage their emissions. This data-driven process enables companies to set realistic reduction targets, monitor progress, and implement effective strategies such as energy efficiency, renewable energy adoption, carbon capture, utilisation and storage technologies. By aligning their operations with robust GHG accounting practices, corporates can not only comply with regulatory requirements but also enhance their transparency, competitiveness, and innovation capacity.

Ultimately, decarbonization through GHG accounting helps corporates mitigate climate change, meet stakeholder expectations, and contribute to global sustainability goals. This commitment to reducing emissions fosters long-term business viability and positions companies as leaders in the transition to a low-carbon economy, ensuring a more sustainable future for all.