environment 23
Fig. 2. Today,
companies
typically measure
and report carbon
emissions on an
absolute basis, eg
by production
location, totaled
by region and
eventually by
company. This is
then reported, for
example in
company annual
reports, or
through dedicated
initiatives.
to produce their products or services. Today, companies together as Scope 3. While it is certainly good to report
typically measure and report carbon emissions on an and minimise Scope 1 and 2 emissions, there are two
absolute basis, eg by production location, totaled by important disadvantages. Firstly, it does not take into
region and eventually by company. This is then reported, account the emissions related to raw materials that a
for example in company annual reports, or through company procures, and secondly, total company emissions
dedicated initiatives, of which the not-for-profit Carbon do not convey how emissions relate to the different
Disclosure Project is the largest. products or services a company provides.
As a result, the current system of emission reporting
Carbon productivity ratio
makes it near impossible to correctly benchmark
To provide additional insight, total company emissions companies about their ability to manage emissions. For
may be divided by total production or sales, to obtain example, if we compare four global, diversified chemical
a CO
2
productivity ratio. This type of reporting is companies, all leaders in the DJSI, we would find a
becoming more prevalent as companies set CO
2
reduction significant spread in both total emissions and carbon
targets using total production to normalize the ratios. efficiency. Is Dow Chemical worse than the others
In their reporting of emissions companies generally because it emits so much carbon, or is it simply a much
follow the GreenHouse Gas Protocol, pulled together larger firm? Is AkzoNobel better than the others because
by the World Resources Institute (set-up by the World its carbon efficiencies are comparatively low? We couldn’t
Business Council for Sustainable Development), or the tell because the product portfolio of these companies is so
ISO 14064 standard, compiled by the International different. Indeed, we need to consider Scope 3 emissions
Organization for Standardization. The standards are and get to a greater level of granularity, comparing
basically equivalent. Both have been set up to create emissions for products, not companies.
a global, harmonized standard to account for CO
2
To help reduce carbon emissions, Scope 1 and 2
emissions. They divide company emissions in three emission reporting can only be seen as a first step towards
‘scopes’. Scopes 1 and 2 broadly correspond to emissions a more sophisticated system of carbon reporting. Indeed,
from energy use controlled by the firm. Scope 1 concerns more and more companies focus on product carbon
direct emissions, eg a furnace that a company is operating. footprint (PCF), instead. PCF is the cumulative CO
2

Scope 2 relates to indirect emissions, predominantly those that is emitted along the value chain to make a particular
from the electricity that is purchased and that has been product and deliver it to the customer. It is obtained by
generated by the combustion of primary fuels like coal, oil calculating all the emissions related to the raw materials
or gas. and ingredients that a company’s product is composed
Until very recently, Scopes 1 and 2 were regarded of. To this is added the energy the company needs to
the most relevant, and all other emissions were lumped manufacture the product, and get it to the customer.
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