Three Greenhouse Gas Management Trends to Watch in 2021

In the last few years, many organizations have set science-based targets (SBTs), which typically include both operational (scope 1 and scope 2) and value chain (scope 3) emissions.

But with these SBTs comes a need to track progress — an area in which historical greenhouse gas (GHG) accounting has struggled due to the complexity and uncertainty of value chains.

Many targets are set using high-level estimates for scope 3 emissions, such as those based on financial metrics (e.g. U.S. Environmental Protection Agency Environmentally-Extended Input-Output.) While these screening estimates are essential for initially prioritizing where to focus, this process leaves reducing spend as the only lever to reduce emissions, which is not viable long-term over the 10-plus-year life of most SBTs.

Further, some emission scopes — such as biogenic emissions — lack a consistent methodology, while others are evolving with changes in how and where employees work. We expect to see scope 3 accounting advancements in the following three areas in 2021 as organizations innovate to address these issues.

Organizations are working to improve both sources of data and knowledge of the supply chain through hybrid approaches that incorporate supplier-level emissions into broader industry average data.

In 2021, we anticipate that these hybrid approaches to measure and manage supply chains will become more common and will be integrated further up supply chains, especially as organizations look to implement initiatives beyond direct (Tier 1) suppliers.

By collaborating directly with suppliers, an organization can collect specific supply chain data and begin to implement and track the benefit of specific reduction projects. Integrating this with industry average data for all other suppliers can support prioritization of critical suppliers and impacts. This example of a hybrid approach allows organizations to begin the process of supplier interventions — such as supporting energy efficiency improvements with a supplier — and expand on these interventions year after year.

The Gold Standard provides a framework for how to implement and track a supplier intervention even when the supply chain is not sufficiently transparent. This guidance can help organizations that do not know exactly who their suppliers are, and subsequently are unable to initiate the supplier intervention process.

Organizations pursuing this approach are approaching the framework through a “supply shed” concept. Supply shed is used to refer to a group of suppliers from the same region producing the same commodity and is applicable in instances where there is insufficient transparency to trace supply back to a specific supplier.

We expect to see an uptick in supplier interventions in 2021 as the Gold Standard guidance helps organizations begin to navigate complex supply chains.

The term “biogenic carbon” is often used to refer to the biomass content stored in products, but it can also refer to GHG emissions and removals from land use, land use change, bioenergy and natural carbon removal technologies. These emission flows are relevant for organizations selling agricultural products, looking to innovate with bio-based alternatives or investing in bio-based fuels.

The current GHG Protocol Corporate Value Chain Accounting Standard indicates that emissions and removals from biogenic sources shall be reported separately due to complexities and uncertainties around boundaries and calculation methodologies. However, recognizing the importance of biogenic carbon flows to achieving a low emissions economy, in 2020 the GHG Protocol convened stakeholders to develop updated guidance for calculating and reporting these emissions.

While final guidance isn’t expected until 2022, we expect to see many organizations taking part in the guidance review and piloting process throughout 2021. This year will be pivotal for defining how biogenic carbon is addressed in goal setting and achievement.

Employee remote work is often categorized as de minimus for organization GHG inventories. However, given the response of many organizations to the impact of COVID-19, we expect remote employee work to become increasingly relevant in GHG inventories.

As organizations embrace the potential benefits of remote work, they may permanently close offices, reducing their scope 1 and 2 emissions. The transition away from centralized workspaces, catalyzed by impacts of COVID-19, will increase the need for remote work to be accounted for in scope 3 – category 7, employee commuting.

There will likely not be one single unifying approach to account for emissions associated with remote employee work. There are several calculation methods that can be catered to an organization based on its specific needs, structures and organization policies.

As we begin 2020 reporting, we anticipate an increase in organizations considering how to include these impacts in scope 3 inventories. Approaches for calculating these emissions will vary based on how a company implements remote work. Assumptions such as number of monitors, locations of employees working from home, and the reduction of employee commuting data will need to be made before deciding on an appropriate approach for calculating these emissions.

With over 250 organizations obtaining the Science Based Targets initiative approval in 2020 alone, we expect to see significant innovation in scope 3 accounting over the next year as organizations address how to track and manage progress toward ambitious reduction targets. The draft releases of guidance focused on supplier interventions and biogenic carbon in 2021 will further spur action.

As the GHG accounting continues to evolve over the next year and beyond, we look forward to the climate innovations that result from better visibility and quality in emissions results.

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