Climate Reporting Blog › Measuring & Managing GHG Emissions: Introduction for Companies

|  September 26, 2023

🕓 Reading time 7 minutes

Table of contents

1. The mandatory topic of GHG emissions for companies at a glance

2. What are GHG emissions and which gases are relevant?

3. What is a GHG inventory for companies?

4. Tips for getting started: What you should pay attention to when measuring your GHG emissions

1. The mandatory topic of GHG emissions for companies at a glance

Global warming and the associated climate change represent the greatest challenges of our time worldwide. The release of greenhouse gas emissions since industrialization contributes significantly to this warming because they trap thermal radiation in the troposphere instead of allowing it to escape.

The most significant greenhouse gas is carbon dioxide, CO2. Other greenhouse gases such as methane and nitrous oxide are also present. These greenhouse gases are converted into CO2 equivalent emissions based on their potential for global warming. All relevant emissions are therefore summarized under the unit CO2e. Colloquially, people often simply refer to CO2, but in most cases, this refers to all greenhouse gas emissions.

To counteract climate change, greenhouse gas emissions must be drastically reduced.

What role do companies play in this? According to statistics from the German Federal Environment Agency, over 60% of greenhouse gas emissions released in 2017 can be attributed to the commercial, industrial, and energy sectors. Companies are therefore a major source of emissions and bear a significant responsibility to manage their GHG inventory.

Due to legal requirements such as the Corporate Sustainability Reporting Directive (CSRD), the requirements of suppliers and the Banks with the ESG questionnaire The GHG inventory across Scope 1, 2, and 3 has now become of great importance for companies of all sizes in Germany and the EU. Large, medium, and small companies alike must meet these requirements.

2. What are GHG emissions and which gases are relevant?

GHG emissions stand for "greenhouse gas emissions" and refer to the release of greenhouse gases into the atmosphere. These gases are responsible for the so-called greenhouse effect, which causes heat to be trapped in the Earth's atmosphere, which in turn leads to warming of the Earth's surface. The greenhouse effect is a major driver of climate change.

After the leading Greenhouse Gas Protocol standard For companies' greenhouse gas accounting, emission data for all greenhouse gases covered by the Kyoto Protocol must be collected in the GHG inventory. These data are also required for CSRD reporting under ESRS E1.

The Kyoto Protocol was an international treaty adopted in 1997 and entered into force in 2005. It established commitments to reduce greenhouse gas emissions, particularly for developed countries, to combat climate change. The relevant greenhouse gases identified are CO2, methane, nitrous oxide, and certain fluorinated gases.

The main greenhouse gases considered relevant under the Kyoto Protocol are:

Carbon dioxide (CO2)

Carbon dioxide is the most abundant greenhouse gas and is released primarily through the combustion of fossil fuels such as coal, oil, and natural gas. It contributes significantly to anthropogenic (human-induced) climate change.

Methane (CH4)

Methane is a more potent greenhouse gas than CO2, although it occurs in smaller amounts in the atmosphere. It is released during processes such as livestock farming, agriculture, and the disposal of organic waste.

Nitrous oxide (N2O)

Nitrous oxide is another gas produced by agricultural activities, the use of fertilizers, and industrial processes.

Fluorinated gases: Fluorocarbons (HFCs), Sulfur hexafluoride (SF6) and Nitrogen trifluoride (NF3)

These gases are used in various industrial applications and technology. Although they are present in smaller quantities, they have a much higher global warming potential per molecule than CO2.

3. What is a GHG inventory for companies?

A GHG inventory for companies is a detailed recording and documentation of the Greenhouse gas emissions (GHG emissions), the one Companies directly or indirectly through its activities and processes in a given year into the atmosphere releases. This serves to record and analyze the sources of emissions, the amount of greenhouse gases released in tonnes and their impact on climate change.

Synonymous terms for a GHG inventory (greenhouse gas inventory) are the Corporate Carbon Footprint (German: CO2 footprint for companies), the CO2 balance or the climate balance.

When creating a GHG inventory, emissions divided into three different categories or scopes, which are classified as Scope 1, Scope 2 and Scope 3 be referred to.

Scope 1

Scope 1 includes direct GHG emissions that result directly from a company's own activities and processes. Typical examples of Scope 1 emissions include the combustion of fossil fuels to generate energy in company facilities (such as heating or vehicle fleets), industrial processes that generate emissions, and fugitive emissions (unintentional release of gases). These emissions are directly under the company's control.

Scope 2

Scope 2 Refers to indirect GHG emissions associated with the provision of energy to the company. This primarily includes emissions resulting from the purchase and consumption of electrical energy, heat, or steam. The emission intensity of the energy sources supplied is crucial here. Companies can influence Scope 2 emissions by using renewable sources for their energy or by increasing their energy efficiency.

Scope 3

Scope 3 includes other indirect greenhouse gas emissions that are primarily associated with the company’s activities. Scope 3 Emissions are 15 categories and classified into upstream and downstream areas. This ensures a clear and consistent presentation. CO2 emissions in Scope 3 This includes, for example, the consumption of energy in rented assets (e.g. real estate, vehicles), the purchase of goods and services, waste disposal, water and wastewater, business travel and employee commuting.

Read article: Scope 3 emissions in focus | Explanation of the 15 categories according to the Greenhouse Gas Protocol

Practical tip

Implementing a process for compliant GHG emissions collection can present some challenges. Therefore, we recommend seeking a partner early on and compiling the GHG inventory for the first year. In subsequent years with mandatory reporting, there will be no time pressure, as the challenges have already been successfully mastered and a reproducible process has been established. Furthermore, valuable data from a reference year will already be available, allowing the necessary measures to be soundly justified. This experience will allow high-quality data to be collected routinely when the reporting obligation begins, ensuring you are on the safe side when it comes to meeting the requirements.

If you do not yet have a suitable partner for collecting your CO₂-Key figures, please inform yourself about our Software+Service solution. Our TÜV-certified Corporate Carbon Footprint offers you standard-compliant GHG emissions measurement with guaranteed success.