CFO Magazine

Carbon Trading

(continued)

John Goff is technology editor at CFO.

The Invisible Inventory
Scoping Out a Carbon Accounting System

While Congress debates exactly how to tackle global warming, many businesses are already preparing for coming federal limits on carbon emissions. For most companies, the first step in the process involves performing a greenhouse-gas inventory.

This is no small task. To begin with, businesses must choose how to conduct the carbon accounting. There's no shortage of advice on that score. The list of CO₂ reporting protocols includes ISO 14064, the Voluntary Carbon Standard, and the GHG Protocol Corporate Accounting and Reporting Standard. Outside of the ISO checklist, none of the protocols appears to be nearly as rigorous as GAAP. The GHG Protocol, devised by a coalition of businesses, government agencies, and pro-green groups, seems to be as much guidance as standard. "It's deliberately broad," explains Emilie Mazzacurati, an analyst at research firm PointCarbon. "They want it to cover as many types of projects and companies as possible."

That may explain why so many U.S. corporations seem to be gravitating toward the GHG Protocol. The standard addresses three areas of emissions. Scope 1 covers direct emissions of six greenhouse gases from things like factory furnaces and boilers. Scope 2 includes indirect emissions — that is, purchased electricity. For now, reporting on Scope 3 discharges (downstream and upstream releases of greenhouse gases) remains voluntary. Says Mark Newton, environmental policy manager at Dell Computer: "The GHG Protocol fairly narrowly scopes to facility and facility manufacturing."

Assessing the carbon emitted outside a company's factory walls poses a number of challenges. Little information is available from the many links in a company's supply chain, and assigning responsibility for emissions can prove tricky. "If everybody counts Scope 3 emissions," says Mazzacurati, "you'll end up with a lot of double-counting."

Most advise starting small. At Green Mountain Coffee Roasters, managers confined the initial inventory to plant operations, then later expanded the inventory to include regional operations, corporate and employee travel, and, more recently, logistics and fulfillment. "Don't do everything in a year," advises Paul Comey, vice president of environmental affairs at the coffee maker. "You'll bury yourself."

Don't expect precise numbers, either. Nancy Hirshberg, vice president of natural resources at yogurt specialist Stonyfield Farm, notes that some of the numbers are hardly rock solid. "Carbon footprinting isn't that advanced," she says. "You have to estimate a fair amount. It's not worth taking extra time and money to try and get actuals." — J.G.

Emission Statement
Businesses struggle to document cuts in CO₂ discharges.

Brent Dorsey doesn't mince words. When asked about the need to rein in carbon emissions, the director of environmental programs at New Orleans–based utility Entergy says flat out: "We are the poster child for the physical risks that climate change can bring."

Entergy actually began reducing its carbon output years before Hurricane Katrina devastated the company's service area, which includes Louisiana and Mississippi. Since 2000, the company has slashed its yearly greenhouse output by nearly a third, getting it close to 1990 levels. Entergy has made improvements to its own generation facilities, but a key aspect of its improved carbon profile stems from its power purchases from merchant generators. By shopping the market, Entergy has been able to sign up with generators that produce energy more efficiently. To assess and report on reductions in emissions, the company adheres to the GHG Protocols, methodologies promulgated by the World Resources Institute and the World Business Council for Sustainable Development.

Comment on this article

Readers' Comments

What individuals can do on a daily basis?

Posted by Ajith Sankar | January 21, 2008 09:39am

Paper used in office

Posted by Raman Rajagopal | January 11, 2008 06:16am

Good Information

Posted by Louisa Nara | January 08, 2008 11:00am