Calculating Carbon Footprint

As more and more shareholders become concerned about greenhouse gasses, many companies have begun including their carbon footprint numbers on annual reports. These reports are one of the factors considered when designing our Green Series of portfolios. In order to calculate the overall score, there are three main areas that firms must consider.

Scope 1 Emissions

Scope 1 emissions are the easiest to identify, and the easiest to calculate. They are quite simply the emissions directly produced by a firm in the operation of its business activities. This would include emissions from any vehicles and equipment owned by the firm. Or gasses produced from factories, plants, or office buildings.

Scope 2 Emissions

Scope 2 is where things start to get a little complicated. These are defined as emissions indirectly produced by core business activities. These are things like gas in cars for employees to commute to work. Airlines flying your svlesteam to meetings. It also includes the gasses that are a byproduct of any energy production that is not done directly by the firm, but where the energy is purchased and used by the firm. Things like a coal power plant that supplies power to an office building.

Scope 3 Emission

Scope three is the broadest scope, and in most cases accounts for the bulk of a carbon footprint. The biggest culprit here are upstream suppliers to business operations. Meaning if you buy bulk plastics from a supplier you account for what portion of their emissions are produced to make the plastic you bought. You also have to think about the fuel used in transporting the plastic. And the energy used to produce it. It gets pretty sticky. This is all usually the scope that offers firms the biggest opportunity to reduce their footprint by finding alternative suppliers, and changing supply chains.

All three of those scopes are combined and the data is inputted into an international standard calculator to produce a net carbon footprint score.

Total carbon output is one of the biggest factors considered when it comes to green investing. The other side of the equation is the resources going into the companies. Our Green Series portfolios, look at both.