Originally created 20 years ago, the GHG Protocol Corporate Standard created a carbon emissions accounting framework to provide firms with a start point to assess their carbon footprint. This became the de facto standard for voluntary carbon reporting and is now baked into the TCFD-aligned climate disclosures being rolled out in developed economies this year and next. As the business priority shifts from disclosing carbon footprint data to pursuing net zero goals the GHG Protocol accounting framework based on Scope 1, Scope 2 and Scope 3 categories of emissions is no longer fit for purpose. Designing new carbon management systems around the three scopes would be comparable to the mistake of designing computer keyboards around the QWERTY lay out of typewriter keys. What’s the problem? The scopes of the GHG protocol were intended to link carbon emissions data to corporate responsibility objectives. That’s different from a data model that is optimized for implementing carbon emissions reductions.
The recently announced Carbon Call initiative is one of many efforts intended to launch a new carbon accounting framework which is centred on business activities rather than scopes of control. The Carbon Call, hosted by ClimateWorks Foundation which has distributed US$1.3 billion in grants to green projects since 2008, is supported by accounting firms like Deloitte and PwC as well as global tech players such as Microsoft and Wipro and smaller net zero emissions solution providers like Radicle. Firms like Carbon Intelligence, which has more than a decade of experience developing process, technology and data systems for carbon management, already deliver solutions for clients designed around business activities rather than scopes.
Firms embarking on designing their carbon management system should also review industry specific carbon accounting frameworks before making a QWERTY error and designing their data models around the generic and outdated GHG Protocol. The Partnership For Carbon Accounting Financials has designed a standard specifically for financial institutions. There are GHG accounting tools for local authorities and other tools designed for the private equity sector as reflected in the standard developed by a community of almost 200 PE firms convened under the UN PRI’s Initiative Climat International. Many industry trade associations have published guidance and may also be working on industry specific accounting frameworks.
What does this mean for the GHG Protocol? Firms should treat the scope-based framework as an essential reporting output from a business activity-centred carbon management data model. To reduce energy consumption and CO₂ emissions, firms need to engage fleet operators, facilities managers, environmental engineers and plant managers. To facilitate CO₂ reduction plans, carbon management systems need to frame projects in terms that operational managers are familiar with: fleet average fuel efficiency, HVAC optimization and production-related regulated air emissions. The data captured in these business activity models needs to flow into disclosure reports designed around the GHG Protocol scopes
