Company Carbon Balances

Many industrial and business companies today report their impact on global warming. It has become an important aspect of their sustainability reports. Beside aspects of public attention and corporate image, this is becoming more and more business relevant. To be considered 'green' is a competitive advantage particularly in certain end consumer businesses. However, this trend is also pushing upstream into the product supply chain and it is becoming more relevant in business -to-business activities. There is a need for public companies to publish their global warming impact, as stock analysts use these reports to evaluate the position of the company in a future 'low carbon society- - Listing in stock indices such as FTSE-4GOOD [3] or Dow Jones Sustainability Indexes [4] require a comprehensive report and measurable targets on GHG emissions and company's climate related activities.

The standard for company GHG reporting is the Greenhouse Gas Protocol [5]. In principle it follows similar rules to financial accounting. Likewise the reports are verified by certified auditors, similar companies as for financial audits. An important section of the GHG standards is the differentiation of three emission scopes. Direct emissions of GHGs are defined as scope 1 emissions. All direct emissions of GHGs from company-owned assets like production plants, power plants, firing and incineration plants, company cars, and so on belong in this category. Scope 2 contains indirect emissions resulting from energy purchase. Mostly this is electrical power. However, for the chemical industry, purchased heat is often an important contributor due to the nature of its production processes. All other emissions are defined as scope 3. Many companies today report their scope 1 and scope 2 emissions. Reporting of scope 3 emissions is not yet established but under discussion (Figure 1.1).

The calculation basics for the emissions in all scopes are very similar to those presented in later sections of this chapter. The ownership of the emission is determined by the asset owner. Example: A chemical company owns a power plant that supplies energy in form of electrical power and steam to company- owned production plants. The emissions of the power plant will be scope 1 for that company. However, if that power plant is outsourced to an energy supplier that now sells steam and power to the respective production plants, the emissions will

be scope 2 for the chemical company and scope 1 for the supplier. Similarly with scope 1 and 3 emissions from own or foreign production plants. All legal entities that are more than 50% owned by one company have to be fully accounted to that company.

One of the major goals of the GHG protocol is to track emissions of a company over time in order to quantify the improvements that have been achieved. To avoid offsets in the balance by changes in the legal structure, the GHG protocol has defined the concept of a base year. We take again an example of a chemical company with captive energy production. The base year is assumed to be the year 2000. In 2009 the power plant is outsourced to an energy provider, which is a separate legal entity. From 2009 on the emissions of that power plant will be reported as scope 2 emissions. The emissions of the power plant in the years from 2000 to 2008 that were originally reported as scope 1 emissions will now be adjusted to the new company structure. The historic numbers will be corrected as if the power plant had always been in an outsourced legal entity and regarded as scope 2 emissions. A virtual historic company that reflects the actual structure is created and used to track the emission changes over time. In this simple example we have only shifted emissions from scope 1 to scope 2. It becomes practically complex if we consider today' s dynamic M&A activities of larger enterprises and shared ownership. Figure 1.2 shows an example of Bayer AG ' s published GHG emissions according to the GHG protocol. It is part of the company' s published sustainability report [6]' Scope 1 and Scope 2 emissions are shown for the major subgroups over time and compared with a voluntary strategic target. Bayer has undergone significant changes in its structure and portfolio over these years. These emissions have been published for the year 2008. For the years 2005 to 2007 the historic emissions have been recalculated to align with the company structure in 2008 (reporting year).

Greenhouse gas emissions for subgroups and service companies

(tot.) direct and indirect emissions in million metric tons of CO; equivalents)





Target 2020


































Specific greenhouse gas emissions for BMS {metric tons of C02 equivalents per metric ton of product)






Figure 1.2 Example of reporting GHG emissions and tracking over time: Bayer AG and subgroups [6].

Figure 1.2 Example of reporting GHG emissions and tracking over time: Bayer AG and subgroups [6].

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