Glossary

What Is The Role Of Renewable Electricity In Corporate Sustainability?

What Is The Role Of Renewable Electricity In Corporate Sustainability?

What Is The Role Of Renewable Electricity In Corporate Sustainability?


by: Garrett Keraga | March 28, 2022


In 2022, it seems that we’ve reached a crescendo of pressure from regulators, investors, customers, peers, and other stakeholders pushing companies along a sustainable path. Things that were once considered exceptional – such as pledging to reach net-zero carbon emissions or using 100% renewable electricity – have quickly become necessities for many companies to keep up with their peers. When we look back at the sustainability landscape over the last few years, it’s easy to see how this sudden boom of ESG has led to some confusion.

As companies enhance their ESG strategy and commit to public-facing initiatives, it becomes crucial to understand how different interventions factor into their corporate carbon accounting. How can carbon offsets be used? Where can companies account for renewable energy? What projects can be undertaken to decarbonize? And ultimately, which of these efforts should be prioritized in an ESG strategy? Companies need to be able to answer these questions and communicate their strategy effectively to stakeholders. In this blog, we explain the role renewable electricity has in corporate sustainability.


How does renewable electricity factor into corporate carbon accounting?

Renewable electricity is often one of the first levers considered when creating a corporate ESG strategy, and the global transition to clean energy is accelerating every year. Bloomberg reported that global renewable energy investment grew by 6.5% in 2021 to a new record of $366 billion. For companies, switching to renewable electricity can be just part of a decarbonization strategy, or specific goals around renewable electricity consumption can be set, such as those set through RE100. When companies plan out renewable electricity adoption, there’s a lot to decipher.

Global Investment In Energy Transition By Sector


First, companies need to understand how to account for renewable electricity in their carbon footprint. For this, as with all carbon accounting questions, companies will want to reference the Greenhouse Gas (GHG) Protocol, and here specifically – the Scope 2 Guidance. Scope 2 covers indirect emissions from purchased electricity and other purchased energy – basically, the emissions created by the generator of that electricity when the generator is not operated by the company conducting the carbon inventory. For most companies, this refers primarily to electricity from the grid.

Location-based Accounting: Within Scope 2, one option is to account for electricity emissions with a location-based emission factor, where reporting entities use an emission factor based on local grid mix to determine their emissions. This doesn’t allow for contractual instruments, such as Renewable Energy Credits (RECs), to be used to switch generation attributes and lower emissions.

Market-based Accounting: However, the other option – market-based accounting – allows for consumer choices in energy generation and contractual instruments to be reflected in the emission factor. In other words, continuous contracts with a supplier to use a renewable generation, or one-time REC purchases, can be accounted for in the market-based approach. Companies that are considering building renewable electricity into their ESG strategy should utilize a market-based carbon accounting approach for Scope 2.



What renewable electricity options are available to companies?

Option 1: RECs are a common entry point for companies starting to use renewable electricity. RECs represent a certified unit of electricity production from a generator. RECs must be retired on behalf of a specific entity, and once retired, that electricity generation cannot be accounted for elsewhere. RECs are often third-party-certified by entities such as Green-e® Energy. As more RECs are retired, the remaining grid mix, called the “residual mix” gets dirtier, further incentivizing companies to adopt renewable electricity. RECs can be simply purchased in bulk and used to switch a company’s entire electricity consumption to renewable sources each year. Similarly, companies can work with utilities to opt into low-carbon energy contracts, which often work by providing RECs to the purchaser. However, some critics argue that purchasing renewable electricity through RECs stunts companies’ impact on increasing the total amount of renewable electricity on the grid. Companies will also often seek to move beyond RECs to avoid the annual expenditure and price uncertainty in their renewable electricity supply.

Option 2: Onsite generation is another choice for companies, especially those that own property and/or their facilities. Rooftop solar is one popular example. Onsite generation can also occur in leased or rented spaces through collaboration with landlords. This strategy is most often employed in facilities or properties where a company has a long-term lease and plans to stay in a particular location for the foreseeable future. Companies should note that they can only take credit for renewable electricity that is generated onsite if they use power directly from their system or retire RECs generated by their systems on their own behalf. If RECs are sold, that company cannot take credit for the renewable electricity it produced on its site.

