What is a Corporate Carbon Footprint?

A definition of Corporate Carbon Footprint and its differences with Household Carbon Footprint

Carbon footprint calculations are a detailed assessment of the climate-altering gases, or greenhouse gases (GHG), associated with a company’s activities. This includes direct emissions from sources like company-owned factories, vehicles, or machinery, as well as indirect emissions from electricity consumption and other energy use. Furthermore, it extends to the emissions generated throughout the entire value chain. It encompasses those from suppliers, logistics, employee travel, and even the use and disposal of the company’s products.

When thinking about carbon footprints, one usually thinks about household activities—like driving a car, heating a home, or managing waste. Corporate carbon footprints differ from household carbon footprints in their scale, scope, and complexity. A household footprint typically focuses on emissions from day-to-day activities, like heating, transportation, and waste. Meanwhile, a corporate carbon footprint is far more extensive, including emissions from three key areas:

1. Scope 1 (direct emissions from owned assets),

2. Scope 2 (indirect emissions from purchased energy),

3. Scope 3 (indirect emissions across the supply chain and product lifecycle): the vast scale of corporate operations, combined with their significant impact on supply chains and entire industries. It highlights the crucial role businesses play in managing carbon emissions to tackle global climate challenges.

Why must companies measure their carbon footprint?

Beyond the environmental benefits of reducing emissions, there is increasing pressure from stakeholders. Customers, employees, suppliers, and investors demand greater transparency and sustainability efforts. Additionally, new sustainability regulations require companies to disclose their environmental impact on climate change. This is the case for the EU Corporate Sustainability Reporting Directive (CSRD), which takes effect in 2024, and updated IFRS sustainability reporting standards. Preparing for these changes not only ensures compliance but also provides businesses with a competitive edge, improving reputation and strengthening stakeholder trust.

At ROSE, our carbon footprint solution is designed to align with the latest CSRD requirements. It means enabling businesses to measure their emissions effectively and seamlessly integrate this data into their sustainability reporting. By staying proactive, companies can both meet regulatory demands and contribute meaningfully to the fight against climate change.

Understanding the Greenhouse Effect

The vast majority of scientists agree that climate change is primarily driven by human activities. They release certain gases, known as greenhouse gases (GHG), into the atmosphere. These gases allow sunlight to pass through the atmosphere but trap the heat it generates, preventing it from escaping back into space. This process is the foundation of the greenhouse effect, a natural phenomenon exacerbated by human actions, leading to accelerated global warming.

The most prominent greenhouse gases include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and fluorinated gases. Each of these gases originates from various human activities, such as burning fossil fuels for energy, managing agricultural systems, and industrial processes. Methane, for example, is commonly emitted from livestock farming and waste management, while nitrous oxide is often released by fertilizers in agriculture.

Not all greenhouse gases contribute equally to climate change. Each has a different capacity to trap heat, quantified using the Global Warming Potential (GWP). This measure allows scientists to compare the impact of each gas relative to carbon dioxide over a specific period. For instance, 1 kilogram of methane has the same GWP as 28 kilograms of CO2. To account for these differences and simplify comparisons, emissions are calculated in terms of CO2 equivalents (CO2e) when assessing a carbon footprint.

This standardized approach to measuring GHG emissions not only aids in better understanding the effects of human activities on the environment. It provides a crucial framework for businesses, policymakers, and organizations to take meaningful action on climate change. By quantifying emissions, stakeholders can develop targeted strategies to reduce their environmental impact. The scope of action is broad: leaner energy solutions, improved waste management, or broader initiatives aimed at environmental protection and sustainability.

A Deep Dive into the Three Scopes

As defined by the GHG Protocol, the three scopes of greenhouse gas emissions categorize a company's carbon emissions. Understanding their breakdown is crucial for identifying impactful activities to focus on.

Scope 1: Direct emissions generated by the company. For example, emissions from combustion in owned or controlled boilers or vehicles. Scope 1 includes the following categories:

• Stationary Combustion

• Mobile Combustion

• Process Sources

• Fugitive Sources

Scope 2: Indirect emissions resulting from purchased energy, such as electricity and heating. Scope 2 includes the following categories:

• Electricity

• Steam

• Heating

• Cooling

Scope 3: All indirect emissions not included in Scope 2 that occur in the company’s value chain. Scope 3 emissions can be broken down into upstream and downstream activities.

Nota bene

It is extremely important to measure all the scopes as in most cases the majority of the emissions come from the value chain (scope 3).

Decoding the Carbon Calculation: From Data to Emissions

The data challenge

Understanding a company's carbon footprint starts with gathering the right data—a process that is often more complicated than it seems. Companies engage in a wide variety of activities, from energy consumption in office lighting to the emissions generated by global logistics or waste management. Each of these activities contributes to the company’s overall environmental footprint, making accurate data collection a critical yet challenging task.

One of the primary obstacles is incomplete records or data gaps, which can make tracking greenhouse gas emissions particularly tricky. For instance, direct emissions from company-owned vehicles or machinery might be well-documented. But indirect emissions from supply chains or energy usage often involve more fragmented or inaccessible data. Additionally, companies with multiple facilities or operations across different regions may face inconsistencies in reporting standards, further complicating the process. To address this, businesses must implement comprehensive systems for gathering consistent, high-quality data that captures the full spectrum of their activities and ecological footprint.

Using the right emissions factors

Once the data is in hand, the next step is processing the actual calculation of emissions. This involves applying emission factors—standardized values that translate specific activities into greenhouse gas emissions. For example, burning a gallon of gas or consuming a megawatt-hour of electricity has a known emission factor. This factor allows for accurate quantification of the associated CO2 or other greenhouse gases. These calculations provide a breakdown of emissions by activity, offering insight into which areas of the business contribute most to its environmental footprint.

Processing the actual calculation

The calculation process might seem straightforward: multiply the activity data (such as fuel consumption or energy use) by the corresponding emission factor. However, nuances like regional variations in energy sources or discrepancies in activity data can complicate the process. Accurate calculations require attention to detail and the use of relevant, and ideally specific emission factors. To maximize the accuracy of the Emission Factors, at ROSE, we have an API to pull from a central point data bases such as Exiobase, Ecoinvent, EPA, IEA, GLEC, just to name a few.

When performed correctly, this process offers businesses an invaluable understanding of their environmental impact. Beyond simply calculating their footprint, companies can identify actionable areas for improvement. For example, reducing energy consumption, optimizing logistics, or adopting more sustainable practices. At ROSE, our software streamlines this entire workflow. From data collection to reporting, we help companies take meaningful steps. They reduce their carbon footprint while aligning with frameworks like the CSRD disclosures.‍