Why can't companies' GHG assessments be compared?

Understanding the role of the GHG balance

📊A strategic tool for companies to manage emissions reductions

This tool, anchored at the heart of our CSR strategy and ESG commitments, enables us to accurately identify the main sources of greenhouse gas emissions, based on a structured analysis of the 3 Scopes:

• Scope 1: direct emissions

Scope 1 covers emissions from all activities directly generated by the company, from sources it owns or controls. This is the primary lever for reducing the impact of internal operations.

• Scope 2: indirect energy emissions

Scope 2 covers emissions resulting from energy purchased and consumed by the organization, such as electricity or heat. Optimization of energy consumption and the use of renewable sources are therefore priorities for reducing this item.

• Scope 3: indirect emissions linked to the value chain

Scope 3, often the most consequential, includes emissions associated with the entire value chain: suppliers, transport, product use, end-of-life management, etc. It is in this field that the greatest potential for innovation and collaboration with stakeholders lies. It is in this field that the greatest potential for innovation and collaboration with stakeholders lies, in order to sustainably transform economic ecosystems.

Adopting a strategic and sustainable management approach fosters a continuous improvement process that values the specific features of each activity and guarantees concrete results. This enables companies to focus on relevant, high-impact solutions.

⚖️ Meeting regulatory and social challenges

Redefining these priorities is therefore essential and necessary for companies, as purchasing management, the circular economy and carrier relations become crucial. The GHG balance sheet provides a structured framework for collecting and analyzing this information. By identifying emission sources and targeting reduction levers, it enables organizations to adopt a proactive and responsible approach, while meeting the growing demands of their stakeholders.

Beyond its operational role, the balance sheet meets growing expectations:

• Regulatory: companies must comply with standards and directives such as the CSRD (Corporate Sustainability Reporting Directive) in Europe.
• Strategic: anticipating market trends and the expectations of investors, who are increasingly sensitive to environmental performance.

"96% of investors surveyed indicated that CSR issues play a key role in their investment decisions. Companies with good ESG (Environmental, Social, Governance) performance are particularly valued, according to BNP Paribas.

• Social: strengthening stakeholder confidence through a transparent, proactive approach.

According to Consumer Science & Analytic: "Employees are in the front line when it comes to advancing the ecological transition within their company. As for 71% of employees claim to act in favor of the environmental transition within their company, testifying to a growing interest in green initiatives."

Why is a comparison of GHG balances inadequate?

🤔 Heterogeneous methodologies and perimeters

BEGES, although based on recognized methodologies such as the GHG Protocol and ISO 14064-1, reveal great diversity in their application, which makes it difficult to compare them between companies. This heterogeneity stems from differences in scope, methodological approach and geographical context, all of which have a direct influence on the data collected and the greenhouse gas emissions calculated.

• Scopes analyzed: when it comes to accounting, some companies focus solely on certain insignificant items or those with little potential for further action.
• Methodological choices:

The calculation of GHG emissions is based on methodological choices that strongly influence the results obtained:

• Emission factors: These carbon weights, used to convert energy consumption or material mass into GHG emissions, vary according to database and country.
• Assumptions and tools: The assumptions used to construct activity data vary from one balance sheet to another, which can affect the assessment of a company's carbon footprint.
• Geographical location:

A company's location has a direct impact on its greenhouse gas emissions, in particular because of the energy mix and infrastructure available:

• In countries where the energy mix is based on fossil fuels (coal, oil), electricity consumption generates much higher emissions than in regions where renewable energies predominate.
• Local infrastructures, such as transport networks and district heating systems, also have an impact on emissions linked to business activities.

🚀The environmental impact of sector specificities

Carbon emissions differ structurally from one business sector to another. For example, an industrial manufacturer will naturally have higher emissions than a digital services company. These differences reflect operational, technological and economic realities specific to each sector, and do not necessarily reflect a lack of environmental efficiency.

🟥 The risks of a simplistic comparison

Comparing GHG balances between companies without taking these differences into account can lead to biased interpretations. This can :

• Discourage certain organizations, particularly those in sectors with incompressible high emissions.
• Favoring opportunistic practices, where form takes precedence over substance, to the detriment of truly effective actions.

This benchmarking approach can also distract companies from their real objective: to reduce their carbon footprint in order to contribute to the fight against climate change. By seeking to position themselves favorably in rankings or benchmarks, some organizations run the risk of prioritizing short-term measures that enhance their image, rather than implementing ambitious, sustainable strategies to protect the environment. A well-considered assessment adapted to the reality of each company is essential to maximize their positive impact and fully embrace the environmental transition.

Alternatives and prospects for harmonization

🟩The Product Carbon Footprint (PCF): a more relevant measure

To overcome the limitations of global comparisons, the Product Carbon Footprint (PCF) offers a targeted alternative. The PCF assesses the carbon impact of a product or service throughout its life cycle, offering a perspective more suited to certain comparisons:

• Comparing similar products: PCF makes it possible to analyze the carbon footprint of equivalent products, helping both consumers and companies to make more informed choices in favor of solutions with lower environmental impact.
• Identify levers for improvement: This approach highlights the key stages in the value chain where initiatives can be implemented to reduce emissions, thus reinforcing the effectiveness of reduction initiatives.

By integrating PCF into their analyses, companies can refine their BEGES by focusing on concrete, measurable achievements. This approach helps transform a simple assessment into a strategic tool, capable of guiding operational decisions and innovation. It also encourages collaboration with value chain partners to collectively reduce the carbon footprint of products and services.

💚Harmonization underway thanks to European frameworks

With the entry into force of the CSRD directive, companies will have to comply with common standards for non-financial reporting, including carbon emissions. This directive aims to reduce methodological disparities and enhance data comparability. Coupled with tools such as the PCF, this harmonization will make it possible to increase the reliability of information, while maintaining a logic of sectoral improvement.

According to BPI France: "It is important to note that companies subject to the Bilan GES must meet the requirements of the law. Any breach of this obligation to carry out a Bilan carboneⓇ is liable to a fine of 10,000 euros."

The diversity of methodologies and sectoral realities underlines the importance of approaching GHG balances as a tool for internal progress rather than an instrument for external comparison. Each company needs to focus on its own emissions reduction trajectory, tailored to its specific circumstances.

At Global Climate Initiatives (GCI), we support organizations with our SaaS platform, designed to provide accurate, reliable BEGES that comply with current standards, such as CSRD. Our solution helps you to :

• Identify your key emissions sources with proven methodologies.
• Compare your results over time to measure your progress.
• Adopt a sector-specific approach and implement concrete reduction strategies.

Our carbon experts will be happy to give you a free free demonstration of our platform. 🚀