Greenhouse gas accounting: key tips and common mistakes to avoid

The first step for companies looking to reduce their environmental impact is to measure and report their carbon footprint. This helps them set relevant reduction targets and allocate time and resources to the most effective sustainability strategies and policies. Although nowadays, most organizations calculate their emissions, are you sure you are doing it right? Let’s take a look at some of the most common shortcuts to avoid. 

Measuring CO₂ emissions only rather than CO₂e 

Calculating the carbon dioxide (CO₂) emitted by organizations’ operations is certainly fine but not complete or accurate enough. When talking about GHG accounting, in fact, we refer to the 7 main greenhouse gases which are covered by the Kyoto Protocol: carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF₆), and nitrogen trifluoride (NF₃). CO₂ is definitely the most present gas in the atmosphere emitted through anthropogenic emissions, with almost 75%¹ of the total GHG emissions. However, it does not represent the only gas emitted. For example, methane (CH₄) and nitrous oxide (N₂O), despite making up a much smaller share of the total, are still considered important contributors of global warming with most of their emissions coming from the agriculture and waste sectors. Another important category is the one of refrigerant gases such as fluorinated gases – also known as “super pollutants”. These are generally used in air conditioning systems and can be over 20,000 times worse than carbon dioxide in terms of warming our planet. The warming power of gases is called Global Warming Potential (GWP) and is a very important indicator used to convert non-CO₂ gases into CO₂ equivalent (CO₂e). This allows for complete accounting across the full greenhouse gases spectrum, as well as following best practice. 

Using outdated or too generic emission factors  

Emission factors can be seen as the currency for GHG accounting and are essentially used to transform any activity data into its equivalent amount of CO₂e produced. These are activity- or industry-specific, as well as location-specific. For instance, the emission factor for electricity generation from coal-fired power plants will be different from the emission factor for electricity generation from wind turbines. But also, an electricity emission factor for India (0.9844 kgCO₂e/kWh²) will be very different from the one for The Netherlands (0.3427 kgCO2e/kWh²), as the electricity grids of these two countries decarbonize at a different pace. And similarly, an emission factor from 2018 will be different from the same one for 2024.  

Therefore, using outdated or too generic emission factors can lead to inaccurate accounting of greenhouse gas emissions. To ensure accurate GHG accounting, companies should always remember to update emission factors year-on-year and prefer the ones specific to their activities and location. This can help them build robust and representative GHG inventories and more effectively track progress overtime. 

Preferring industry average data over company activity data 

For many companies the easiest way of tracking emissions is by relying on industry average intensities, sectoral benchmarks or estimated data. This, of course, is still better than not accounting for any emissions at all. However, it does not represent best practice and most of all it does not provide a good understanding of the real corporate footprint. Aiming for actual data is always the best option to go for. The more accurate your data is the more representative your corporate footprint will be. But not only that, by collecting actual data it is also very likely your total CO₂e will be lower than what it would look like if industry average data was used instead. This is because the latter tends to be much more conservative. 

Moreover, making sure to always improve data quality and expand the scope of your actual data collection are also fundamental practices to keep in mind when collating activity data. By following this approach, improvements and sustainable measures adopted within the company (i.e. switching to green electricity or electric vehicles) will also be reflected in the results.  

Ignoring organizational changes over time 

To accurately measure a company's footprint, it's crucial to consider any changes to its structure over time. This includes mergers, acquisitions, and fluctuations in size. Failing to account for such changes can lead to inaccurate estimations of the company's carbon footprint. For example, if a company has acquired smaller businesses over time but only measures the emissions of the parent company, the total emissions produced by the organization may be underestimated. Conversely, if a company has divested certain operations but still includes them in their carbon footprint inventory, it can lead to overestimation. To ensure accurate GHG accounting, companies should regularly update their analysis to reflect any organizational changes. However, it's important to note that only significant structural changes such as acquisitions or mergers require a recalculation of the baseline year and a potential change in methodology. Minor changes due to organic growth do not require a change in methodology.  

More information 

At BDO, we understand the importance of reducing carbon emissions and achieving sustainability goals. We offer GHG accounting and reporting services to help businesses measure, manage, and reduce their carbon footprint, and provide insights into how to do it properly.  

Contact us today to learn more about how we can help your business take action towards a more sustainable future. 

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¹ Source: Word Resources Institute
² Source: IEA Emission factors Energy 2022