(NSAI: Nashua, New Hampshire) — Even though no firm action was taken during the 2009 Climate Conference in Copenhagen, the U.S. administration has still pledged that the country will tighten carbon emission regulations. The most plausible possibility is what is referred to as a “cap and trade” system where the government sets a cap on how much pollution a company can produce and companies that need to exceed the cap can buy credits from those who pollute less.

While the concept of regulating carbon emissions may be new for U.S. businesses, many foreign governments and companies—as well as U.S. businesses that have a global presence—have been struggling with how to identify and regulate their greenhouse gases since the Kyoto Protocol was passed in 2005. If there is a silver lining in all of the discussion, it’s that it is much easier to implement a proven system to monitor your carbon emissions that it was just four years ago—and often reducing carbon output results in a company saving money on utilities and other products.

Background

While global warming is still being debated in some circles, concern about global warming was the force behind The Kyoto Protocol. Many scientists say excess carbon and similar gases in the atmosphere create a “greenhouse effect,” trapping heat in the form of ultraviolet radiation, which has been naturally transformed to infrared in the earth’s atmosphere. The principal concern is anthropometric gases (those gases that are emitted by man’s activities), which became a concern from the time of the industrial revolution but worsened with the globalization of industry, and the discovery and use of fossil fuels.

The most abundant greenhouse gas is carbon dioxide (CO₂) and therefore CO₂ is the gas that is most sought to be regulated by governments.

“While carbon dioxide isn’t the only greenhouse gas, all other gases with a global warming potential (GWP) are rated with a CO₂ equivalent. For example, methane is a greenhouse gas that is 72 times more potent than CO₂, so it is given a GWP rating of 72,” says Richard Hadfield, technical services manager with the National Standards Authority of Ireland (NSAI), a company that specializes in management system assessment and verification. NSAI has been providing carbon certification services since 2005 and has clients ranging from large facilities emitting millions of tons of CO₂ per year to smaller operations.

“The Kyoto Protocol established mechanisms to control the emissions of greenhouse gases including global and regional initiatives, such as the EU Emissions Trading program,” Hadfield explains. “But in order for these programs to work, companies must account for their carbon output and determine exactly how much carbon they are putting into the atmosphere. This can be problematic.”

Hadfield says there are many carbon footprint programs active across the globe but it’s difficult to make them meaningful. It’s one thing to study and determine the carbon emitted by a single activity, but we live in interactive systems with many direct effects and hundreds of indirect effects; at this level it is important to define boundaries, understand interactions, and bring the results of a carbon footprint determination to a level that can be understood and help in decision making. The carbon accounting industry is still nascent, so even if a company can determine how much carbon it is creating, it’s another challenge having the public understand just exactly what that number means.

For example, Lufthansa recently did a self-declaration of its carbon footprint, calculating how many pounds of CO₂ are produced per mile per airline passenger. But because this accounting wasn't done by a licensed certification body like NSAI, it’s difficult to know exactly how precise the study is and gauge the public’s reaction.

“Self certifications are good in the sense that companies show an interest in accounting for their carbon output and can determine a baseline value,” says Hadfield. “A baseline is important because it lets a company say ‘we’re here and we are going to reduce our carbon emissions by X’ and set up real targets and start putting together plans to address the situation. But when the time comes to comply with real legislation, these companies will need to be certified by an outside body to a real standard. One such method is ISO 14064.”

ISO 14064

As with all ISO standards programs, the ISO 14064—“Greenhouse gases” standard lays out a logical and codified management system. Hadfield says ISO 14064 is being used in many different ways. For example, in the most stringent form, companies are using it to integrate a formal carbon reporting and accounting system into everything they do. The results are then used in an annual report and have a fiscal effect on the company. If companies are looking to implement a full carbon offset structure—such as a cap and trade system, currently under consideration in the United States—full implementation of ISO 14064 would facilitate this and is likely to be the chosen methodology.

