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Carbon accounting advisory

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Carbon accounting advisory

  1. 1. Making of a CarbonCO2nscious CompanyAn introduction to Carbon Accounting Advisory Copyright 2009 Agneya
Carbon
Ventures
  2. 2. It takes 153 growing, 20 feet tall, eucalyptus trees to absorb a car’s annual CO2e emissions1.
  3. 3. Making of a Carbon Conscious Company ________________________________________________________________________ ContentIntroductionProduct Carbon AccountingCorporate Carbon AccountingValue Chain Carbon AccountingCarbon Mitigation and Neutralization________________________________________________________________________________________________Agneya Carbon Ventures 1
  4. 4. Making of a Carbon Conscious Company ________________________________________________________________________Introduction Climate change is one of biggest threats faced by humanity. Temperature records back to the middle of the last century establish that recent temperatures are warmer than any since direct measurements began — all the 10 warmest years have occurred since 1990, including each year since 1995. Global warming is expected to lead to massive loss of the glaciers and ice-caps at the poles. The loss of land based arctic ice caps would cause rise in sea levels threatening countries like Maldives and coastal populations in many countries including India. Greenhouse gases (GHGs) such as CO2 are believed to be responsible for this and therefore the efforts to limit the CO2 concentration in the atmosphere below 550 ppm are underway. The one way to do so is to control rate of greenhouse gases emission into the atmosphere.Europe has been at the forefront of these initiatives, havingestablished world’s first carbon cap-and-trade system (EU-ETS)in 2005. This mechanism is intended to cap the emissions frommore than 12,000 large emitters in the EU. USA throughWaxman-Markey Bill, is planning for GHG emission allowanceon the lines of EU-ETS of Europe. Though India’s contributionto global CO2 emissions is currently only around 4%, it isexpected to continue growing given the aggressive growthplans driven by infrastructure, power, and other sectors. India,China, Brazil and South Africa (the BASIC) would continue toface pressures from the developed world to measure and reportemissions, as least measure, which later may becomecompulsory. India has already agreed for measuring andreporting GHG emissions from foreign funded projects. Coupledwith this and to meet increasing need for information on climate-risk management by stakeholders and investors, companies areincreasingly disclosing their carbon emission profiles and takingreduction targets. Various voluntary initiatives such as Carbon Disclosure Project (CDP2), Investor Network on Climate Risk (INCR3), and Institutional Investor Group on Climate Change (IIGCC4) are increasing the thrust on this area. An organization can undertake the measurement and reporting of its GHG emissions in a mode and format that suits the nature of its business and the requirements. Agneya Carbon Ventures, through its Carbon Accounting Advisory, offers three distinct services, which are discussed at length below.________________________________________________________________________________________________Agneya Carbon Ventures 2
  5. 5. Making of a Carbon Conscious Company ________________________________________________________________________Product Carbon AccountingProduct Carbon Accounting is ideally suited for organizations which have distinct branded productsor services. It delivers a product-centric view of the GHG emissions – providing the organizationsto apply reduction and/or communication efforts on a single product before scaling it up for theentire organization. Organizations which treat their products or service lines as distinct profitcenters and therefore manage them accordingly are best suited to take on this approach to CarbonAccounting. The Product Carbon inventory can be created to capture a business-to-business(Cradle-to-gate) view or a business-to-consumer (Cradle to grave) view of the GHG emissionsassociated with the product depending on its nature. Various approaches to establish product GHGinventory are PAS 2050 (Publicly Available Standard 2050) instituted by BSI and a GHG ProtocolProduct Life-cycle accounting and reporting standard under development by WRI5 and WBCSD6 . CO2 Emission Distribution/ Raw Material Manufacture Consumer Retail As raw material for further value additionAgneya Carbon Ventures can help the organization in makingdecisions including selection of an appropriate approach (B2B orB2C), choice of best suited product / service to achieve carbonaccounting objectives, setting a suitable system boundary,collection of data, GHG inventory quantification, data qualitymanagement, and assurance plan. The outcome of theseactivities can be presented to the stakeholders as a summaryreport containing carbon disclosure and emission reductiontargets. Product Carbon Accounting can help the organizationidentify emissions and cost reduction opportunities along thesupply chain of the product being accounted. A product-basedaccounting creates a matrix against which the year-on-yearperformance can be monitored, measured, and communicated.As and when regulations or laws about labeling products withtheir associated carbon emissions get established – this analysiscan provide jump start to establish product level GHG inventoryaccording to the then prevalent rules. Within an organization, Product Carbon Accountingassignment are best handled by the practitioners of Life Cycle Management – the personnelresponsible for development and marketing of the product (or service) – as the decisions andcommunication arising as a result of accounting have a direct implication for promotion,enhancement, modification or replacement of the product (or service).