Drawing the Line

Paul Hepperla, Director of Sustainability Solution at Verisae offers his advice on where the carbon footprint starts, ends and the paradox in between.

My company is currently evaluating sustainable strategies for multiple business processes and systems. What's your advice for quantifying emissions across organizational boundaries? And how would you suggest establishing a carbon footprint baseline?

Regulatory bodies worldwide are beginning to mandate carbon emissions management and reporting. An enterprise carbon footprint is a mosaic of emission sources, spreading across a global stage, and extending to the asset level throughout hundreds of facilities.

Organizational boundaries

Organizational boundaries set the requirements for emission calculations. They define your enterprise structure from the perspective of emissions reporting. They determine the proportions of your Scope 1, 2, or 3 emissions to allocate to your footprint and in what proportions. Boundaries are based on either the equity share or operational control approaches.

The equity share approach is based upon each entity making up a larger enterprise and its share of economic interest. The percentage would reflect the extent of rights or ownership each entity has based on its profit and loss as reported against the parent enterprise. The control approach requires 100 percent reporting of all emissions from all operations under the entity's operational or financial control.

The organizational boundaries established for your initial carbon baseline are of strategic and financial importance. Deciding between equity share or control approach across multiple divisions, subsidiaries, partnerships, or joint ventures involves a dizzying array of discussions, radical collaboration among partners and related third parties. It demands extreme transparency.

Quantify emissions

It is advised to account for emissions to the lowest level possible. This means tracking to a very granular level. If you don't, you may face the consequences of an inventory that is fraught with brand, corporate and financial risk.

If you are publicly announcing your baseline or promoting reductions, you must answer the following with great certainty. First, you must audit your carbon inventory and verify its accuracy. Second, you must communicate transparently to all interested parties who may inquire. Third, you need to create a sustaining platform to support reductions.

Material emissions

Most organizations begin measuring emissions using spreadsheets and manual data collection. Perhaps, you're basing your approach on a well-known reporting protocol or a commandeered template. Maybe, you are starting with 'educated guesswork' to piece together your carbon story. You're wondering: How do Scope 1, 2, and 3 emissions affect my emissions; how do third party logistics considerations affect my emissions; and how does each facility's determination of materiality affect my emissions? 

Progressive enterprises do leverage automated tools to help. Unfortunately, even these leaders may be defining organizational boundaries without a strategic mindset. The approach an enterprise takes with their carbon reporting is not unlike tax or financial reporting. 'C' corporations report differently than 'S' corporations. Likewise, the equity share approach has a different impact on your carbon footprint than operational control.

These inherent uncertainties of materiality can be a result of rounding errors, numerical mistakes or non-specific emission sources. Still this only accounts for emissions materiality at the facility level unless there is a push to collect asset level data. Any difference between true emissions and derived emissions due to the inaccuracy of materiality will account for a variance of +/- five percent.

What is less damaging a reporting error at the asset (lbs), the facility (ton) or the enterprise (MT) level?

Enterprise visibility

The source of greatest enterprise risk is the 'guessed carbon footprint'. It relies on assumptions and estimates without the automated sourcing of emissions data. It is not practical, cost effective or an acceptable risk to aggregate emissions data across locations, assets or the supply chain partners without the proven enterprise tools.

Verisae's Sustainable Resource Planning (SRP) platform offers: Visibility to the lowest level, i.e. 'the Asset'; an integrated carbon solutions to mitigate the variance risk; a means to optimize organizational boundaries; ways to collaborate outside of your own enterprise.

It is tracking emissions sources to the asset level that will unlock a data-driven foundation for informed decision-making. Gain unprecedented visibility of your true carbon liabilities or assets. Verisae offers an enterprise carbon accounting (ECA) solution to enable your distributed enterprise to measure, monitor and actively manage carbon emissions - globally.