Carbon Footprint
Our experience with extended scope 3 reporting for our own carbon footprint.
Our Carbon Footprint
At McHugh & Shaw we have been measuring our own carbon footprint since 2012 and achieved Climate Positive status through the Ekos programme for FY22 & FY23. Over this time, measuring the full value chain emissions has become best practice. These are the ISO category 3-6 or GHG Protocol Scope 3 emissions. The reporting guidance requires an organisation to have a method or significance criteria to determine which indirect emissions to measure. Our approach to measuring our indirect emissions has always been to measure as much as possible which has long been limited by the availability of suitable emission factors.
In FY23, however, we increased our reporting boundary and measured emissions, covering 99% of our business expenses. Using our general ledger to identify emission sources was a good approach for us as we are a service organisation. Other sectors, especially product based, would need to map their value chain and identify the emission sources and where the data would be sourced from, as an expense report would only identify emissions that have a cost associated. For example, a tea (beverage) brand would have material emissions from consumers boiling the kettle, or the transport emissions associated with customers picking up purchased products via the ‘click and collect’ method from a retail store.
Extended Scope 3 Emissions
Adding in these extended Scope 3 emissions changed our emissions profile drastically. In FY23, if we had continued to measure our existing set of Scope 3 emissions (i.e. business travel, working from home, sub-contractor emissions, staff commuting, IT services & data storage, waste, water, wastewater, and consumables), then total emissions would account to 3.14tCO2e.
But our expense report from Xero revealed other expenses that we needed to report, including tax, insurance and donations. So taking these into account, our extended FY23 footprint is 9.49 tCO2e - an increase of 300% compared to our previous, more narrow reporting boundaries. Our top three emission sources are now tax, insurance, and business travel.
The Issue of Spend-Based Emission Factors
The emission factors for these newly included sources are the key challenge in measuring an extended set of Scope 3 emissions for us. We used spend-based emission factors for tax, insurance and donations, and these factors seem high as we chose the most conservative factors we could access. Earlier this month, the Ministry for the Environment | Manatū mō te Taiao released the 2023 Measuring Emissions: A Guide for Organisations. One of the updates from the previous year is the reference to spend-based emission factors published by Auckland Council.
It is difficult to set a meaningful reduction target using spend-based emission factors as the only way to reduce is to ‘spend less’. We are forecasting business growth, so our spending on tax, insurance and donations will increase. There are two ways for us to address this: firstly, we can encourage the government and support others to develop quality spend-based emissions factors for New Zealand, or we could request emissions data from the Inland Revenue Department, our insurance provider (broker and underwriter) and the charities we donate to.
Offsetting Our Emissions
For the past two years, we have achieved Ekos Net Climate Positive Certification which means we offset 120% of our reported emissions. We chose this certification as we wanted an additional buffer of credits to account for the uncertainties in carbon reporting. The uncertainties include the emission factors used for all emissions sources, estimates made on waste production, water consumption and wastewater production from home offices.
We purchase reforestation carbon credits because we are passionate about conservation, biodiversity and the income generated for landowners, but we do not view credits as environmental compensation for our emissions. While we work hard to improve our business and implement environmental and sustainability initiatives, we know our company impacts the environment by its mere existence.
We are committed to reduce our gross emissions, and reducing business travel emissions is our key focus for FY24. We continue to trial Information and Communications Technology options to conduct virtual facility tours where appropriate, without compromising the integrity of the audit. We are also working to extend our network of carbon professionals to deliver on-site work around New Zealand to reduce air travel.
Reporting Full Scope 3 Value Chain Emissions
It will be a challenge for organisations in Aotearoa New Zealand to report full Scope 3 value chain emissions. However, many stakeholders now require this level of transparency. Our experience is that while it is tempting to want to compare your organisation’s emissions to similar businesses or your competitors it’s not that straightforward. As our example above explains very well, the devil is in the detail - what has been excluded from the organisational boundary and reporting boundaries? What assumptions or estimates have been made and what emission factors are used? The answers to these questions make a comparison practically meaningless.
Last updated July 2023