The Next Economy
Carbon Footprint Measurement and Challenges:
A Case Study

As companies increasingly take up the challenge of measuring their greenhouse gas (GHG) emissions, many have realized how complex an undertaking this can become. Such measurements are often a first step toward reduction and offsetting GHG emissions at a corporate level, and a large number of Fortune 500 companies have committed to aggressive GHG reductions. A few corporate commitments are:

• Apple: carbon neutral in all product lines and supply chain by 2030

• Amazon: carbon neutral in all operations by 2040

• Microsoft: offsetting all GHG from past operations (from founding of company to present) by 2050

While not all companies have the resources to commit to such ambitious targets, most companies can measure or estimate their GHG emissions and begin the process of reductions immediately. In fact, not doing so exposes a company to financial, market and potential legal risk.

Cuningham is an international design firm with decades of experience in sustainable design. As a result, we have become quite expert at calculating GHG emissions from real estate development and operations. To that skillset, we have recently added expertise in estimating GHG emissions from vehicle fleets. Our combination of knowledge of both real estate and vehicle fleet carbon-related issues makes us ideal for assisting many companies in calculating their GHG emissions.

Given this skillset, Cuningham was commissioned to estimate GHG emissions for a company with $6.6 billion in annual sales and operations in 14 states. Having completed the analysis, the company must determine where reductions can be made, whether offsets should be considered, and costs for the entire program. In this article, we share results of the analysis we performed for this company, though the company itself will remain anonymous.

Greenhouse Gas Protocol – Scopes 1, 2 and 3

The Greenhouse Gas Protocol is an entity that established the emissions reporting standard for governments, industry associations, NGOs and businesses. Most Fortune 500 companies use their protocol for reporting. It defines three scopes of emissions, which are depicted in the graphic from the EPA below. Where the graphic mentions “Federal,” substitute “corporate” as appropriate.

Scope 1 – For most companies, Scope 1 is fairly simple to calculate and consists of fuel used on sites owned or controlled by the company. Examples are natural gas for space and water heating, propane, diesel and gasoline for vehicles. Larger companies may also include onsite landfill or wastewater treatment fuels. For our test case company, Scope 1 included onsite natural gas, propane, gasoline and diesel fuel.

Scope 2 – For most companies, Scope 2 is the simplest of the three to calculate. It consists of purchased electricity. In cases where a facility is connected to a central plant, purchased steam would also be considered in scope 2. For our test case company, scope 2 was only purchased electricity.

Scope 3 – This scope is essentially everything else and can be difficult and time consuming to calculate. In our experience, most companies try to establish reasonable limits on which Scope 3 items they can calculate and control.

Base year selection

Normally, selecting a base year for a GHG emissions analysis is simple — use the most recent year (calendar or fiscal) for which there is complete data. However, because COVID-19 so thoroughly disrupted most company operations starting in March 2020, and because that disruption in still ongoing, many companies have looked back further. Our case study company elected to utilize 2019 calendar year data for their GHG analysis.

For our own GHG analysis and offset calculation, Cuningham has gone through a process of analyzing each sector of emissions and estimating a percent reduction from our last complete base year. We are calling this our “New Normal” and basing our reductions and offset efforts on that. The chart below depicts the evolution of our carbon footprint in the last few years. Many companies are undertaking similar analyses.

Disclosure

Once a company has calculated its GHG footprint using the GHG Protocol, it must decide whether to disclose that information publicly and if so, in what format. Our case study client is currently making that decision and has not yet committed to disclosure. We are encouraging our client to disclose and have recommended using CDP — which has collected data from more than 2,400 companies as well as numerous municipalities, NGOs and organizations. It publishes an annual summary and grades companies in three categories – climate, forests and water.

Real estate GHG challenges

Our case study client has real estate in 14 states, 305 locations, and controls more than 4 million square feet. This posed a significant data collection and processing challenge, starting with reviewing the client’s already collected data on utility costs and bills from each of their locations. We immediately realized we would need to solve several problems. Different locations collected utility bill information in different ways — some in Excel spreadsheets and others in PDF format. Our in-depth review of the data revealed many gaps in the baseline year, as well as reporting inconsistencies. We worked closely with our client to resolve these issues, but it was time-consuming and expensive for both parties. Advice for any company contemplating GHG emissions analysis is to first ensure consistency of reporting and formatting utility data.

