Demystifying Carbon Footprinting for SMEs
What is a Carbon Footprint?
Greenhouse gases, such as carbon dioxide, are released by burning fossil fuels and other industrial processes. These gases build up in the atmosphere, causing climate change across the globe. The total amount of greenhouse gases released by a business or individual is their carbon footprint. This is usually shown as “carbon dioxide equivalents” or abbreviated “CO2-eq.”
How are Carbon Footprints Reported? Scope 1, 2, and 3
When tracking greenhouse gas emissions or carbon footprints, companies often report on scope 1, 2, and 3 emissions. These different emission types are used in carbon accounting to differentiate the source and how much control you have over the emissions.
Scope 1 emissions are from direct operations. For example, if you burn diesel gas to run a generator, the carbon dioxide released would count as your scope 1 emissions.
Scope 2 emissions are indirect, caused by generating the electricity you use to run your business. The emissions depend on where your electricity comes from, and how much you use. For example, if your electricity is provided by coal-fired power plants, then the amount of coal burned to power your business would be allocated to your scope 2.
Scope 3 emissions are the indirect emissions from your value chain. For most businesses, these can be the largest bucket of emissions. For example, if you manufacture chairs, the carbon emissions from each component, including manufacturing, transport, and raw materials, would be added up to reach your scope 3 emissions.
How Can You Report on Your Carbon Footprint?
There are many approaches to reporting carbon footprints, but the most widely accepted is the GHG Protocol. This standard has specific guidance on how to calculate carbon footprints for both businesses and products.
However, finding data to account for scope 3 emissions is a challenge for everyone. These value chain emissions require detailed information across the supply chain, which is often not available.
There are many technical innovations such as BMW’s Catena X platform, blockchain, and Life Cycle Assessments that can help fill in the gaps, but they can be expensive. Some specialized software offers a simpler, faster, and less expensive approach, or you can rely on industry averages and proxy data such as emission factors.
What Does This Mean for SMEs?
As an SME, you may be asked by your larger customers about your carbon footprint. We suggest taking a pragmatic approach to reporting on yours:
Focus your efforts on the data you can easily get and have the most control over: Scope 1 and 2. You can use the GHG protocol documentation to do it yourself or reach out to us for streamlined help.
For scope 3 emissions in your value chain, it is accepted that you will know less. As an SME, you have two main options:
Ask your suppliers for their carbon footprint. Depending on how many customers they have, you may or may not get this information. It never hurts to try.
Use an industry average or emission factor. These aren’t perfect, but they can give an idea of scale and get “close enough.” You can find these in databases to purchase or with some specialty software.
At QuickSustainability, we have vast experience helping large and small companies navigate the complex sustainability landscape. While digging out numbers can be annoying, we can help make the process less painful for you now and in the future with basic tools.
It’s important to remember that while carbon accounting in itself won’t bring direct revenue, showing your transparency and improvements over time can differentiate your business as the preferred partner of choice for larger companies. This can improve your profits by reducing churn, increasing revenues, and reducing marketing costs to find new clients.
