A Scope to Allocate Emission Responsibility
June, 2010

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Energy Related Data is Key to Mapping Carbon Footprint

By Chris Caners and Peter Clarke
 
Greenhouse gas accounting, like financial accounting, involves many rules that can be complex to navigate. These rules are also open to interpretation, especially in the commercial building sector where there are infinite combinations of physical and operating characteristics.
  
Furthermore, there are often numerous stakeholders involved at a given commercial property, each of which may wish to complete a carbon footprint and each of which could easily expect to be responsible for that property’s emissions.
   
In order to understand what emissions sources should be included and to determine what entity is responsible for accounting, boundaries must be selected and evaluated. The operational and organizational boundaries work in tandem to define the scope of the carbon footprint.
   
Owners, managers and tenants represent three separate categories for allocating emissions from the operations of commercial buildings. Adding to the complexity of GHG accounting, a company may fall into more than one of these categories. For instance, it could own, manage and occupy a facility. There may also be multiple companies categorized in the same way for a facility if, for instance, there were several building owners with separate tenants on each floor.

OPERATIONAL BOUNDARIES

In GHG accounting, emissions are classified broadly as: direct; indirect from energy sources; and indirect emissions from other indirect sources. Direct GHGs result from sources that are owned or controlled by the company, while indirect GHG emissions are a consequence of activities of the company, but occur at sources owned and controlled by a different entity.
   
When completing the carbon footprint, companies should separately account for direct and indirect emissions from energy sources that they are responsible for. For example, direct emissions could include on-site combustion of fossil fuel such as natural gas for space heating and diesel combustion for emergency generators and fuel consumed for the operation and maintenance of the company’s fleet or maintenance vehicles. Indirect emissions from energy include electricity and/or steam consumption at the facility.
   
Energy related data is the backbone of quantifying GHG emissions for stakeholders in the commercial building sector. Emissions associated with heating, cooling and powering the fleet likely make up the majority of emissions. Therefore, quality information on the energy use of the buildings themselves is critical to completing a GHG inventory.
   
Indirect emissions from other sources is an optional category that represents emissions that occur as a consequence of a company’s activities, which are from sources that are not owned or controlled by the company. Quantifying these emissions can be a useful tool for increasing the efficiency of company operations.
  
For commercial buildings, this could include emissions resulting from the construction of the building or waste generated annually. For companies, common indirect emissions include employee commuting and business air travel.
  
If the owner and manager or co-owners of the same building include the GHG emissions from the building in their carbon footprint, double counting will have occurred. However, that’s not a significant concern unless the emissions inventories of each stakeholder within the building are aggregated and/or the reporting of emissions is regulated. In that case, the regulatory authority should dictate the approach for the inventory.

ORGANIZATIONAL BOUNDARIES

A company should select an organizational boundary consolidation approach for consolidating GHG emissions and then consistently apply that approach to determine which GHG emissions are included or excluded from its carbon footprint. Once a consolidation approach has been chosen, it should be applied consistently across all company operations included in the carbon footprint.
   
Under the equity consolidation approach, a company accounts for its share of GHG emissions according to its share of financial equity in that building. Under the operational consolidation (control) approach, a company reports 100% of the building emissions if it has the full authority to introduce and implement operating policies at the building. Using the financial consolidation (control) approach, a company should account for 100% of GHG emissions from a building if it has the ability to direct the financial and operating policies of that building.
  
In the commercial building sector, the financial consolidation approach can be the most transparent for owners. Where sub-metering of tenants occurs, the party that is directly responsible for the utility costs is a reasonable method for determining control. For example, if an owner installed electrical sub-metering for each tenant and the tenants were responsible for payment of the electricity consumed, then it is far less likely that the owner is responsible for any associated emissions, although in such situations the owner would still be responsible for emissions associated with the operation of common spaces, outdoor lighting etc.
   
In contrast, the operational consolidation approach is likely best suited for managers of commercial buildings. Although this could result in double counting with building owners if the owner is using the financial consolidation approach, that’s less disconcerting than having neither party account for the emissions.
   
Operational control does not mean that a company necessarily has authority to make all decisions concerning the operations of a building, such as capital spending decisions, but it does mean that a company has the authority to introduce and implement its operating policies. From a commercial building manager’s perspective, it is important to consider to what extent daily management responsibilities can influence building operational and investment decisions, as well as where financial responsibility for utility costs lie.
   
Owners and managers should consider emissions to be tenants’ responsible if the tenants’ emissions are sub-metered and either paid directly or charged back to those tenants. Tenants require certain information to complete their carbon footprints so building owner and managers should communicate:

a) The consolidation approach – i.e. equity, financial or operational
b) Which sources of emissions are treated as direct and indirect from energy
c) The tenant’s energy consumption, prorated based on the share of total rentable space.

The preceding is an excerpt from Recommended Best Practices in Accounting for GHG Emissions in the Canadian Commercial Real Estate Sector, a research report prepared for the Real Property Association of Canada (REALpac) by ICF International.

GHG ACCOUNTING PRINCIPLES

There are a range of documents and standards that provide greenhouse gas (GHG) accounting guidance for measuring, quantifying and reporting carbon footprint. The International Organization for Standardization (ISO) provides ISO 14064 as a non-specific and high-level framework for companies seeking to identify and verify GHG inventories and projects, while the World Business Council for Sustainable Development/World Resources Institute offers a Greenhouse Gas Protocol with more specific guidance.

All related documents are consistent with the following principles for best practices in GHG accounting.

• Relevant: The carbon footprint should appropriately reflect the GHG emissions of the company and serve the decision making needs of its users.
• Complete: Account for and report on all GHG emission sources and activities within the chosen inventory boundary. Disclose and justify any specific exclusions.
• Consistent: Use consistent methodologies to allow for meaningful comparisons of emissions over time. Transparently document any changes to the data, inventory boundaries, methods or any other relevant factors in the time series.
• Transparent: Address all relevant issues in a factual and coherent manner based on a clear audit trail. Disclose any relevant assumptions and make appropriate references to the accounting and calculation methodologies and data sources used.
• Accurate: Ensure that the quantification of GHG emissions is systematically neither over nor under actual emissions, as far as can be judged, and that uncertainties are reduced as far as practicable. Provide sufficient accuracy to enable users to make decisions with reasonable assurance as to the integrity of the reported information.