When businesses dip a toe in the rising sea of corporate action on climate change, the first box they check before diving in involves tabulating their own greenhouse-gas inventory. In getting your corporate house in order, the first step is defining where your yard ends and your neighbor’s begins.
The good news: There is a clearly accepted international standard providing guidance to companies sorting “what’s in” and “what’s out” for their GHG inventory. The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard is the playbook everyone is working from.
The bad news: Some issues are more clearly defined in the guidance than others, leaving individual companies to sort out their own best way forward.
Emissions from employee commutes are one such gray area. In these early days, how leading companies come down on this issue is critically important in setting a precedent. The GHG Protocol does provide general guidance on this issue, but more specific direction is needed.
In the United States, over 20 percent of GHG emissions are from road transport. While plug-in hybrids or other advancements may someday allow us to bask in the glow of greener traffic jams, today’s commuter is a major contributor to the country’s GHG tally.
In establishing a GHG inventory, emissions from sources such as combustion of fuel in furnaces owned by a company are a black and white area. They would be referred to as a “Scope 1” direct emission, and are a mandatory part of a company’s GHG inventory.
Other emission sources, such as those produced by employees commuting to and from work (in vehicles not owned by the company), fall into a murky gray zone known as “Scope 3” indirect emissions. Individual companies are left to decide whether such emissions are in or out.
What to do?
With employee commutes, it is tempting to assume that these are not a business responsibility. After all, an employer can’t control whether Tim from HR rides the bus to work. In fact, it’s a gray area, according to the GHG Protocol, which offers broad guidance to companies working through this issue.
The guidance recommends that companies account for Scope 3 emissions based on the “relevance and significance” of these emissions to the company’s overall operations or business goals, suggesting that such emissions may be deemed relevant if they meet any or all of the following four criteria:
- Relative size: They are large (or believed to be large) relative to the company’s Scope 1 and Scope 2 emissions.
- Risk: They contribute to the company’s GHG risk exposure.
- Stakeholder concern: They are deemed critical by key stakeholders (e.g., feedback from customers, suppliers, investors, or civil society).
- Company influence: There are potential emission reductions that could be undertaken or influenced by the company.
A key test for Scope 3 indirect emissions then is the significance of these emissions in relation to other Scope 1 and Scope 2 sources. If a Scope 3 area (such as employee commuting) accounts for a significant portion of the organization’s overall emissions, then the guidance suggests the company should include these within its GHG inventory.
Given these guidelines, service sector businesses, government organizations, and most other knowledge-based entities (which likely have very few, if any, direct emissions) are the groups that must take the closest look at Scope 3 indirect emissions, as they are more likely to come from relevant and significant areas central to the core operation of the organization. For a knowledge-based business, employees are at the very core of the organization’s operations, and how they get to and from work matters.
The “company influence” factor is most interesting. Essentially, the GHG Protocol specifies that the key lies in company influence rather than control over an issue. So while an employer can’t control whether Tim from HR rides the bus to work, there are indeed many factors fully within an employer’s control that significantly influence Tim’s decision. Does the company offer Tim a free parking space at work, or do they offer free or discounted bus passes? Do they offer flexible schedules to better accommodate public transit schedules? Did they consider transit accessibility when locating the business? These and other employer decisions are factors proven to directly impact employee commute behavior.
Because this is a gray area, however, many companies seem to be placing employee commutes outside their GHG inventories out of convenience, rather than out of a sound reading of international guidance. Too often, it appears these decisions are based on a perception that including employee commutes would place too large a burden on overall GHG reduction strategies (or offset purchase costs). While some may still sponsor generous employee commute programs, if these are not part of their GHG inventory process, the programs will always be second-tier considerations.
As one important example, the World Resources Institute, co-authors of the GHG Protocol, includes employee commutes in its GHG inventory. The WRI conducts annual surveys of its employees to understand travel patterns and offers a full array of company-sponsored programs to reduce transport-related emissions from these activities.
Should others follow suit and establish a clear precedent for best practice on this important issue?