Climate change is not only a very real threat; it is changing the way the world does business. South Africa’s top 100 JSE-listed companies are already reporting their carbon footprints, and it will not be long before all industries will need to follow suit.
While climate change naysayers continue to argue the validity of global warming, governments across the world have begun to take the issue seriously. In South Africa, a vehicle emissions tax will come into affect as of 1 September 2010. Carbon reporting for industries is sure to follow in the near future. The Chemical and Allied Industries Association (CAIA) is a step ahead of the pack with the launch of its Carbon Footprinting Guidelines for members of the chemical industry, which itself contributes approximately 4.3% to South Africa’s national greenhouse gas (GHG) inventory.
CAIA believes that climate change is not only one of the most complex challenges facing the modern industrialised world, but also one of the most serious. Defined as the destabilisation of the earth’s climate system, climate change is the result of a rapid increase in the concentration of atmospheric greenhouse gases, which themselves are the consequence of burning fossil fuels like coal, oil and natural gas.
According to Lloyd Christie – a senior associate at Edward Nathan and Sonnenbergs, and a member of the law firm’s corporate commercial department: natural resources and environmental law unit – although there are currently no regulation and compliance requirements for GHG emissions reporting by companies in this country, Government recognises that South Africa is one of the largest emitters of GHGs globally relative to the size of its population and economy, and that future action will become necessary.
“In fact, the Minister of Water and Environmental Affairs has stated that greenhouse gas emission reporting by industries will soon be mandatory in South Africa, and non-compliance will be met by penalties. Tighter regulations in energy efficiency, building standards, vehicle emission standards, waste regulations and greenhouse gas reporting are all therefore imminent,” he maintains.
Although CAIA’s guidelines for the development of a carbon footprint monitoring system are specifically for the chemicals industry, the need for carbon footprint monitoring will affect all local industries in the near future, with specific attention being paid to the role of commercial transport.
“Transport consumes 20% of global energy reserves and 90% of global oil reserves,” elaborates Christie. “In addition, 13% of global emissions (or greenhouse gases) are a direct consequence of transport. It’s an industry that has a huge impact on our natural environment, both in terms of what it takes and what it puts back into our atmosphere.”
According to Christie, transport emissions will have doubled by 2050 unless transport becomes more efficient. “The main emissions affecting our atmosphere are CO2 emissions, which are a by-product of burning fuel and directly proportional to the amount of fuel consumed,” he explains. “So the less fuel burnt, the less CO2 enters the atmosphere.”
Which is also why transport plays such an important role in carbon footprinting, greenhouse gas reporting and in achieving more efficient, sustainable businesses.
Taking the first step
According to CAIA, its Responsible Care carbon footprinting monitoring guidelines document is intended to support companies in moving beyond the measurement of direct emissions from their operations – as is currently required in terms of the industry’s Responsible Care Quantitative Indicators of Performance – to a carbon footprint monitoring system that measures both direct and indirect emissions.
Globally, climate change legislation is one of the prime motivations for early action in this area. CAIA maintains that any policy regulating GHG emissions constitutes a major market shift, setting new “rules of the game” and changing the competitive landscape. In South Africa, reporting of direct emissions is likely to be the first step in a regulatory framework on GHGs. A company that understands its climate change impact, and can measure its carbon footprint before it becomes mandatory to do so, will simply be ahead of the game.
The first step in the development of a carbon footprint is to decide the scope of the measurement to be undertaken. In terms of the scope, the organisational boundary identifies the business units, facilities or operations from which emissions will be measured, while the operational boundary identifies activities that cause emissions. A carbon footprint is a measure of the total GHGs caused directly and indirectly by an individual, organisation, event or product. A carbon footprint generally covers the six GHGs outlined in the Kyoto Protocol, and is expressed in terms of tons of carbon dioxide equivalent (tCO2e) based on the global warming potential (GWP) of the gas.
To help delineate direct and indirect emission sources and improve transparency, three “scopes” (Scope 1, Scope 2 and
Scope 3) are defined for GHG accounting and reporting purposes.
Scope 1 (direct GHG emissions) is drawn from sources that are owned or controlled by the company. Such emission sources may include vehicles, furnaces, generators, air-conditioning equipment and process equipment. Scope 2 (indirect GHG emissions) occurs from the consumption of purchased energy such as electricity, heat or steam. Scope 3 (indirect GHG emissions) is any other indirect emissions from sources not owned or controlled by the reporting company, but which occur as a consequence of their activities. This could include emissions generated from employee business travel, transport-related activities, extracting materials, outsourced activities, and waste disposal. While these emissions are challenging to measure, they provide a more complete picture of the organisation’s impact on emissions.
Government regulation of emissions by businesses will apply to direct emissions, or Scope 1. Regulations distinguish between direct and indirect emissions to make sure that different companies do not double-count the same emissions as direct emissions.
Reporting more complex supply chain emissions – in other words Scope 3 emissions – requires several questions to be considered. Is the emission-causing activity large (or believed to be large) relative to the company’s Scope 1 and Scope 2 emissions? Is the emission-causing activity crucial to the company’s core business? Do the company’s stakeholders (customers, suppliers and investors) believe that it is important to account for particular emission-causing activities? Can the company reduce or mitigate some of these emissions? Does the company now outsource an activity that it previously categorised as Scope 1? Can the company find reliable data for the activity?
In respect of which gases a company should include in its scope, the first step is to identify gases that could be emitted by the company.
Once the data has been collected, a carbon footprint can be calculated. The basic formula is carbon footprint emissions = activity data x emissions factor x global warming potential. Emission factors convert the activity data collected and consolidated by the company into tons of the relevant GHG. Emission factors are presented in specific units, for example: kg of CO2 per air km travelled; kg of CO2 per kW hour of electricity; and kg of CO2 per l of petrol/gasoline/diesel consumed.
Global warming potentials are applied to non-CO2 greenhouse gases to convert the result to carbon dioxide equivalent (tCO2e).
Once the carbon footprint has been calculated, the results can be examined to determine which activities contribute most to the footprint. After developing an emissions profile, the next task is to evaluate options for reducing emissions. Ultimately, the goal of carbon footprint monitoring is not only to be able to report GHGs, but also to be able to reduce those emissions. Once the emissions are understood and measured, it then becomes possible to find solutions to reduce them.