Environmental Metrics : Basic Module
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The environmental disclosures included in the basic module of VSME are B3 (energy and greenhouse gas emissions), B4 (pollution), B5 (biodiversity), B6 (water) and B7 (resource use, circular economy and waste management). Information on each of these disclosures is provided below.
(Expand each section to view more details about the specific disclosure)
Energy consumption
The company should disclose its total energy consumption in MWh, preferably broken down by type of fuel (renewable and non-renewable) and source of energy (electricity and fuel).
Since climate-related impacts are significantly driven by energy consumption, it is necessary that companies disclose both the quantity and type of fuel i.e fossil fuels such as coal, oil and gas versus renewable energy, and the mix of energy consumed. Other breakdowns may be reported such as the consumption of purchased or self-generated electricity from renewable sources.
In case the company purchases fossil fuels (e.g. natural gas, oil) or renewable fuels (e.g. biofuels, such as biodiesel and bioethanol) to generate electricity, heat or cooling for its own consumption, there is a risk of double counting. To avoid this, the company should only account for the energy content of the purchased fuel as fuel consumption. It should not account for, or report on, the electricity and heat consumption produced from that fuel. If the company generates electricity from non-renewable energy sources such as solar or wind, where no fuel is necessary, it can account for the amount of electricity generated and consumed as electricity consumption.
The company should not offset its energy consumption by its energy production even if energy generated on site is sold to and used by a third party. The company should also avoid double counting fuel consumption when disclosing self-generated energy consumption. If the company generates electricity from either a non-renewable or renewable fuel source and then consumes the generated electricity, the energy consumption should be counted only once under fuel consumption.
The share of renewable energy consumption can be calculated based on guarantees of origin (GOs), renewable energy certificates (RECs) or electricity composition as stated in the electricity bill. The electricity bill may refer to electricity units consumed and specify the percentage of electricity provided coming from renewable sources.
When preparing information on energy consumption, the company should exclude feedstocks and fuels that are not combusted for energy purposes. The company that consumes fuel as feedstocks can disclose information on this consumption separately from the required disclosures.
Energy consumption should be reported in terms of final energy, which is the amount of energy delivered to the company, for example, the Megawatt-Hours (MWh) of electricity purchased from the utility, steam received from a nearby industrial plant or diesel purchased at petrol stations. Electricity explicitly refers to heat, steam and cooling while fuels include anything burned, e.g. gas, natural gas, biomass, etc.
Energy consumption should be measured in MWh and any data expressed in other units such as energy content (e.g. kJ, Btu), volume (e.g. litres, m³) or mass (e.g. metric tonnes, short tonnes) should be converted.
GHG emissions
Additionally, the company should disclose its estimated gross greenhouse gas (GHG) emissions in tons of CO2 equivalent (tCO2eq), inline with the GHG Protocol Corporate Standard (version 2004). The information required includes:
scope 1 emissions in tCO2eq i.e emissions from owned or controlled sources; and
location-based scope 2 emissions1 in tCO2eq i.e. emissions from the generation of purchased energy, such as electricity, heat, steam or cooling.
Scope 1 emissions include CO2 (as well as CH4 and N2O) emissions associated with fuel combustion, for example in boilers, furnaces, vehicles, etc, and fugitive emissions from air conditioning and industrial processes. Location-based scope 2 includes emissions from electricity, heat, steam and cooling purchased or acquired and consumed by the reporting company. It reflects the average emissions intensity of grids on which the energy consumption occurs and uses mostly grid-average emission factor data. Typical sources of scope 2 emissions relate to any equipment that consumes electricity (electrical engines, lights, buildings, etc.), heat (heating in industrial processes, buildings, etc.), steam (industrial processes) and cooling (industrial processes, buildings, etc).
The company should follow the reporting principles outlined in the GHG Protocol to ensure a fair account of its emissions. These principles are:
relevance: ensuring that the GHG inventory reflects the GHG emissions of the organisation;
completeness: ensuring that the GHG inventory account for all GHG emission sources and activities within the chosen boundary;
consistency: ensuring the consistency of the methodology used to allow for comparisons over time;
transparency: disclosing the assumptions, references and methodology used when computing GHG emissions; and
accuracy: ensuring that GHG emissions data is sufficiently precise to allow users to make decisions.
Alternatively, companies may use ISO 14064-1 if it’s better suited to their needs and circumstances.
When reporting on GHG emissions, it is important for the company to set the appropriate boundaries to ensure that the GHG inventory is correct and to avoid double counting. The GHG Protocol defines two main types of boundaries; organisational or operational boundaries.
