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Typical carbon footprint components the carbon emissions of the managers’
actions, the business was inadvertently
Scope 1 incentivising behaviour that increased,
Scope 2 direct rather than reduced, the business’s carbon
Scope 3 upstream emission emission Scope 3 downstream
emission sources source source emission sources footprint. The supermarket had based its
Resources Travel and Purchase of Emissions After sale Use and SCEM on carbon reporting standards that
limit the required disclosures to indirect
logistics energy from the but before disposal
use of use carbon emissions from purchased
electricity or energy used in heating or
n Purchased n Delivery of n Electricity, n Company n Delivery of n Use of cooling (Scope 2 emissions) and carbon
goods and goods and steam, heat, facilities, goods and product
services services to or cooling land, and services to n End-of-life emitted from its buildings, vehicles,
n Capital business purchases buildings customer disposal operation of equipment, or any land use
goods, n Employees’ n Company n Further (Scope 1 emissions) rather than on its
owned and commuting vehicles processing carbon footprint.
leased n Business of product Scope 1 and Scope 2 emissions are only
n Fuel travel by customer part of a business’s carbon footprint. When
n Waste
from calculating a business’s carbon footprint,
operations you also need to consider the carbon
emitted in the business supply chain or
Source: Greenhouse Gas Protocol. that related to other assets owned by a
business (often referred to as Scope 3
Top 9 tips when interpreting carbon KPIs upstream emissions) and carbon emitted
after the sale of a product or service, as a
result of its consumption and any eventual
Don’t take carbon emissions disclosed in corporate reports or scorecards at disposal (often referred to as Scope 3
face value. Finance professionals can mitigate many of the mistakes and downstream emissions).
misinterpretations of carbon emissions observed in practice if they follow A carbon footprint aims to measure
these steps: total global emissions across the life cycle
1. Always confirm how the carbon emissions have been calculated, looking for of a product or service (see the table
a breakdown by categories in the table “Typical Carbon Footprint “Typical Carbon Footprint Components”
Components” and whether the numbers have been assured or arranged by the main stages of a product
independently verified. life cycle).
2. If you cannot identify which categories are included in carbon KPIs, do not The shaded columns in the table
use them because you cannot guarantee they will provide reliable evidence represent the components that most
for decision-making or performance measurement.
3. Look for other carbon KPIs produced by the company in relation to
departments or products, including annual reports, regulatory returns,
integrated reports, or external sources such as the Carbon Disclosure Carbon emissions beyond
Project. Always use the carbon KPI that includes the most categories. corporate disclosures

4. Look for discrepancies between corporate climate change strategies, Percentage of UK businesses including carbon
aspirations, and targets, and how carbon KPIs are calculated. footprint components in their net-zero
5. Check the timescale of the carbon KPIs. Are they quarterly, annual, rolling strategy.
averages, or two-year targets? Remember this is a fast-evolving topic, and Including carbon % of
there is considerable variation in practice. emissions from respondents
6. Take care when interpreting carbon KPIs based on ratios, eg, carbon/sales. Purchased goods and 18%
Check that there is a meaningful relationship between the two numbers. services
For example, ask if sales really drive the carbon emissions and whether all Capital goods, owned or 15%
the carbon emissions associated with sales are included in the carbon KPI. leased
7. Make sure you use the most relevant carbon data. If you are looking at Delivery of goods and 8%
pricing, use the carbon emissions associated with the product life cycle. If services to your business
you are measuring the performance of a manager, use the carbon Business travel 16%
emissions they are responsible for. Employee commuting 14%
8. If there is any doubt, contact those responsible for producing the carbon Delivery of goods to your 10%
KPIs to get as much additional detail as possible on carbon emissions customers
before starting your analysis. Use and disposal of your 13%
9. Always qualify any analysis of carbon KPIs with an assessment of the products after they are sold
quality of data available and clearly disclose what information is missing.
Source: 2022 YouGov survey commissioned by Lloyds
Banking Group Centre for Responsible Business.
14 I FM MAGAZINE I February 2023