________________________________________________________________________________________________Agneya Carbon Ventures 3
  6. 6. Making of a Carbon Conscious Company ________________________________________________________________________Corporate Carbon AccountingCorporate Carbon Accounting is an approach suited for an organization which wishes to take anoverview of the entire organization’s GHG footprint. This approach is suited to all types oforganizations irrespective of their domain or nature of operations. A robust approach to establishcorporate GHG inventory is GHG Protocol Corporate Accounting and Reporting Standarddeveloped by WRI and WBCSD. This approach has been in use since 2004 and organizationsworldwide including Nike, Shell, IBM and DuPont have tested this approach for robustness andused it for reporting their own GHG emissions.Agneya Carbon Ventures can help the organization in establishing its corporate GHG inventory byidentifying the business goals for the GHG inventory, setting a suitable organizational andoperational boundaries, selecting an appropriate base year, creating a robust data collection, andpreparing plan for data quality management and assurance. The outcome of these activities canbe presented to the stakeholders as a summary report containing carbon disclosure and emissionreduction targets. This report can be used for communicating the inventory to voluntary disclosureprograms such as the Carbon Disclosure Project. The robust systems and processes establishedcan be verified independently by a designated third party and can possibly lead to ISO 14064certification for the developing organization.Corporate Carbon Accounting can help the organization identify its emissions and communicatethe same to the stakeholders. Communication of the emissions and reduction targets taken (if any)can boost the corporate image by demonstrating the commitment to measure (and reduce) GHGemissions. Within an organization, Corporate Carbon Accounting assignment is best handled bythe Corporate Communications and Corporate Branding – the personnel responsible forcommunication of organizations’ initiatives and activities to the stakeholder community. Corporate Carbon Accounting in India Indian companies are increasingly focusing on their corporate GHG emissions. Tata Motors, Tata Chemicals, Asian Paints, Infosys, Wipro, ACC, ONGC, Tata Steel, Aditya Birla Group, Ashoka Buildcon Ltd, among other have established corporate carbon accounting system and have disclosed their GHG emissions on Carbon Project Disclosure. Ashoka Buildcon Ltd has become India’s first infrastructure company to get ISO 14064 certification. Government of India has committed to reduce its Carbon Intensity by 20% by 2020 in recent Copenhagen Climate Summit. Also it has allowed for monitoring, measuring, and reporting of GHG emissions for foreign funded projects. Such initiatives from government side would put increasing pressure on corporate sector to go for Carbon Accounting at corporate or project or product (service) level. Most of the developed world already has or going to have regulations which would put limit on the GHG emissions. Europe has EU-ETS, and soon USA would have Waxman-Markey Bill, which would regulate GHG emissions in their domestic industry. These regulations will impact the trade of the goods and services with these countries. Some of the world’s leading organizations have started asking their suppliers to disclose their GHG emissions. Walmart has asked its all suppliers to start measuring GHG emissions and report the same. Carbon emissions information is playing crucial role in business deals, joint ventures, and collaboration decisions. These are game changing challenges and opportunities, and winners would be the organizations which can capitalize on these opportunities and mitigate any risks in their value chain.________________________________________________________________________________________________Agneya Carbon Ventures 4
