Carbon footprint: what it is, how it is calculated and how to reduce emissions

CO₂ emissions per unit of GDP, also known as global carbon intensity, fell by 0.5% in 2021. This is a significant figure but still far from sufficient if the aim is to reduce global temperatures by 1.5°C in the coming years. In fact, to reach the value included in the Paris Agreement, it would have to rise to 15.2 %.

However, more and more efforts are being made to achieve this. For example, the United Kingdom has been the first country to commit by law to have neutral emissions in 2050. Furthermore, the 27 members of the EU, like the United States, want to be climate neutral by 2030 which means that, by then, emissions should be reduced by 55%. In order to achieve this, it is essential for SMEs and micro-SMEs to measure their carbon footprint and establish sustainability strategies.

What is a carbon footprint?

Definition of carbon footprint

The carbon footprint is defined as the total trace of greenhouse gases produced by daily and economic activities that people carry out. This factor is part of the environmental footprint and is expressed in tonnes emitted during a given period of time (hours, days, weeks, months, years…). These can be of:

• Carbon dioxide (CO₂).
• Nitrogen oxide (N₂O).
• Methane (CH4).
• Sulphur hexafluoride (SF6).
• Perfluorocarbons (PFCs).
• Hydroflurocarbons (HFCs).

Since 1961, the human carbon footprint has increased eleven-fold. It now accounts for 60% of humanity’s total impact on the environment.

However, it is not only people and companies that leave a carbon footprint. Services and products do too, as they emit greenhouse gases before (during the extraction of raw materials, their manufacture and transport), during (e.g. when driving a car) and after the end of its useful life (when it needs to be recycled or disposed of).

Is it mandatory to calculate the carbon footprint?

Reporting on GHG emissions varies across jurisdictions. Mandatory GHG reporting programs can be found in 40 countries around the globe, including the UK and many EU member states.

How to calculate the carbon footprint

Basic principles for calculating the carbon footprint

The carbon footprint is the result of multiplying these two values:

• Activity data. Its function is to define the volume of CO2 emissions generated by the activity. This would be the case, for example, of the kWh of natural gas used for heating.
• Emission factor. This represents the amount of greenhouse gases emitted by each unit represented in the previous section.

In order to apply this formula, it is necessary to know in detail the consumption of electricity and fossil fuels, as well as their corresponding emission factors. For example, that of natural gas mentioned above is 0.202 kg CO₂ eq/kWh.

Methodologies for calculating corporate carbon footprints

Although this data is of vital importance, there is no single method for calculating the corporate carbon footprint. This is the case, for example, with the Greenhouse Gas Protocol (GHG), as well as the EU standard ISO 14064-1.

However, the most important of those currently in use is the TCFD (Task Force for Climate-related Financial Disclosures). It was established by the UK’s Financial Stability Board (FSB) in 2015; it considers both the carbon footprint and exposure to its assets and intensity as defined in the introduction to this article.

Today, 134 industrial companies are responsible for 80% of total greenhouse gas emissions. However, 98% did not provide evidence in 2021 that their activities take into account the environment. This was reflected in their financial reports, which made a key omission for investors.

Taking climate-related risks into account is essential, which is why the use of the TCFD methodology is important now more than ever.

A short practical guide to calculating the carbon footprint

By following these steps, it is possible to calculate the carbon footprint of any business:

1. Choose the year in which to calculate.
2. Establish the operational boundaries of the organisation. This is the case, for example, for the areas included in the calculations and the identification of the emitting sources.
3. Collect consumption data. Both in terms of direct emissions (fuel consumption of buildings and vehicles) and indirect emissions (electricity, subcontracted services, business travel by train or plane, etc.).
4. Multiply activity data by emission factors.

A good tip is to set up a system for collecting information that can be used to calculate the carbon footprint in future years. This will make the task less complex in the future. In any case, once the data has been obtained, it is time to think about how to reduce the carbon print.

How to reduce a company’s carbon footprint

All companies should have a plan in place to reduce their emissions going forward. The goal is to reach Net Zero: the state whereby the actions taken by the company have no impact on the environment in terms of greenhouse gas emissions.

However, to properly manage a company’s carbon footprint, the UK’s DEFRA (Department for Environment, Food and Rural Affairs) outlines four steps.

Step 1: Reduce GHG emissions

Essentially, this involves identifying the company’s main sources of greenhouse gas emissions, which is followed by drawing up a plan to reduce said emissions. For example, raising the thermostat temperature in summer by a few degrees, buying LED lighting or installing enclosures to prevent energy leakage.

Step 2: Decide whether to purchase external emission reductions.

This is an interesting option when the company cannot sufficiently reduce emissions from its activity. In particular, external emission reductions are called «carbon offset credits». Each is equivalent to one tonne of carbon dioxide. They are bought from CO₂ absorption projects and, through them, finance their continued work.

For example, imagine that a company, after a lot of work, still emits 1000 tonnes of CO₂ per year. In that case, it can buy 1000 carbon offset credits. This external agent will be responsible for carrying out work to reabsorb this amount of greenhouse gases.

Step 3: Assess the quality of these external emission reduction projects.

Naturally, there are many external emission reduction projects and each has its own characteristics. The most common include:

• Carbon offsetting. This is the most common type of emission reduction project. It involves buying credits such as those described above to offset the excess emissions generated by the company and comply with legal regulations. There is a mandatory market for large corporations and governments, along with a voluntary market for small consumers.
• Green tariffs. Green tariffs are tariffs that guarantee that the energy supplied to the business comes from renewable sources. This is particularly common for electricity, but impossible for fossil fuels.

Step 4: Create reports on these external emission reductions to promote greater transparency

Transparency is key in business. Therefore, within the corporate financial statements, the purchase of these offsets must be included and failure to do so can be seen as bad faith towards external investors.

Other ways to reduce a company’s carbon footprint

Companies have other ways to reduce their carbon footprint:

• Develop energy efficiency plans.
• Electrify their vehicle fleet.
• Replace refrigerant gases with ones that create less damage to the environment.
• Prioritise rail travel over air travel.
• Encourage telecommuting to avoid unnecessary travel.

Certifications and carbon footprint

A carbon footprint certificate is a document that verifies that a company meets certain requirements in terms of greenhouse gas emissions. It is only awarded by official or externally accredited bodies for this purpose.

What is a carbon footprint certificate for?

In essence, a carbon footprint certificate gives credibility to the products offered by companies. This type of certificate confirms that they have been obtained by trying to generate as little impact as possible and through environmentally responsible practices.

Types of carbon footprint certificates

Carbon footprint certificates vary according to each country’s regulation. According to Royal Decree 163/2014 in Spain, carbon footprint certificates are recognised as being issued by entities accredited by:

• GHG Protocol.
• PAS 2050.
• ISO 14064.
• ISO 14067.
• ISO 14069:2013.

Any other operational entity (DOE) or accredited entity (IEA) designated by the UN under the Kyoto Protocol.

Still unsure where to turn to measure your carbon footprint?. Use our tool to measure your emissions. If you have any questions or queries, please do not hesitate to contact us. 

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