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Services company and carbon footprint accounting: monetary or physical approach?

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Answering climate emergency

The new IPCC (Intergovernmental Panel on Climate Change) report’s summary was approved and published on April 4th. It is irrevocably calling for the emergency on the climate change. According to the IPCC, carbon emissions can still be reduced by half by 2030 but it requires taking actions starting 2025, in other words today. For the IPCC, solutions to decrease carbon emissions should combine clean technology and decreasing demand, which is possible through the transformation of uses and lifestyles. These recommendations are obviously part of the climate change limitation policy of 1.5 °C-raise, according to the Paris agreement from 2015.

Adopted in 2015, the plan made by France is described in the Low Carbon National Strategy which defines the direction to take to reduce greenhouse gas emissions until 2050, sets goals on short and medium terms (through carbon budgets) and aims at reaching carbon neutrality by 2050. The Low Carbon National Strategy leads the transition towards a low carbon, circular and sustainable economy in each industry.

Beyond the industrial orientation of the strategy and this new IPCC report, all companies are concerned and the awareness on the climate emergency is of the upmost importance.

Carbon footprint accounting

But companies carbon accounting has been active for a while. Since the 2000s, it has been practiced in companies, often pushed by laws. The article 75 of the French Law on the National Commitment to the Environment from July 12th, 2010, makes the carbon footprint accounting mandatory. For companies of over 500 employees, the accounting must include direct (scope 1) and indirect emissions from energy consumption such as electricity, heat and steam which are necessary to the production (scope 2). And since January 2022, it must include significative indirect emissions, which includes a big part of the scope 3 emissions.

For services company, scope 3 is at least 75% of the carbon emissions!

Companies’ carbon accounting is deployed around 3 practices:

  • The first one according to the 14064 ISO norm. It was created in 2006 with the 14069 TR to help its implementation. A revision published in 2018 makes it even more relevant.

  • The second one is the carbon footprint accounting by the ADEME (the Agency for the Green Transition). It was implemented in 2004.

  • And the third one is the GHG Protocol (Green House Gas Protocol) and is available since 2001. It is used by a lot of international companies.

Monetary or physical approach?

The “physical” approach is defined as integrating the calculation of carbon emissions from physical realities, for example the travelled distance or the consumed kWh. It is often opposed to the “monetary” approach which estimates the carbon quantity from a bill or a monetary amount.

The “physical” approach is based on emission factors, which are coefficients allowing the conversion of a company’s data (travelled kilometers, consumed kWh etc.) into carbon emissions (usually in tons). Emission factors are key elements to guarantee the carbon accounting’s reliability and then to identify levers companies can use to decrease their carbon footprint. The ADEME provides over 5000 emission factors.

The ”monetary” approach is based on monetary ratio to convert a company’s activity’s data (money spent in travel expenses or raw material for example) into carbon quantity. Even if this approach seems simpler, it comes with uncertainty for the great diversity of the company’s underlying activities. Furthermore, as it is based on an economical logic, it integrates a short-cut occulting the activities’ physical reality. All emission items, including the indirect emissions, do not appear on the accounting and will be neglected in the carbon footprint, even though they might represent most carbon emissions in one company. Finally, comparing accountings between years is even more complex as the financial mechanisms are fluctuant and impact companies’ accounts.

The physical approach, a must-do for services companies

Whether it is about commuting to work or travelling for sales representatives or technicians' tours, employees’ mobility is the main source of carbon emissions for services companies (maintenance, cleaning, intervention, safety, etc.). These companies must, among other things, handle the daily itineraries of their employees to deliver services to their customers. It is the case for facility management companies for example, whose staff is in charge of the upkeeping and technical maintenance of buildings and their equipment. Among these companies, some are already keen to plan their travelling staff’s technical activities to reduce their carbon emissions, even if it means negotiating with their customers on the interventions’ delay. Likewise, within these companies’ customers, some are already integrating clauses regarding environmental performances in their contracts, which encourages services companies to integrate environmental objectives of reducing greenhouse gas emissions in their operations and services production.

A study from the SYPEMI (the Syndicate of Facility Management Professionals) quotes: “As companies are facing new environmental and societal challenges, the Facility Manager is a strategical resource to reach their social and environmental commitments. The Facility Manager develops solutions to reach ever more ambitious goals of reducing energies consumption and more globally, decreasing the carbon footprint, and it implements them with specific and dedicated expertise.”

The challenges are considerable. However, it is not easy to establish an objective assessment of the carbon footprint for employees’ mobility and travels and to project ourselves in realistic scenarios with the relevant carbon footprint reduction strategy.

As the French Carbon Footprint Association (ABC) reminds us, “the physical approach is the only one able to lead the companies’ transformation and the only one to measure what has been done (and what is remaining to do) to build the 2050 low carbon world.”

The challenge is to have a fine knowledge of emission levels from each employee according to their transportation mode, to establish a reliable assessment at the whole company scale. Then, it is about building a clear vision of the accessible mobility offer to be able to project ourselves in reduction scenarios, to build a decarbonization strategy and to act on the individual scale in a pragmatic manner.

As we can see, the monetary approach is not enough in this context. It is thus necessary to use an approach based on physical data which is the only one able to show the available and accessible mobility offer for the travelling staff, using proven scientific model to calculate carbon emissions of vehicles and transportation modes, and the geographic reality of companies’ locations and their sites of intervention. It is the integration of these 3 dimensions that paves the way to a reliable simulation solution able to draft robust strategies to reduce the carbon footprint and project them into feasible scenarios.

Learn more about Neovya mobility data intelligence solutions to reduce enterprises’ carbon footprint


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