The GHG Protocol defines organisational boundary as the boundaries that determine the operations owned or controlled by the reporting company, depending on the consolidation approach taken. There are three approaches to consolidation of emissions:
The equity share approach relates to accounting for GHG emissions from operations according to its shares of equity in the operation.
The financial control approach involves accounting for emissions from operations over which it has financial control, meaning that the reporting company has the ability to direct the financial and operating policies of the operation with a view to gaining economic benefits from its activities.
The operational control approach involves accounting for emissions from operations over which it has operational control over an operation i.e the reporting company or one of its subsidiaries has full authority to introduce and implement its operating policies at the operation.
The company should choose the approach that reflects its circumstances
The GHG Protocol defines operational boundary as the boundaries that determine the direct and indirect emissions associated with operations owned or controlled by the reporting company. This assessment offers the company the ability to establish which operations and sources cause direct (scope 1) and indirect emissions (scope 2 and scope 3) and to decide which indirect emissions to include resulting from its operations.
The GHG Protocol defines a five-step procedure to identify, calculate and track GHG emissions:
Identify sources of emissions;
Select the calculation approach;
Collect data and choose emission factors;
Apply calculation tools;
Roll-up data to corporate level.
There are two main approaches for calculating GHG emissions: the calculation approach and the direct measurement approach.
The direct measurement approach involves multiplying the quantities of gas directly measured by their respective global warming potential values. Global warming potential (GWP) values quantify the impact of the given GHG on the climate compared to an equivalent unit of carbon dioxide. The data necessary to use this method includes the quantity of gas emitted, which is obtained from gas measurement (flow, concentration, volume) and global warming potential (GWP) values of these gases.
The calculation approach generally involves multiplying the activity data by the emission factor that integrates the global warming potential (GWP). Emission factors quantify how much GHG is emitted per unit of activity. The emission factors frequently take into account the GWP of the greenhouse gas, hence the company doesn’t need to consider GWPs.
The company may also want to provide their market-based scope 2 figures 2. Emission factors for market-based scope 2 emissions reflect the contractual arrangements of the company with its energy suppliers. Market-based emission factors can be provided by their electricity or heat suppliers as well as supported by their own purchase of Energy Attribute Certificates3 or Power Purchase Agreements (PPAs)4 or the use of residual-mix emission factors.
The company should also disclose its GHG intensity, which is calculated by dividing GHG emissions by turnover (in Euro).
The company should disclose the pollutants it emits to the air, water and soil in its own operations, with the respective amount for each pollutant. If this information is already publicly available, the company may refer to the document where it is reported, for example, by providing the relevant URL link or embedding a hyperlink.
The disclosure of this information only applies if the company is already required by law or other national regulations to report to competent authorities its emissions of pollutants, or if it voluntarily reports on them according to an Environmental Management System. If the company is not legally required to do so, it should state this to be the case.
In general, this requirement is expected to apply to companies that are operators of an industrial installation or intensive livestock farm covered by the Industrial and Livestock Rearing Emissions Directive (IED 2.0).
The IED 2.0 applies to installations in Europe covering activities such as burning fuel in boilers with rated power of more than 50 MW, founding in metal foundries, processing of non-ferrous metals, production of lime, manufacturing of ceramic products by firing, production of plant protection products or biocides, rearing of any mix of pigs or poultry representing 380 livestock units or more, tanning of hides, slaughterhouses, etc. In these cases, the installation must already report the pollutants released to air, water and soil to the competent authority, and the data publicly available at the Industrial Emissions Portal Regulation (IEPR), replacing the European Pollutant Release and Transfer Register (E-PRTR).
Companies do not have to report consolidated company-wide emissions under the E-PRTR since this standard requires the reporting of the total amount of pollutants of all the facilities, at the facility level. Similarly, companies owning but not operating in a facility do not have to report to the E-PRTR but are expected to reflect their facility-owned emissions in their sustainability report.
If the company is required to monitor and report on the pollutants listed in the E-PRTR under an Environmental Management System such as, for example, an EcoManagement and Audit Scheme (EMAS) or ISO 14001 certification, it should include these aspects in its sustainability report.
If the company has only one facility or operates in only one facility, and its pollution data is already publicly available, it may refer to the document where such information is provided instead of reporting it twice. Likewise, if the company publishes an organisation-wide report such as, for example, an EMAS report that incorporates pollution data, it can include it in the sustainability report by reference.
To report information on pollutants in the sustainability report, the company should indicate the type of pollutant material being reported alongside the amount emitted to the air, water and soil in a suitable mass unit (e.g. tonnes or kg).
