Greenhouse gases (GHG) are a collection of gases contributing to global warming. Their presence in the atmosphere traps heat from the sun, resulting in warmer temperatures over time.
The increased emission of these gases following the industrial age has resulted in the world warming faster than at any other point in history.
The debate on the environmental pillar and climate risk arising from the broader ESG agenda implies that organisations and society, in general, must respond to the physical and transition risk posed by climate risks resulting from a warmer world.
The first step to dealing with climate risk is measuring and reporting on the level of emissions of greenhouse gases resulting from human activities.
Organisations, depending on their sectors, will have different levels of emissions. Examples include power, electricity and heating, transport, building, manufacturing and construction, agriculture, waste and forestry.
As organisations transition towards more sustainable climate solutions in response to society’s demands and expectations, it is imperative to provide accountability on the level of their emissions and the impact of the climate change discussion on their business.
The greenhouse gas protocol establishes a comprehensive global framework for measuring gas emissions. It is the world’s most widely used greenhouse gas accounting standard.
For organisations, the protocol defines three scopes of emissions that help distinguish between direct and indirect emissions.
Scope 1 emissions are direct GHG emissions from sources owned or controlled by the organisation—for example, vehicles.
Scope 2 emissions are GHG emissions from generating purchased electricity the organisation consumes.
Scope 3 is the optional reporting category that allows for the treatment of all other indirect emissions. Scope 3 emissions are a consequence of the company's activities but occur from sources not owned or controlled by the organisation.
For example use of products and services produced by an organisation.
The International Sustainability Standards Board (ISSB) recently announced that organisations would be required to measure the scopes 1, 2 and 3 GHG emissions in the soon-to-be-issued sustainability standard (IFRS S2) effective 2024.
The increase in global and local carbon trading will also pressure organisations to measure and report on their emissions in the future.
Organisations, therefore, should begin to invest in the capacity required to measure and report on their emissions.
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