Upon surveying the landscape of organisational climate commitments, it is not uncommon to hear about attention-grabbing goals, like committing to 100% renewable energy, setting a science-based target, going carbon neutral or even climate-positive.

You might be wondering: How do these organisations get started? Looking around your own organisation, it may be difficult to imagine how the fragmented efforts that are taking place within different business units and on different timelines can come together to form a coherent story about the opportunity for impact and risk mitigation.

Establishing a carbon baseline

A carbon baseline is an inventory of sources of carbon emissions from business activities. This is typically a snapshot of one or more years that serves as a reference point for organisations to understand and track their changing emissions over time. Building a multi-year emissions baseline not only enables an organisation to have a better understanding of its recent historical GHG emissions trends but also enables it to grasp the business trajectory and associated potential future emissions. A carbon baseline includes direct and indirect emissions, also known as Scope 1, Scope 2 and Scope 3 emissions (see image, below, for detailed categories).

Scope 1: Direct carbon emissions from owned or controlled sources (for example, fuel)

Scope 2: Indirect carbon emissions from consumed purchased electricity, heat or steam

Scope 3: Indirect carbon emissions from all other business activities (to cite some examples, purchased goods and services, capital goods, production of purchase materials, transport-related activities not owned or controlled by organisation, waste disposal, business travel and the use of sold products)

Source: GHG Protocol

Why establish a carbon baseline? 

Just as companies take stock of other types of resources or supplies, it is important for organisations to assess their carbon budget, in order to understand which areas of business activities have the greatest opportunities for impact. We’ve discussed the importance of data quality in a previous blog when establishing carbon inventories. Establishing a detailed carbon baseline provides management with the ability to understand carbon emissions across different business units and make data-informed decisions, for example, by having specific fuel-type information, according to projected business growth, or understanding how carbon-intensive specific regions’ electric grids are going to behave in the future, where the company operates. Given the likely volume of data collection and calculations, the baseline inventory data can be much easier to visualise, analyse and synthesise, if it is established in a centralised software system. A secondary benefit to establishing a baseline carbon inventory is for tracking change over time. Since a baseline carbon inventory is only a snapshot in time, organisations need to build their processes for ongoing data collection to evaluate the effectiveness of operational changes. Having a baseline carbon inventory also supports companies in conducting peer benchmarking and evaluating their market position.  

So you’ve built your baseline… what’s next?

Establishing a carbon inventory baseline is only the first step to managing organisational GHG emissions. Once an organisation undertakes the effort to put together this emissions approach to understanding its impact, it can extend the same approach to thinking about risks and opportunities in business decision-making processes. For example, when evaluating capital investments into a new facility, a company can inquire and collect data about the historical operational costs – including energy data – for existing facilities it is considering for acquisition, and/or factor in how “dirty” the electric grid is in the potential regions where a new facility may be sited. Since an organisation already has a baseline understanding of its existing portfolio of facilities, it can evaluate potential facilities against their own portfolio’s average emissions as well as compare potential acquisitions against one another from a carbon-impact standpoint. Siting new facilities in a region with a cleaner electrical grid, or with easier access to cleaner alternative fuels, can be considered alongside other performance and market factors in the capital investment decision-making processes.‍

Beyond singular business decisions, having an established carbon inventory baseline can facilitate an organisation’s goal setting and scenario planning. Companies that have a target year and an established emissions target can draw a line from their established carbon baseline to their designated emissions target to understand the necessary change in their carbon budget over time, compared to business as usual (see purple and green lines in graph, below).

Source: SINAI Technologies

Forecasting different projections of possible futures based on the current carbon baseline provides a data-driven approach to stacking individual or decentralised business decisions together to get a comprehensive understanding of the planned emissions reductions, which aggregates the approved project pipeline. The planned emissions reductions can then be compared to the planned emissions gap, or the targeted emissions reduction that has yet to be accounted for, based on existing company mitigation strategies. Finally, for companies thinking about supporting a 1.5 degree C climate scenario, modelling the path from their carbon baseline to the company’s current goal versus what the target emissions would need to be to achieve the 1.5 degree C scenario can facilitate an internal discussion around the target emissions gap (shown as the steepest emissions pathway in the graph, above).

References:

1. RE100 campaign. The Climate Group & CDP. https://www.there100.org/. Accessed Friday 27 November 2020.
2. Science-based targets. https://sciencebasedtargets.org/. Accessed Friday 27 November 2020.
3. Carbon Neutral Standard. Natural Capital Partners. https://www.carbonneutral.com/. Accessed Friday 27 November 2020.
4. Greenhouse Gas Protocol. World Resource Institute & WBCSD. https://ghgprotocol.org/. Accessed 29 November 2020.
5. https://www.sinaitechnologies.com/post/four-main-data-challenges-in-managing-carbon-inventories. SINAI Technologies.
6. https://www.sinaitechnologies.com/about-us#contact

The writer is with Sinai Technologies and may be contacted through https://www.sinaitechnologies.com/about-us#contact