According to the Guide for Business on air pollutants emissions adopted by the Alliance for Clean Air, the major sources of emissions of air pollutants in the private sector, that are also highly impactful for the entire value chain, include:
electricity generation from fossil fuel or biomass combustion, which may be done externally, distributed through a national grid, then consumed along the value chain activities;
direct stationary fossil fuel or biomass combustion within a company’s activities or industrial processes, or the operation of stationary machinery or other activities that require fuel combustion;
transport e.g. freight, road, rail, shipping and aviation, off-road vehicles such as those used in agriculture or construction;
industrial processes i.e.all other emissions that do not stem from fuel combustion and that occur during industrial processes;
agriculture e.g. livestock and manure management, crop production such as crop residue burning, manure and fertiliser application;
waste disposal e.g. landfilling, incineration or open burning, or composting.
The guide contains a six-step methodology that users can follow to develop their air pollutant emission inventory:
mapping the value chain,
identifying key sources of pollution,
identifying the appropriate methodology for quantifying emissions,
identifying appropriate activity data,
choosing the appropriate emission factors, and
quantifying emissions.
Sources of soil pollution in the private sector are mainly the products or by-products of industrial processes, e.g. production of chemicals, energy, textiles manufacturing, accidental spills of petrol-derived products, livestock and agricultural activities e.g. irrigation with untreated waste water, poultry rearing, production and treatment of waste water, production and processing of metals and minerals, and transportation (FAO, 2021).
The company should disclose the number and area (in hectares) of sites that it owns, has leased, or manages in or near a biodiversity sensitive area.
Additionally, the company may disclose metrics related to land use, such as:
total use of land (in hectares);
total sealed area;
total nature-oriented area on-site; and
total nature-oriented area off-site
A ‘sealed area’ is an area where the original soil has been covered (e.g. roads, buildings, parking lots), making it impermeable (not allowing fluid to pass through it) and resulting in an impact on the environment.
A ‘nature-oriented area’ is an area that primarily preserves or restores nature. Near-natural areas may be located on the organisation’s site and may include roofs, facades, water-drainage systems or other features designed, adapted or managed to promote biodiversity. Near-natural areas may also be located off the organisation’s site if they are owned or managed by the organisation and primarily serve to promote biodiversity.
When disclosing information regarding land use, the company should consider both local impacts, as well as direct and indirect impacts on biodiversity, e.g. through raw material extraction, procurement, supply chain, production and products, transportation and logistics, and marketing and communications.
The company should disclose its total water withdrawal i.e. the amount of water drawn into the boundaries of the organisation or facility. The company should separately present the amount of water withdrawn at sites located in areas of high water-stress. Water stress occurs when the demand for water exceeds the available amount during a certain period or when poor quality restricts its use.
If the company has production processes that significantly consume water e.g. thermal energy processes like drying or power production, production of goods, agricultural irrigation, etc., it should disclose its water consumption, calculated as follows:
\[water~consumption~=~water~withdrawal - ~water~discharge\]
Water consumption is the amount of water drawn into the boundaries of the organisation that is not discharged or planned to be discharged back into the water environment or to a third party. This typically relates to water evaporated e.g. in thermal energy processes like drying or power production, water embedded in products e.g. in food production or water for irrigation purposes e.g. used in agriculture or for watering company premises. For companies that solely withdraw water from the public water network and discharge it into the sewer, water consumption will be close to zero and can therefore be omitted from the report.
Water withdrawal is the amount of water a company draws into its organisational boundaries from any source during the reporting period. For most companies, this relates to the amount of water taken from the public water supply network as indicated in the utility bills. Water withdrawal also includes amounts of water taken from other sources such as groundwater from own wells, water taken from rivers or lakes or water received from other companies. In the specific case of companies operating in agriculture, water withdrawal would include rainwater if collected directly and stored by the company.
Water discharge means, for example, the amount of water transferred directly to receiving water bodies such as lakes or rivers, the public sewer or to other companies for cascading water use. It can be seen as the water output of the company.
The company may provide additional explanatory information to contextualise its water withdrawals or consumption. For example, it may highlight if rainwater is collected and used as a replacement for tap water or if water is discharged into other parties for cascading use.
To determine whether it operates in an area of high-water stress, the company may consult local water authorities of the place(s) it operates in to inform its assessment of water resources and identification of areas of high-water stress. The company can also consult publicly available and free tools that map out water scarcity globally, such as the WRI’s Aqueduct Water Risk Atlas. This tool provides an interactive map of a water stress indicator, the ‘baseline water stress’, at sub-basin level. This indicator measures the ratio of total water demand to available renewable surface and groundwater supplies. Companies can use this tool to determine the water stress baseline set for different river basins globally. Values of the baseline water stress indicator above 40% indicate an area of high-water stress.
Other tools that companies can use to determine if their operations are located in water stressed areas are:
The European Environment Agency (EEA) Water Exploitation Index plus (WEI+) for summer and Urban Morphological Zones (UMZ) (static map and dataset); and
The Water exploitation index plus (WEI+) for river basin districts (1990-2015) (interactive map)
These tools present the water stress indicator WEI+, that measures total water consumption as a percentage of the renewable freshwater resources at sub-basin level. WEI+ values equal or greater than 40% generally indicate situations of high-water stress.
WRI Aqueduct bases its baseline water stress indicator on water demand, while the EEA indicator of water stress WEI+ is based on water consumption.
The company should disclose whether and how it applies the circular economy principles.
The company should disclose:
the total annual amount of waste generated, broken down by type (non-hazardous and hazardous);
the total annual amount of waste diverted to recycling or reuse; and
if the company operates in a sector using significant material flows, for example manufacturing, construction, packaging or others, the annual mass-flow of relevant materials used.
The European circular economy principles are usability, reusability, repairability, disassembly, remanufacturing or refurbishment, recycling, recirculation by the biological cycle and other potential optimisation of product and material use.
The Ellen Macarthur Foundation believes that in nature, there is no waste; waste is a human invention. They define three core principles to a circular economy:
Eliminate waste and pollution by designing products, materials and infrastructure to go back into the economy after use. Design considerations can be made at the level of usability, reusability, repairability, disassembly and remanufacturing.
Circulate products and materials by maintaining, reusing and refurbishing them. If they can’t be used anymore, we can take them apart (disassemble), remanufacture them, and, as a last resort, recycle them. Biological products can be composted to return to nature. This way, we keep finite materials in the economy and out of the environment, and safely return biodegradable materials to the earth.
Regenerate nature by focusing on improving natural environments and building biodiversity, instead of focusing on what we can take. This can be achieved by using farming practices that restore soils and increase biodiversity, and returning organic materials to the earth. By adopting a regenerative model, we can mimic how natural systems work.
SMEs that generate hazardous and radio active waste should disclose this information. Examples of hazardous waste that small businesses may generate include batteries, used oils, pesticides, mercury-containing equipment and fluorescent lamps. These companies are recommended to classify their hazardous waste using the European Waste Catalogue (EWC), which categorises waste by type. Waste is considered hazardous if it displays one or more of the hazardous properties listed in Annex III of the Waste Framework Directive.
Radioactive waste can be present in a variety of items such as medical, research and industrial equipment, smoke detectors, or sludges. It has or can have properties such as carcinogenic, mutagenic or toxic for reproduction, that render it hazardous. Companies using radioactive materials with the ability of generating radioactive waste subject to EU regulation should be aware of it. Radioactive waste should be identified based on the presence of radio nuclides at levels above regulatory clearance thresholds. See page 35 of the standard for a pictogram that can guide companies in determining properties of hazardous waste.
When presenting information on its waste generation or diversion from disposal, the company should preferably report such information in units of weight (e.g. kg or tonnes). In case units of weight are considered inappropriate, they may alternatively disclose the information in volumes (e.g. m3).
When disclosing information on the total annual waste diverted to recycling or reuse, the company should consider the waste that is sorted and sent to recycling or reuse operators, e.g. the amount of waste put into recycling container or sorting of waste into certain categories of materials and their delivery to waste treatment facilities, rather than the waste that gets effectively recycled or reused.
Footnotes
The location-based method quantifies scope 2 GHG emissions based on average energy generation emission factors for defined locations, including local, subnational, or national boundaries↩︎
The market-based method quantifies scope 2 GHG emissions based on GHG emissions emitted by the generators from which the reporting entity contractually purchases electricity bundled with instruments, or unbundled instruments on their own. These instruments include Guarantee of Origins (GOs) or Renewable Energy Certificates (RECs).↩︎
Energy Attribute Certificates (EACs), also known as Renewable Energy Certificates (RECs), are tradable certificates representing the environmental attributes of electricity generated from renewable sources, verifying the renewable energy content of electricity.↩︎
A Power Purchase Agreement (PPA) is a long-term contract between an electricity generator (often a renewable energy producer) and a buyer (like a utility, government, or company) where the buyer agrees to purchase electricity at a pre-negotiated price for a set period↩︎