Five-steps to calculate the GHG footprint for SME

We have labeled the “team” as the author. And while the people at BC Consulting strongly believe in individual contributions and responsibilities, this blog article really was a team effort. We, therefore, label it as such.

Posted by Frank BroerOctober 26, 2022

Climate change is the biggest challenge of our time. Scientists agree that only holding warming to 1.5°C above pre industrial levels can limit the most dangerous and irreversible effects of climate change. A lot has been written about the importance of calculating the GHG footprint accurately. But many of our customers are still struggling with measuring Greenhouse gas emissions and reductions. Although a reliable footprint calculation can involve some complexity, we believe that for many small- and medium enterprises (SME), a relatively simple five-step approach to calculate the GHG footprint can be very accurate.

General methodology

In line with GHG accounting conventions, we differentiate between the Corporate Carbon Footprint (CCF), which considers the impact of an entity (e.g., a company or a group), and the Product Carbon Footprint (PCF), which determines the climate impact of an individual product.

For the Corporate Carbon Footprint (CCF), we believe that there is a 5-step process that can be followed by most companies:

Based on this Corporate Carbon Footprint, a Product Carbon Footprint (PCF) can be calculated using a contribution margin calculation logic, similar to well-known controlling tools. To avoid unnecessary layers of complexity in this, developing a reporting framework supported by enterprise-level technology is paramount. Already existing data sources can be used for accurate, timely and actionable insights that drive GHG improvements. This also means that teams, product managers and designers, controlling and management can spend less time searching and entering data and more time working with information. Our framework helps to gather relevant data points fast

The five-step approach

Preparation of stocktaking

The first step for our clients is understanding the full environmental footprint, in other words “carbon stocktaking”. To initiate stocktaking across emissions scopes 1, 2 and 3, we need to identify all business processes in the entire value chain that are carbon sources and carbon sinks. This requires a deep understanding of the entire production and utilization processes, including suppliers and customers – holistically from cradle-to-grave for consumer products, cradle-to-gate for capital goods.

It is important to define the reporting scope and the boundaries of the reporting entity. Not only for the allocation between emissions scopes 1, 2 and 3, it is crucial to determine which parts of the business need to be included (and in what scope), typically using the “control” concept. For small businesses, this will be straightforward, as they are likely to own or control all business operations. In this case, the boundary will be the entire business. However, if the structure of the business is more complicated and includes partnerships; franchises, joint ventures, the boundary will be more complicated to set and can have a material impact on total emissions and allocation between emission scopes 1-3.

If an entity owns or controls all parts of its business, it should include the emissions from all parts of this business
100% subsidiaries are typically included with all emissions sources as well
Partnerships, franchises, joint ventures, etc., on the other hand, need a more detailed review

Identification of activities releasing GHG emissions

Now that you know which parts of your business you need to include, you need to identify activities in your business that release (or reduce) GHG emissions. The main activities from your business which release GHG include, for example:

Electricity/gas use
Owned or controlled vehicles
Business travel
Employee commute
Waste disposal/recycling

Data collection

To calculate the amount of GHG for the activities releasing GHG emissions, customers need to collect data for each relevant emission-releasing activity. Most of our customers already have the information they need to collect this data in one of their data warehouses – either in their finance, ERP, or other IT systems. This could be electricity use in total kilowatt-hours (from ERP, accounting data, or electricity bills).

Identify which activities in your business release GHG emissions. Define and use a a significance threshold and apply consistently over time.

It is normal practice to measure GHG emissions over a 12-month period; however, for some companies shorter, e.g. quarterly periods may be recommendable
Typically, the reporting periods are align with accounting periods
Where activity data is difficult to obtain, it is possible to make reasonable estimates; GHG protocols regulate in detail the amount of leeway that can be applied

Conversion of accounting data to GHG equivalents, using emission factors

To calculate the GHG emissions associated with each activity in “GHG equivalents”, it is necessary to convert the activity data into emissions, using emission factors. This is theoretically straightforward, using:

Activity data x Emission Factor = GHG emissions

However, in practice, it can be a challenge to determine the precise GHG conversion factor for all parts of the value chain. Therefore, our last step of any GHG calculation is always the verification and plausibility check of all emissions as well as the benchmarking with other players from the industry.

Subsequent identification of ways to reduce emissions

Once GHG emissions have been calculated, this information should be used to reduce emissions, and to monitor progress over time. We recommend to monitor and report (internally) performance on a monthly basis and provide a breakdown by organizational units to help staff “own” local targets.

Subsequent reporting of emissions

Once GHG emissions have been calculated, we encourage our customers to report this information, even if they are not (yet) required to legally publish this information. We have detailed our approach on the reporting of emissions here.

Where to go from here

Climate change is the biggest challenge of our time. To limit the impact of global warming below catastrophic effects, “net zero” is the benchmark. Whatever your strategic climate goals are, you have read this far for a reason. Maybe, because you wish to reduce your GHG footprint and are looking for the “how”. We can only encourage you to make “net zero” your short- to mid-term ambition. On the “how” side, our simple, five-step approach to calculate GHG footprint can help you achieving that goal. We have further detailed our approach in our publications section. And if you wish to discuss with our experts, feel free to contact us here: