Three GHG Accounting Fudges to Watch Out For

written by Richard Tipper, Chairman Ecometrica

With mainstream businesses becoming alert to climate change and adopting strategies to align with net zero targets, there has been a growth of new consultants and tech providers offering quick fixes when it comes to measuring and reporting greenhouse gas emissions.

Analysts at Ecometrica, an established software provider, supporting businesses with robust GHG accounting for over 12 years, have seen an increasing number of ‘quick hacks’ being used to shortcut the measurement process.

“These three carbon accounting short cuts could seriously damage your business reputation and net zero strategy.”

Charlotte Wylie, a Senior Analyst within the sustainability team, who works with a wide range of businesses has seen companies referred to Ecometrica who only realised that these shortcuts had been applied a year or two after signing up with certain providers.

Fudge No. 1. Using company turnover and sectoral benchmarks in place of real activity data, such as energy use. Some providers have touted the use of sectoral turnover metrics that apply a GHG coefficient to businesses, based on the sector and their overall size. For a hotel chain, for example, they would simply apply a Hotel or Hospitality Sector benchmark and multiply it by the turnover of the business.

Charlotte says, “It simply isn’t accurate enough to assume a given business is represented by a sectoral mean or benchmark, even if, as some providers claim, these factors are generated by AI and machine learning. Companies sometimes don’t realise that this has been done until after they have adopted measures such as energy savings within their own operations. These improvements will clearly not be reflected in the reported results if you are just sticking to a benchmark. Indeed, if you use this approach no matter how good your emission reduction programme, the more successful you are as a business, it will inevitably increase your reported emissions.”

Fudge No 2. Failing to update emission factors year after year. Emission factors for energy use and other activities change from year to year, location by location. In many cases, the reduction of emissions per unit energy supplied over the electricity grid is a key aspect of a net zero plan, for example the UK’s grid has decarbonised significantly since Ecometrica was founded in 2008 when the emissions intensity was 492 gCO2e per kWh generated compared to 210 gCO2e in 2021. Keeping up to date with all these changes and applying the correct emission factor to a given period and activity is somewhat onerous and is at the core of robust accounting.

Bertil Abbing, Head of Sustainability Analyst at Ecometrica notes, “When customers migrate to the Ecometrica platform, one of the first things we do is to review the historic emission factors that have been applied and in many cases it highlights some wild inaccuracies. It is often the case that an external consultant has built a spreadsheet for a client, which is then used and expanded year after year but without the emission factors being changed, or where they have changed they are not referenced in a way that can be audited. These spreadsheets inevitably break down in the face of time and changes within the business. At Ecometrica our factors are automatically kept correct and up to date by our powerful database Emissionfactors.com which has been expertly curated since the start of the business in 2008 and is independently audited by PWC and viewed by many as industry standard.”

Fudge No 3. Measuring CO2 only. Carbon dioxide (CO2) is one of several greenhouse gases that are covered by the GHG reporting standards, each gas having its own characteristics in terms of the heat they absorb and the amount of time they stay in the atmosphere. Together these gases contribute to a more complete picture of climate impact, reported as carbon equivalent (CO2e). For instance, refrigerant gases commonly used in air conditioning systems for instance are often omitted from GHG inventories, and yet their global warming potential is hundreds or thousands of times greater than CO2, depending on the type of gas used. Accounting for CO2 only underestimates your activities’ impacts on climate change and opens the door to misleading claims when making disclosures, setting targets or making “carbon neutral” or “net zero” commitments.

Vanessa Boudreau-Sannier, CEO of Ecometrica’s North American business says “Covering the spectrum of GHGs in an auditable way is not straightforward but is essential if you want your reports to be in line with the accounting standards set by IASB”

Vanessa adds, “We find these shortcuts and a few others are often applied by new entrants who don’t have much experience of GHG accounting or who are offering cheap accounting solutions as a pathway to sell various offsets and credits.”

Adam Leaver, Head of Customer Relations at Ecometrica says “we don’t aim to be the cheapest provider of sustainability accounting software, but if you think a high quality solution is expensive then you might well be surprised at how much a low cost solution will end up costing you!”

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Contact Ecometrica for further information on robust GHG reporting.