Businesses are increasingly considering the environmental performance of suppliers as part of their procurement process. If a business has selected a supplier because they provide a carbon neutral service, this guidance sets out best practice with regards to reporting the GHG emissions from the service within the business’ annual GHG inventory. Services that are frequently supplied as carbon neutral services include taxis, flights, logistics services, electricity or gas supply. This approach would apply equally to the GHG inventory of a product where components of the product are sourced as carbon neutral products. Given carbon neutral services are more widely available in the market, this guidance focuses on services in the context of an annual corporate GHG inventory.
This guidance aligns with the GHG Protocol’s Scope 3 Standard (GHG Protocol, 2011, Corporate Value Chain (Scope 3) Accounting and Reporting Standard, link) and UK DEFRA’s Environmental Reporting Guidelines (DEFRA, 2019, Environmental Reporting Guidelines, link). This guidance recommends the following steps:
1. Request suppliers provide a breakdown of the GHG emissions associated with the services consumed. The total gross carbon footprint for a specific time period (e.g. financial year) plus an intensity measure relevant to how the service is consumed. For example, if document storage is outsourced to a cloud-based service, request the figure for CO2e emitted per gigabyte per year. The carbon intensity metric is useful for forecasting how GHG emissions will vary based on the level of consumption
2. Confirm if the service purchased is carbon neutral. To deliver a carbon neutral service the provider will need to offset (retire) a volume of carbon credits equivalent to the emissions created by the provision of the service. For example, if the gross footprint of the service equals 10 tCO2e, then 10 tCO2e of carbon credits need to be purchased and retired, and once retired the net footprint equals 0 tCO2e, i.e. the service is carbon neutral. To ensure the service provider is using high quality carbon credits which guarantee emissions reductions from credible project types, you should request that they work with a carbon credit supplier that complies with the requirements set out in Technical Guidance 4.1.1. If a supplier is not using credits in compliance with the ICROA Code, then those credits cannot be included in support of a CarbonNeutral® certification
3. When preparing a corporate GHG inventory, categorise the carbon neutral service according to requirements of the GHG Protocol standards. To maintain the integrity of the GHG inventory, total GHG emissions should be reported, before reporting a lower figure for net emissions that has been reduced by the retirement of carbon credits by the product or service provider
Table 14 illustrates how this guidance can be applied to a corporate GHG inventory in order to transparently account for the GHG emissions of carbon neutral services consumed within a reporting period. In this example, the reporting company has sourced three services; electricity, logistics and data hosting, that are offset by their respective suppliers. The GHG emissions of all three services are counted in the total annual GHG emissions figure, and the GHG reduction from the purchase and retirement of carbon credits is then subtracted from this figure. The reporting company then purchases and retires a sufficient number of carbon credits to reduce its remaining net GHG emissions to zero to support a carbon neutrality claim.
Table 14: Illustrative Corporate GHG Inventory for 2022 and 2023
