Understanding Carbon Emissions and Tracking Solutions

Unveiling the Environmental Impact

Decarbonization has become part of the business lexicon in recent years. Rising carbon dioxide (CO2) emissions from human activities and the corresponding threat of climate change have created a sense of urgency to reduce emissions. Moreover, organizations are being challenged by stakeholders to implement meaningful reduction strategies and adopt sustainable operational models.

While many initiatives have been undertaken to meet voluntary standards, governments increasingly are imposing regulatory requirements in a variety of forms. There is more to the story than the threat of negative consequences. Organizations are finding that sustainability can add value, providing a positive business case for decarbonizing operations. The issues are complex, but organizations and individuals can take advantage of an array of tools. They are empowered and equipped with standards for measuring and tracking emissions, technological innovations, and other specialized services.

Understanding Carbon Emissions

From burning fossil fuels to manufacturing processes, many human activities emit carbon dioxide (CO2), a potent greenhouse gas (GHG). As a result of a natural process called the greenhouse effect, CO2 and other GHGs trap heat in earth’s atmosphere and thus have an influence on local and global climate trends. Although CO2 is only one of several GHGs, it accounts for a large majority of anthropogenic GHG emissions. In the United States, for example, CO2 accounts for approximately 80% of all GHG emissions produced by human activities, according to the US Environmental Protection Agency (EPA).

Because human activities increase the level of CO2 at a rate faster than natural processes can remove it from the atmosphere, CO2’s impact on climate has become a global concern. As pressure for action continues to mount, organizations have begun to implement programs for managing their carbon emissions. Corporate leaders and executives also believe there is a strong business case for reducing CO2 emissions.

In short, tracking CO2 emissions has become a high-profile priority. At the national level, governments are establishing systems to monitor emissions and “carbon sinks,” processes that remove atmospheric CO2, such as the worldwide CarbonTracker system devised by the US National Oceanic and Atmospheric Administration. But government efforts often track regional levels rather than specific sources. Companies that engage in CO2-emitting activities are closer to the source and therefore can help make a more direct contribution by decarbonizing their operations and reducing their carbon footprints. To do that, it’s important to have effective tracking solutions in place.

The Power of Carbon Emissions Tracking

The first step of addressing carbon emissions is to measure an organization’s baseline carbon footprint, which is often part of a larger GHG inventory that includes other gases. Carbon accounting is a methodology developed for the purpose of calculating and tracking CO2. The most widely accepted framework of accounting standards for CO2 and other GHG emissions is the GHG Protocol, which establishes general principles for measuring, monitoring, and reporting emissions. Under the GHG Protocol, emissions are divided into three different categories:

• Scope 1: Direct emissions from sources controlled by an organization.
• Scope 2: Indirect emissions from purchased energy generated by external sources.
• Scope 3: “Supply chain emissions” or “value chain emissions,” including all sources of emissions from activities not included in scopes 1 and 2.

In addition to the general principles of the GHG Protocol, the ISO 14064 standards and Science-Based Targets initiative (SBTi) are widely recognized frameworks that provide more specific and detailed guidance to support organizations in their efforts to reduce CO2 emissions.

Beyond establishing the baseline carbon footprint or GHG inventory, organizations also need a comprehensive carbon accounting process for monitoring changes in emissions and progress toward targets as well as for generating an audit trail of rigorous data that can be verified by management, shareholders, and stakeholders including regulators. Moreover, an effective carbon accounting process can add value for companies in other ways. Asset manager Blackstone has described emissions inventories as “a window into a company’s operations that can help leaders spot other opportunities for value creation and cost savings.”

Streamlining Emission Monitoring with Software

Carbon accounting is a complex process in itself. CO2 reduction strategies involve efforts in multiple units across an organization, so effective alignment, coordination, and data management are critical for success. With myriad sources of carbon data arising from different operations, the accounting challenge may become unwieldy and labor intensive. Plus, the end process of reporting and communicating metrics may pose another level of difficulty.

Software has been developed to address these challenges. Comprehensive software solutions enable organizations to calculate emissions and footprints, facilitate data collection, centralize information, support compliance efforts, and create an auditable data chain. Nasdaq Metrio™, for example, not only helps organizations take control of their carbon footprint but also goes beyond carbon emissions, providing an end-to-end sustainability reporting platform to help:

• Collect, analyze, and share data
• Create custom key performance indicators (KPIs)
• Transform data into standard reporting metrics

Finding a software solution may seem like an obvious choice for organizations with sufficient resources, but evaluating options to determine the best fit can become a labor-intensive undertaking. The good news is that business operations now have access to specialized external support that can streamline the process and help lead to improved outcomes. Nasdaq ESG Advisory provides expert guidance to help organizations at any stage assess opportunities and risks, define priorities, and plan effective strategies.

Carbon Tracking for Smaller Businesses and Individuals

Climate issues are not exclusively the concerns of governments and larger corporations. Everyone, including individuals and small businesses, can contribute. While advanced carbon accounting systems and software solutions require the resources of an organization with a certain scale, a variety of tools are available to help smaller organizations and individuals.

At the individual level, a range of free services can help measure carbon footprint and devise strategies to reduce impact. Government agencies, such as the US EPA, and not-for-profit organizations, such as The Nature Conservancy, offer online resources to get started with quick estimates, calculate the impact of common activities, and create plans to take action. In recent years, a growing number of tracking apps have been developed to monitor individual emissions across household and residential factors or specific activities, such as shopping, travel, or lifestyle. Some apps also enable users to set targets for changing their behaviors and others facilitate access to emissions offsets. In addition, organizations are empowering customers by providing information about the impact of their consumption of products and services.

Widespread adoption and usage of these tools has the potential to make a significant contribution. In the United States, for example, the average individual carbon footprint amounts to 16 tons of emissions. The global average has been estimated at four tons, according to the Nature Conservancy. This amount needs to fall below two tons by 2050 in order to achieve key climate goals. Individual choices and actions can have a compounding effect.

Although the significance of smaller organizations may get overlooked, they have a substantial collective impact. Even in the largest developed economies, small- to medium-sized businesses account for a large percentage of economic activity, which correlates with a significant level of emissions. The smaller scale of these operations limits their resources for acquiring or developing custom solutions to support efforts to reduce their emissions footprint, but governments and larger organizations have made tools available to support these small businesses. For example, the US EPA provides a simplified GHG emissions calculator designed for small businesses and low emitters and the National Federation of Self Employed and Small Businesses offers guidance and resources.

Embracing a Sustainable Future

No single entity or sector alone will be able to solve the problem of carbon emissions and bring about a sustainable future. Governments, businesses large and small, and individuals all have important roles to play. Increased awareness, availability of expertise and support, and technological solutions are equipping decision makers with knowledge and tools to drive progress toward achieving reduction targets for CO2 emissions and other GHGs. Improved methods for tracking emissions and advanced software solutions are enabling more ambitious sustainability programs with greater complexity and aggressive targets.

At the same time, leaders have recognized that efforts to reduce emissions can be a value driver for businesses. Organizations that do not act in the near term may risk being put at a disadvantage in the future. Organizations that implement voluntary programs to reduce emissions may be better positioned to meet stakeholder expectations, improve operational efficiency, enhance business outcomes, and manage compliance risks that arise with new regulatory requirements.