IT Sustainability Think Tank: Getting a handle on greenhouse gas emissions regulations

Enterprise sustainability practices are coming under close scrutiny from clients, consumers, governments, and regulators. IT companies, and organisations with IT estates, should be proactive to ensure their sustainability, environmental reporting and climate action practices hold up.

For greenhouse gas (GHG) emissions reporting in particular, those responsible for leading sustainability in each organisation should familiarise themselves with the Greenhouse Gas (GHG) Protocol standards related to corporate accounting and reporting, the Corporate Standard and Corporate Value Chain (Scope 3) Standard. This will help companies understand the process to measure and track the emissions of their operations and value chain and – in turn – where reductions could be made.

The first stage of carbon foot-printing is calculating Scope 1 and 2, which relate to an organisation’s direct business operations. Scope 1 emissions include direct emissions from fuels used within equipment and machinery owned or operated by the reporting company, such as diesel fuel used in company vehicles, or natural gas used in boilers.

Because a lot of enterprise IT estates are primarily office-based, the bulk of their operational emissions will relate to the electricity they consume and how it is generated, whether from renewable or fossil-based sources. Emissions from electricity will be particularly important for IT companies and IT estates with significant datacentre operations.

These emissions, which fall within Scope 2, are classified as ‘indirect’ emissions, since they are created where the electricity is generated, rather than where it is consumed.

Scope 2 emissions can be calculated using two different methods: location-based and market-based. Location-based Scope 2 emissions are determined using national or regional average emission rates for the generation of electricity, while the market-based method uses emission rates specific to the electricity suppliers’ mix of electricity generation sources.

Importantly, the market-based approach enables organisations to procure renewable electricity backed by renewable energy certificates (RECs) from an electricity supplier and reflect this in their footprint. A concept called additionality is important to consider here, especially for larger organisations, where sourcing renewable electricity through a power purchase agreement (PPA) can help to ensure new electricity generation is added to the electrical grid as a result of the contract.

There are also emissions related to a company’s own operations that fall in the value chain. These emissions are classified as Scope 3, with 15 distinct categories that include the upstream emissions (such as from the manufacture of products and equipment purchased by the reporting company) and downstream emissions (such as emissions from the use of products sold by the company) in the value chain. Normally, the value chain is where the majority of a company’s emissions fall, in the range of 90% for some organisations.

Once Scopes 1, 2 and 3 emissions are measured, the results will serve as a useful tool to identify the key emission sources and develop a plan about how emissions are managed and reduced. When working with organisations to map and communicate their footprints, we advise working to principles of transparency, accuracy, clarity and substantiation. Adhering to these for environmental reporting will position organisations well for increased scrutiny from regulators and governments.

Importantly, IT companies should seek senior leadership support and buy-in for their environmental practices, to help ensure the right resources and focus are devoted to reporting, planning and staying aware of changing regulatory landscapes.

For enterprises, the accountability for this work should ultimately rest with the C-suite and maintaining best practice in sustainability should fall within the remit of a sustainability team with dedicated resources. For smaller organisations, without specific internal resources or skills in this area, they may seek support from industry groups or trade associations who are often working to understand how changing environmental regulations impact their sectors. For more tailored support, they can engage an expert consultant who understands the process and landscape.

Governments, policymakers and regulators across the world are considering new requirements and regulations around reporting and environmental claims. It is important to adhere to the principles discussed above, stay engaged within your sector and follow best practice for carbon accounting.