Greenwashing and carbon accounting standards
I’ve been invited to comment on a recent article by Hunter Richards of Software Advice on greenwash. The article calls for an improvement to environmental accounting infrastructure through software, so that consumers can have greater confidence in claims of carbon neutrality. Financial accounting methods, standards, auditing procedures and tools are well developed, but not so with carbon accounting. By way of example Richards highlights how a well known company that stated it was carbon neutral hadn’t accounted for its scope 3 emissions.
Scope 3 emission are “indirect” emissions that are embodied in products and services that a company may use. For example scope 3 emissions for a drinks manufacturer would be the carbon emission embodied in the aluminium the drinks company makes its cans out of. However the Greenhouse Gas Protocol, the major global carbon accounting standard in use, hasn’t yet prescribed inclusion of scope 3 emissions in carbon accounting practices
Scope 3 emissions are challenging to measure, and ultimately can only be accurately tracked if every product is labelled with its embodied carbon emissions. Financial accounting practices rely on everything having a price. For example, the sale price of a car is comprised of the cost of everything that goes into making the car, down to the wheel nuts. The price of the wheel nuts in turn depends on the price of the steel used to make the nuts, and the amortised cost of the tooling used to make the nuts. The price of the steel depends on the ingredients in the steel, for example its molybdemum content, amongst others. The price of molybdemum depends on the cost of energy and labour and amortised machinery used to mine it, process it and transport it. The amortised price of mining machinery depends on many factors as well. Ultimately there are probably well over a million prices that come together to make up the price of a car. In the same way complete carbon accounting also relies on every product or service having emissions associated with it accounted for.
This is complex to do. Daniel Goleman’s book Ecological Intelligence gives the example of glass, which typically has over one hundred ingredients in it in addition to sand. To provide thorough scope 3 carbon accounting requires being able to identify the emissions arising from each ingredient. Thorough scope 3 accounting for something like a computer or a mobile phone is thus very hard to do if the embodied emissions of each constituent part is not known. In the absences of mandated carbon labelling for all products and services, voluntary carbon reporting of scope 3 emissions is very challenging.
This is where emissions databases, and associated software, are useful. “Generic” emission factors could be developed for a particular type and size of product or service, in the absence of actual numbers, and applied when estimating scope 3 emissions. Global sharing of this information via on-line databases could make scope 3 carbon accounting much easier. However generic emission factors will only ever be rough approximations. Ultimately if accuracy is the aim everything in the economy needs to be labelled with its carbon emissions.
Standards, auditing standards, certification schemes and clear rules are needed for accurate carbon accounting. In the absence of complete carbon labelling of everything there needs to be transparency around methodologies and recognition that scope 3 carbon accounts will at best be estimates with a long list of assumptions behind them.