One common problem is reporting only the cost in dollars of a utility bill as opposed to the raw kilowatt-hours or natural gas therms needed to calculate GHG emissions. We worked closely with our client to obtain utility data for missing periods of time and to replace cost with units of energy.

Another issue likely to surface in large real estate portfolios is that many smaller office or operation locations are likely to not pay utility costs directly. In these cases, utility bills are included in the rent. In our work for the case study client, we did not want to neglect the probable impact in GHG emissions of the many locations that did not pay their own utility bills. Therefore, our approach was to precisely locate each of the non-utility paying locations, determine their square footage, and estimate the average energy use per square foot of space in that geographic location. Using published data on carbon emissions per kilowatt hour for each utility grid sub-section, we estimated GHG emissions for all those locations not paying directly for utilities.

Results of our real estate GHG emissions calculations for are seen in the chart below. Our client has seven operational regions, which are detailed in rows below the summary row. Our client is responsible for 15 pounds of GHG emissions per square foot of real estate per year, averaged across their entire portfolio. The total annual impact is 28,013 metric tons.

Vehicle fleet challenges

As challenging as our client’s real estate portfolio was to translate into GHG emissions, their vehicle fleet was even more so. The fleet consisted of 917 vehicles, including:

• Vintage automobiles

• Large service vehicles

• Vans

• Hybrid sedans

• Electric vehicles

As with real estate, we discovered several reporting inconsistencies that made our work more difficult. One especially difficult issue was mileage reporting. Many reports we received indicated year-end mileage but not beginning of year mileage. As a result, we had to examine multiple-year reports to determine single-year mileage figures. As with real estate portfolios, companies with extensive vehicle fleets need to pay close attention to reporting information and formats in order to easily and reliably determine GHG emissions.

One aspect of vehicle fleet GHG emissions that is simpler than real estate is that, in general, vehicle emissions are not location dependent. A gallon of gasoline or diesel yields the same mileage in the same vehicle no matter where it is used — and the same emissions per mile, as well. That trend is being rapidly disrupted as vehicle fleets electrify. While electric vehicles offer substantial environmental advantages over fossil-fueled vehicles, their emissions per mile varies significantly depending on the location where they are charged. This is due to the wide disparity in local grid GHG emissions per kilowatt hour. For example, an electric vehicle driven in Wyoming results in 2.7 times more CO2 per mile than the same vehicle drive in California.

In our work on vehicle fleet emissions for our test case client, we separated vehicles into classes based on fuel type. We developed average miles per gallon for fossil fuel vehicles in each class and applied those to the miles driven across the fleet. For the electric vehicles, we identified their typical charging locations, miles driven by each vehicle, kiloWatt hours per mile, and GHG emissions per kiloWatt Hour.

The results of our analysis are seen below. Interestingly, the total GHG emissions of our test case client’s vehicle fleet was 7,524 metric tons, or 25 percent of their real estate GHG emissions.

Summary

We have found that different GHG reporting metrics are appropriate for different companies. Typical reporting metrics in use are:

• Metric tons per Million Gross Sales

• Metric tons per Employee

• Metric Tons per square foot

For our test case client, we provided the following metrics and results:

• GHG per Employee per year: 2.55 metric tons

• GHG per $ Million Sales per year: 5.33 metric tons

To the best of our knowledge, the figures we provided to our test case client were the first time they had seen their corporate GHG emissions for Scopes 1 and 2. We understand this glimpse of their environmental impact has triggered in-depth discussions about what that company should do next. We hope to be involved as our client develops a formal climate action plan to reduce its GHG emissions, with a goal of achieving net-zero emissions in the near future.

From this process and working closely with our test case client, we have learned that accurate Scope 1 and 2 analysis takes time and effort, in addition to willingness to press various entities and individuals within the organization for additional information where needed. We have also learned that the real work begins when the GHG emissions are known and companies must decide how to respond to newfound knowledge about their impacts.

Our advice to companies ready to do their part in combatting climate change is to follow these steps:

• Determine a baseline year and estimate your “new normal” operations

• Calculate all of your scope 1 and 2 emissions for that new normal

• Identify the scope 3 aspects of your operations over which you have the most control and calculate those related emissions

• Develop a climate action plan with a specific schedule and costs

• Set up an ongoing GHG emissions monitoring plan

• Disclose or publish your results for shareholders, clients, or customers

• Celebrate your successes!