Identifying the amount of greenhouse gas emissions a given company is responsible for is not as straightforward as it seems. The crucial factor in this equation is what’s being measured, or to put it in regulatory parlance, what “scope” of emissions is applied. It is a term that both corporate and regulatory entities are increasingly using to define responsibility and accountability for carbon emissions.
Consider the case of an oil company; the company’s direct emissions resulting from its trucks, drills and facilities and other operations comprise only a small fraction of the CO2 released when the oil products it sells are burned. The same concept applies across other sectors. For example, ranchers raising cattle for corporations like McDonald’s Corp. generating significantly more emissions than the company’s offices.
In the face of mounting pressure to curb greenhouse gas emissions, regulators all around the globe are adopting more or less ambitious and comprehensive approaches towards addressing this subject. It’s clear that companies are under increased scrutiny regarding their carbon footprints, thereby driving a critical re-evaluation of methodologies for measuring emissions.
However, the crux of the matter is how broadly or narrowly the ‘scope’ is defined. Authorities have to ascertain if they will limit accountability to direct emissions solely created by a company’s operations, or if they will extend responsibility to include indirect emissions resulting from the end-use of their products among others. This dilemma poses a significant challenge for both corporations and regulators.
For a more detailed explanation on the subject, refer to the Bloomberg Law’s recent article on the issue here.