  7. 7. Making of a Carbon Conscious Company ________________________________________________________________________Value Chain Carbon AccountingValue Chain Carbon Accounting is the approach designed for organizations wishing to understandand communicate carbon emissions in all its core and allied activities. This includes activities in itsdirect control and those associated with its products or services over entire value chain. Thisimplies that emissions arising out of raw material procurement and pre-processing till the end of lifeof the product are accounted for. The corporate overheads such as travel, commuting ofemployees are also included. This view is an aggregate view of all the products and services of thecompany as against the Product Carbon Accounting, which takes a single product / service view ofthe emissions.Agneya Carbon Ventures can assist the company in selecting the right organizational andoperational boundaries, designing of data collection system, selecting GHG quantificationmethodology across the products and service, and designing of GHG data quality assurancesystem, and reporting subsequent findings. Implementing this form of carbon accounting involves 2standards – both instituted by collaboration of WRI and WBCSD. They are GHG ProtocolCorporate Accounting and Reporting Standard (in use since 2004) and GHG Protocol Scope 3Standard (under development and being road tested).By taking an initiative to measure carbon emissions across the entire value chain, the organizationcan establish itself as the environmental leader. The knowledge of the relative extent of emissionsunder direct control as against those outside can provide a starting point to engage with the supplychain to highlight hot spots of emissions and thus potential for reductions in emissions and costs.The appropriate groups to implement this in the organization are the corporate communications,supply chain practitioners, and the marketing groups.________________________________________________________________________________________________Agneya Carbon Ventures 5
  8. 8. Making of a Carbon Conscious Company ________________________________________________________________________Carbon Mitigation and Neutralization As a natural extension of its efforts in accounting the carbon emissions, an organization can take carbon reduction or carbon neutrality targets for itself. Such reduction can be a part of an internal target that is monitored on a periodic basis or a public commitment to reduce the emissions, disclosed and discussed in communications such as the annual reports, sustainability reports, or on company website. Agneya Carbon Ventures can help to identify appropriate reduction targets that are in sync with the business goals. Such target could be to reduce product carbon footprint orabsolute emission against the base year or carbon intensity7 of the product (service) andorganization.The process can then navigate through setting a plan for achieving these targets, measuring, andmonitoring. Multiple options exist to reduce and offset the emissions. A careful evaluation of theseoptions for cost-benefit and implications for the implementing organization is essential to finalizethe mitigation plan. MAC (Marginal Abatement Cost) analysis can highlight the appropriate optionsfor reduction and offsetting the emissions. By establishing and communicating such reductioncommitment, the organization can establish itself as environmental leader. It can engage with itsstakeholders, supply chain partners, and include employees inthe move towards carbon mitigation and neutrality. The topmanagement and the communications group support isessential for implementation of such an initiative. Topmanagement involvement is essential since the targets areset for the organization as a whole and requires a senior levelcommitment for the planning to realize actual reduction inGHG emissions. Communications group can be involved inspreading the awareness internally to the employees and tothe stakeholders outside.________________________________________________________________________________________________Agneya Carbon Ventures 6
  9. 9. Making of a Carbon Conscious Company ________________________________________________________________________1 A eucalyptus tree absorbs approximately 16 kg of CO2 annually. Assuming car runs 15,000 KM in a year,its total emissions is 2.4 tCO2.2 Carbon Disclosure Project, an NGO, on behalf of its 475 financial institutions and investors signatories,asks leading organizations worldwide to disclose their GHG emissions and Corporate GHG strategy. Moredetails at www.cdproject.net3 More details at http://www.incr.org4 More information at http://www.iigcc.org5 World Resource Institute (http://www.wri.org)6 World Business Council for Sustainable Development ( http://www.wbcsd.org)7 Carbon intensity indicates the amount of carbon emissions per chosen parameter. The parameter couldany measure, that gives a true picture of emissions. Carbon intensity could therefore be reported as CO2e perrupees of profit or per product or per employee or at revenue.Cover Photo: 3D Image of CO2 molecule. Photo Source: WikipediaAgneya Carbon Ventures is a focused CarbonManagement consulting firm. We provide servicesin the wide spectrum of carbon management,helping our clients identify the risks andopportunities in climate change, mitigate the risks,exploit the opportunities, and thus tackle theenvironmental challenge. For further details, reach us at indrajeet@agneya.in I www.agneya.in________________________________________________________________________________________________Agneya Carbon Ventures +91-96654 07848 I +91-90287 88430 7

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