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Wood for the W.I.N. – Carbon Accounting

There is a huge market gathering around carbon and greenhouse gas emissions (GHG’s). Governments are being pressured by the public to address climate change and global warming, and very soon regulation and the monetization of carbon offsets will create an asset tradeable marketplace that will classify a price for it.

As you read this post there are numerous bills in the US Congress being proposed to put a price tag on carbon. This prospective legislation, along with other cap and trade proposals, are the foundation of a new paradigm in the world economy. Imagine carbon offsets as the tradeable asset and a model price at around $100 dollars per metric ton. These are very real numbers based on existing frameworks in the EU system. Let’s break it down for the United States.

In 2020, the United States is estimated to have generated ~5.16 billion metric tons of greenhouse gas emissions. At the $100 per ton number that represents a VERY LARGE number, and about 2.5% of the total estimated US GDP for 2020. That is also accounting for the effect of the pandemic on the US economy.

Who is accountable for all of these emissions you ask? All of the companies in the US, and in the larger frame, the world. Now you can begin to grasp why the C-suite is concerned, and why companies are in a blitz of marketing and green policy initiatives.

In this exclusive Nature’s Packaging post, we dive into What’s Important Now (W.I.N.) for the wooden pallet and container industry by examining a methodology called “Carbon Accounting” that companies and organizations around the world are utilizing to assess their greenhouse gas emissions.

Carbon Accounting 101

Carbon accounting, also known as greenhouse gas accounting, is an approach and process designed to audit and provide an assessment of the company’s carbon “footprint”, which is the total amount of greenhouse gases produced by the company both directly and indirectly.

Carbon accounting measures the emissions produced by a certain business activities and processes. It quantifies the amount of output from the use of fossil fuels, agricultural practices, industrial production, various supply chain operations, and other indirect processes. The data and information generated from an account and inventory of emissions becomes the framework that a company utilizes to further manage their climate change impact and determine possible strategies to mitigate that impact going forward.

In terms of reporting, many countries have regulatory agencies that require companies to report their emissions. In the US, this would be part of the Environmental Protection Agency’s Greenhouse Gas Reporting Program.

Greenhouse Gas Protocol (GHGP)

The Greenhouse Gas Protocol is a guideline created by the World Resources Institute (WRI) in partnership with the Business Council for Sustainable Development (BCSD). Many companies around the world have adopted the GHGP as it provides accounting and reporting specifications, guidance appropriate to different industries, tools for calculation, and training for businesses and government entities.

The GHGP provides a standardized framework for measuring and managing emissions from both public and private sector companies and organizations. Additionally, an accounting protocol for emissions created from logistics operations was established in 2016 by a newly formed council. It was established in collaboration with the World Resources Institute, and it is known as the Global Logistics Emissions Council (GLEC) Framework.

Emission Scope

The Greenhouse Gas Protocol divides emissions into 3 Scopes. Companies measure and set goals to reduce emission based on the framework of these Scopes:

Scope 1

This scope is based on all the direct GHG emissions by a company. These are emissions that created by resources owned or controlled by the company. These include GHG’s produced from fuel combustion in assets like vehicles, boilers, and furnaces.

Scope 2

Scope 2 refers to indirect GHG emissions from consumption of utility purchases like electricity, heat, cooling or steam. These emissions occur outside any company’s actual facilities as a result of utility usage and are considered an indirect source of emissions.

The Corporate Standard is an accounting and reporting standard provided by the GHG Protocol that gives guidance on how an organization can calculate and inventory its Scope 2 emissions. The standard is designed to ensure consistent methodology and transparency of results between organizations around the world.

Scope 3

Scope 3 contains other types of indirect emissions that can be the largest source of GHG emissions for an organization and represent up to 90% of the total carbon footprint. Scope 3 sources include emissions that occur both upstream and downstream of the organization’s activities, as in supply chain and logistics operations. This upstream/downstream activity constitutes the organization’s full value chain in creation of its products and/or services.

Scope 3 includes 15 overall categories:

  1. Purchased Goods and Services
  2. Capital Goods
  3. Fuel- and Energy-Related Activities Not Included in Scope 1 or 2
  4. Upstream Transportation and Distribution
  5. Waste Generated in Operations
  6. Business Travel
  7. Employee Commuting
  8. Upstream Leased Assets
  9. Downstream Transportation and Distribution
  10. Processing of Sold Products
  11. Use of Sold Products
  12. End-of-Life Treatment of Sold Products
  13. Downstream Leased Assets
  14. Franchises
  15. Investments

Corporate Sustainability & You

Scopes 1 & 2 mentioned above are the starting points for any business and generally are the easiest to assess and reform as they are the closest to day-to-day operations. They can include anything from changing out lighting systems in buildings to promote savings on electricity costs, implementing new HVAC systems and filtration, utilizing new control software that maximizes the efficiency processes in building maintenance systems, to using “green” vehicles.

Scopes 1&2 are the ‘proof of concept’ phase in most cases as a company ramps into a sustainability program across the entire organization. However, companies also have to account for Scope 3 emissions in order to achieve and claim successes. The difficulties in Scope 3 accountability are directly related to the above-mentioned value chain that include suppliers and customers as part of the framework.

Many companies are embracing the GHG protocol and it’s variants like the GLEC Framework and the Corporate Standard. In example, Walmart has launched it Project Gigaton which aims to avoid one billion metric tons (a gigaton) of greenhouse gases from the global value chain by 2030. Pepsico has incorporated the Pepsico Positive program to address their sustainability initiatives.

Both companies are customers of the pallet industry and we exist in their value chains. Additionally, there are many other companies in a multitude of industries that need and use pallets to move their goods through the supply chain. The Pallet Foundation provides numerous resources like the Environmental Product Declaration and the Landfill Avoidance Study as excellent reference documents that help inform customers how well the wooden container and pallet industry aligns with the sustainability efforts of these organizations.

It is critical that companies in the wooden pallet and container industry continue to fund, promote, and align themselves with these corporate sustainability efforts. As an industry, we must have a solid grasp of the various GHG protocols, carbon accounting, and sustainability initiatives because it exponentially multiplies the value of your company in the value chain of the customer companies we service. We must connect and understand what’s important to them now.

 

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