Environmental Metrics and Reporting

The Environmental Pillar

Environmental factors typically receive the most attention in ESG, driven by climate change urgency and relatively mature measurement methodologies. This module covers the key environmental metrics and how to report them effectively.

Greenhouse Gas Emissions

The GHG Protocol

The Greenhouse Gas Protocol is the most widely used standard for measuring and reporting greenhouse gas emissions. Understanding its structure is fundamental to environmental reporting.

Scope 1: Direct Emissions

Definition: Emissions from sources owned or controlled by the reporting company

Examples:

• Fuel combustion in company-owned vehicles
• On-site fuel combustion (boilers, furnaces)
• Process emissions from chemical production
• Fugitive emissions (refrigerant leaks, methane from operations)

Data Sources:

• Fuel purchase records
• Fleet fuel consumption
• Process engineering data
• Refrigerant tracking logs

Calculation: Activity data × Emission factor = Emissions (tCO2e)

Scope 2: Indirect Energy Emissions

Definition: Emissions from purchased electricity, steam, heating, and cooling

Two Calculation Methods:

Location-based: Uses average grid emission factors for the location where energy is consumed

Market-based: Uses emission factors from contractual instruments (renewable energy certificates, power purchase agreements)

Data Sources:

• Utility bills
• Meter readings
• Renewable energy certificates
• Power purchase agreements

Scope 3: Value Chain Emissions

Definition: All other indirect emissions in the value chain

15 Categories:

Upstream:

1. Purchased goods and services
2. Capital goods
3. Fuel and energy-related activities
4. Upstream transportation and distribution
5. Waste generated in operations
6. Business travel
7. Employee commuting
8. Upstream leased assets

Downstream: 9. Downstream transportation and distribution 10. Processing of sold products 11. Use of sold products 12. End-of-life treatment of sold products 13. Downstream leased assets 14. Franchises 15. Investments

Challenges:

• Data availability (suppliers may not track emissions)
• Calculation complexity (multiple estimation methods)
• Scope (often represents 80%+ of total emissions)

Approaches:

• Supplier-specific data (most accurate, hardest to obtain)
• Average data methods (industry averages, spend-based)
• Hybrid approaches

Carbon Accounting Best Practices

Organizational boundaries: Define what entities and operations are included

Operational boundaries: Clarify what activities are covered

Base year: Establish a consistent reference point for tracking progress

Recalculation policy: Define when historical data should be recalculated (acquisitions, methodology changes)

Data quality: Document data sources and estimation methods

Energy Metrics

Key Metrics

Total energy consumption: Usually in MWh, GJ, or MMBtu

Energy intensity: Energy per unit of activity (per revenue dollar, per product unit, per square foot)

Renewable energy percentage: Portion of total energy from renewable sources

Energy efficiency: Change in energy consumption relative to output

Renewable Energy Tracking

Self-generated: On-site solar, wind, etc.

Purchased:

• Power Purchase Agreements (PPAs)
• Renewable Energy Certificates (RECs)
• Green tariffs from utilities

Additionality: Whether renewable energy procurement leads to new renewable capacity

Water Metrics

Key Metrics

Water withdrawal: Total water taken from sources

Water consumption: Water not returned to source (incorporated in products, evaporated)

Water discharge: Water returned to environment

Water stress exposure: Operations in water-stressed regions

Water Risk Context

Water metrics should reflect local context:

• Operations in water-stressed regions require more attention
• Water quality (pollution prevention) matters alongside quantity
• Watershed impacts affect communities and ecosystems

Reporting Frameworks

CDP Water Security questionnaire provides comprehensive water disclosure guidance.

Waste Metrics

Key Metrics

Total waste generated: By weight or volume

Waste by type: Hazardous vs. non-hazardous

Waste by destination:

• Recycled
• Composted
• Recovered for energy
• Landfilled
• Incinerated
• Other disposal

Diversion rate: Percentage diverted from landfill

Circular Economy Metrics

Beyond waste:

• Material efficiency
• Recycled content in products
• Product recyclability
• Extended producer responsibility compliance

Other Environmental Metrics

Biodiversity

Land use and conversion: Hectares owned/operated in sensitive areas

Impact assessments: Biodiversity assessments for operations

Conservation: Protected areas, restoration projects

Air Quality

Emissions of:

• NOx (nitrogen oxides)
• SOx (sulfur oxides)
• Particulate matter
• Volatile organic compounds

Materials

Total materials used: By weight

Recycled input materials: Percentage of recycled content

Renewable materials: Percentage from renewable sources

Environmental Reporting Best Practices

Data Quality Hierarchy

1. Primary data (measured, metered)
2. Secondary data (calculated from primary data)
3. Estimated data (industry averages, models)

Document which level applies to each metric.

Verification and Assurance

Internal verification: Cross-check data, review calculations

External assurance: Third-party verification (limited or reasonable assurance)

Assurance standards: ISAE 3000, ISAE 3410 (for GHG statements)

Year-Over-Year Comparability

• Use consistent methodologies
• Restate prior years when methodologies change significantly
• Explain any changes in scope or methodology

Contextualization

Raw numbers without context are less meaningful:

• Compare to prior years
• Normalize by activity metrics (intensity)
• Benchmark against peers
• Reference to targets and commitments

Common Pitfalls

Cherry-picking metrics: Reporting only favorable metrics

Incomplete scope: Missing significant emission sources

Inconsistent boundaries: Changing what's included year-to-year

Lack of transparency: Not disclosing methodologies and limitations

Overstating progress: Using favorable baselines or comparison points

Setting Environmental Targets

Science-Based Targets

The Science Based Targets initiative (SBTi) provides methodologies for setting emissions reduction targets consistent with climate science.

Requirements:

• Cover Scope 1 and 2
• Cover significant Scope 3 categories
• Align with 1.5°C or well-below 2°C pathways
• 5-10 year target timeframe

Net Zero Commitments

A net zero commitment requires:

• Deep emissions reductions (typically 90%+)
• Neutralization of residual emissions through carbon removal
• Near-term targets showing reduction pathway

Renewable Energy Targets

RE100 is a corporate initiative committing to 100% renewable electricity.

Key Takeaways

• The GHG Protocol provides the foundational structure for emissions reporting (Scopes 1, 2, 3)
• Scope 3 emissions typically represent the largest portion but are hardest to measure
• Environmental metrics extend beyond carbon to include energy, water, waste, biodiversity, and air quality
• Data quality and methodology transparency are critical
• Targets should be science-based and cover material impacts
• External assurance adds credibility to environmental data

Next Module

Module 4 covers social metrics and reporting—labor practices, human rights, diversity, community impact, and other social factors.