UPS spends $1 million per year to measure its carbon footprint. Is that a lot or a little? I wasn’t sure, so I decided to research the cost of conducting a greenhouse gas inventory. Since companies and governments are increasingly accepting the need to manage greenhouse gas emissions, this is becoming a growth industry, so getting a handle on costs will be important.
How Much? It Depends.
How much should a company expect to spend to measure its greenhouse gas emissions? If you ask people who know the first thing you will hear is “it depends.” According to the World Resources Institute, the costs can vary widely, but are correlated with factors such as size of the company, the complexity of operations, whether the company already has a data management system, and some other factors. The components of cost vary to some degree as well, ranging from allocating internal manpower to developing and deploying new information systems or other monitoring infrastructure to fees paid to external consultants.
Multiple Standards May Muddy the Waters
Several standards have been developed to define measurement practices. The major standards include:
- The GHG Protocol. This may be the best known and most widely used standard. Indeed, the GHG Protocol Web site describes it as “the most widely used international accounting tool for government and business leaders to understand, quantify, and manage greenhouse gas emissions.” The GHG Protocol is the product of a long-standing partnership between the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).
- ISO 14064 Part 1, which is said to be consistent and compatible with the GHG Protocol
- The US Environmental Protection Agency (EPA) Climate Leaders GHG Inventory Guidance. The EPA describes it as “a modification of the WRI/WBCSD GHG Protocol that fits the needs of Climate Leaders more precisely.”
The choice of standard might not be a major factor in the cost of the inventory. But it’s worth being aware of the major standards and having a clear rationale for adopting one or the other.
A Golden Age for Climate-Change Consultants
It is a bit of a golden age for climate-change consultants. Many firms, from established consulting firms to start ups, have developed services to help companies inventory their greenhouse gas emissions. For example: Starbucks hired CH2M Hill, the $5 billion engineering, consulting and construction firm, to help it calculate the carbon footprint of its retail locations. PepsiCo retained The Earth Institute at Columbia University, a research, education and policy institute, to calculate the carbon footprint of Tropicana orange juice. (Note that the Tropicana Orange juice project is an example of a “product carbon footprint,” which is distinct from a “corporate footprint.” There are separate standards for product footprints, such as PAS2050 and the upcoming GHG Protocol supply chain and product standards. ) Twelve-year-old Best Foot Forward, based in the UK, has done a wide range of footprint analysis projects ranging from the UK operations of water filtration company Brita to the US tours of rock band Radiohead.
How much do such consultants charge? One former consultant, who performed corporate GHG inventories before moving to an environmental NGO, told me that her firm typically charged $25,000 to $150,000 for an inventory, with the costs most dependent on the quality and number of data sources involved.
It’s worth noting that the EPA says it provides free assistance to develop a greenhouse gas inventory plan and to complete a base-year inventory. If you are preparing to do your own corporate inventory, be sure to investigate free sources of assistance.
Tools to help corporations track, calculate and manage greenhouse gas emissions have also been proliferating. One expert I spoke to said that “Most companies are still doing a lot of this manually and software is just beginning to get some traction; in fact, there are already too many products out there.”
For purposes of illustration, here’s a short and arbitrary list of a handful those products:
- Environmental Sustainability Dashboard for Microsoft Dynamics AX
- the Enterprise Sustainability management Platform from CSRWare
- Foundation Footprint, from New Zealand-based Revolution ID
- ghgTrack by Enverity
Experts say that the major cost of greenhouse gas inventory programs is in the use of staff time. Therefore, the benefit of tools like these should be assessed largely but how much staff time is saved once they are up and running, after the first inventory is complete.
Estimating Overall Costs
The EPA recently proposed a regulation that would require large emitters of greenhouse gases in the U.S. annually to report their emissions. (The EPA
says the accounting methodology used in the proposed regulation is “the same as, or similar to” the methodologies contained in a variety of state programs and its Climate Leaders program, which as I noted above is similar to the GHG Protocol.) Along with this proposal, the EPA published a pretty exhaustive analysis of the impact of complying with it, including its cost to businesses across the industrial sectors that are the greatest emitters of greenhouse gases. The EPA analysis provides a useful data point for getting a grip on costs.
According to the EPA analysis, reporting costs will rang from $3,000 per year to $150,000 per year for large-scale emitters like cement manufacturers. The median annual cost for a representative entity cross all sectors in their analysis was about $17,500, with labor costs accounting for most of the expense. The EPA calculated that cost as a percentage of company revenue declines as company size increases, and ranges from .1% to .4% of revenue for the larger enterprises (with 1000 to 1499 employees).
It’s reasonable to assume that very large enterprises, whose emissions sources are diverse and globally distributed, will incur substantially greater costs. Hence UPS’s statement at a recent conference that they spend $1 million annually (a modest sum for a $50 billion company) to calculate their carbon footprint.
Anything to Add?
As more companies begin to undertake greenhouse gas inventories, it will be possible to collect more data on the costs and best practices of doing so. If you have anything to share on this topic, feel free to share below. Thanks.