“Fully implementing ISO 14064 is along the lines of Sarbanes-Oxley; it becomes a corporate governance document,” says Hadfield. “If a company declares its data incorrectly it will have a negative impact on that business. Full implementation of ISO 14064 is very rigorous and comprehensive. For this reason we have not seen many adoptions of the full standard. Companies simply don’t want the liability or are unable to devote so many resources to it. Lacking a mandate from governing bodies, many companies are waiting to see what they will be required to do before taking the hard core leap.”

Hadfield says the most popular use of the ISO 14064 scheme at this point is as a guide for determining what a company’s carbon baseline output is and to help formulate plans on how to address and lessen carbon outputs in the future.

“A good example of how we have seen it used is when we were approached by a person from the beef industry in Ireland who had done a lot of work on trying to determine a carbon baseline value. However, because of the changing nature of the rules and lack of a formal government program to work with, he had a lot of questions,” says Hadfield. “We used ISO 14064 as a guideline, not performing a full audit, but using it as a road map to help him figure out his carbon baseline, form a strategy to address carbon output, and determine the gaps that would present problems down the road. In this example we found that the processing plants were easy to analyze but further down the carbon chain, when you tried to determine the carbon intensity of the farm, it was very difficult to come up with more than general estimations.”

The ISO standard framework can also help a company figure out its carbon baseline in a more difficult setting, such as a department store in a mall. In this case, many of the carbon producing systems such as heating and air conditioning and electrical come from the mall and not the store, but the store will still need to account for a portion of those systems’ carbon output.

“The same holds true for a multinational company that may own stock in other companies or hold a partial interest in other firms. The ISO framework gives us a methodology on how to account for this,” says Hadfield. “In many of these complex cases, companies simply want to know what their current position is and how they can start the process of accounting for and mitigating their carbon output. Can they come up with a proper program that will address all of their carbon management needs within 10 years? Using the framework we can do that.”

So should you do it?

Whether or not to pursue ISO 14064 all boils down to determining if there is an incentive for you to do so. And Hadfield says there are many positives to knowing your carbon footprint.
“The primary benefit at this point would be energy savings,” he says. “The more carbon you emit, the more energy you are using, so if you can find ways to limit the amount of carbon you produce, chances are you can find more efficient ways to use energy. This will translate into a bottom-line savings. For example, I’m working with a cement producer right now, which is a very energy-intensive company. If we can reduce their carbon outputs, then we can reduce their energy usage, which will make them more profitable.”

Later this year ISO will publish its energy management standard—ISO 50001. Hadfield says this new standard, or its precursors—I.S. 393 and EN 16001—or other environmental management systems, are very complementary to addressing a carbon footprint because they provide a holistic approach to reviewing, controlling, and reducing the effect of an organization’s output.

Then, of course, there is the whole public relations aspect of carbon accounting. For better or worse, many members of the public will have a better opinion of a company and may choose to purchase its products and/or services based on what it is doing to address its carbon footprint.  

Hadfield sees the biggest benefit as positioning yourself ahead of the regulatory curve. “I think it’s inevitable that there will caps on carbon output in the near future or the introduction of carbon taxes,” he predicts. “By starting the process of finding out your company’s baseline and figuring out what steps you should be taking to reduce your output now, will make you all the more prepared when such legislation passes.”

In Europe, for example, there is already talk of a carbon tax where companies would be assessed a fee based upon what the emissions are for their plants and other buildings. If this happens—or is even formally proposed—companies that know their baseline will be easily able to predict the fiscal consequences and will be able to start positioning themselves to be more competitive in a carbon-regulated marketplace.

Conclusion

“Right now ISO 14064 and self auditing is a ‘nice to have,’ not a ‘need to have,’” says Hadfield. “The United States government is still caught up in the health care debate. With a lack of definitive action in Copenhagen, a carbon cap and trade program has been put on the back burner, but that doesn’t mean it’s going away. There are also local efforts that are starting up, like in California, where companies will have to start knowing their baseline. And while the United States isn’t yet moving forward, other governments are, and companies that are doing business on a global basis will need to comply. Forward-thinking companies will start their efforts now so that they can continue business without interruptions once carbon starts to be officially regulated. Companies that are not currently taking a stock of their carbon outputs risk major difficulties in the future.”