Option 3: Many companies who don’t have the assets to invest in onsite renewables opt instead to pursue a Power Purchase Agreement (PPA). In a low-carbon PPA, companies will pay a third-party to develop and maintain a renewable electricity system and sell that energy physically or in the form of credits back to the company. When credits are sold back to the company, but the electricity itself is consumed elsewhere or sold to the grid, these agreements are called Virtual Power Purchase Agreements (VPPAs). Typically, companies will size a PPA based on their energy consumption and will often develop a project along with other interested companies.

In all of these cases, renewable electricity can be accounted for in a company’s carbon footprint, as long as the company uses the market-based approach for Scope 2 accounting and retires the renewable generation credits on their behalf or directly consumes renewable electricity.  

Energy Attribute Certificate Pathways   
Source: GHG Protocol Scope 2 Guidance (linked above)


“Additionality” in renewable electricity – is it an effective or appropriate metric?

In the world of carbon offsets and project development, “additionality” is a strict qualifier that assesses whether a project was caused by intervention above and beyond regulation. To be additional, it must be determined that a project would not have happened without the intervention of the entity supporting the project. When evaluating what type of renewable electricity strategy to pursue, companies tend to ask themselves about additionality and whether they are supporting a new project – through a PPA, for example. But is this term really applicable to renewable electricity?

Ultimately, additionality isn’t a term that should be used to discuss renewable electricity. The GHG Protocol Scope 2 Guidance advises that Offset additionality criteria are not fundamental to, or largely compatible with, the underlying rules for market-based scope 2 accounting and allocation. Additionality is used to qualify projects that are an improvement over a baseline. For example, in carbon offset projects, what is being measured is a change in avoided GHG emissions from a theoretical baseline without intervention. In renewable electricity, direct energy use attributes are being claimed rather than separation from a baseline. It’s also a challenge to determine what is really “in addition” to regulation in the world of renewable electricity. On top of that, there are more aspects of additionality as used in project development, like proving that technology isn’t commonplace, which aren’t useful to apply to renewable electricity.

That said, companies may still face criticism if it’s perceived that they aren’t doing enough to support the development of new renewable electricity sources. Voluntary programs can be developed to address this concern, but for now, companies should stray away from the term “additionality” to avoid making a false claim. In the words of the GHG Protocol Scope 2 Guidance “Maximizing the speed and efficacy of voluntary initiatives in driving new low-carbon development is an important, complex, dynamic, and evolving process for program implementers, regulators, and participants.”. Supporting development of new renewable assets is an ongoing challenge that companies can help accelerate as they increase demand for renewable electricity.


Creating a corporate renewable electricity strategy

As companies face the challenge of adopting renewable electricity and developing a robust plan to meet stakeholder demands, ClimeCo is here to develop a strategy that is right for you. For more information or to discuss how ClimeCo can drive value for your organization, contact us at info@climeco.com.


About the Author

Garrett Keraga is a Manager on ClimeCo’s Sustainability, Policy, and Advisory team based in Burlington, Vermont. His sustainability work has included greenhouse gas accounting, carbon abatement planning, ESG strategy development, and disclosure advisory. He has worked with a large variety of industries, both across consumer-facing and industrial clients. Garrett holds a Bachelor of Science in Mechanical Engineering from the University of Vermont.

What is a Life Cycle Assessment?

What is a Life Cycle Assessment?

What is a Life Cycle Assessment?


by: Gary Yoder and Jaskaran Sidhu | February 22, 2022


Team Working on LCA


Solutions
considered essential to decarbonization reduce greenhouse gas (GHG) emissions, yet rarely come without other environmental impacts. For example, while vehicle electrification will increase battery production, the mining of lithium has a substantial environmental impact. So how do we evaluate whether each trade-off on our path to net-zero is worth it? A Life Cycle Assessment (LCA), which offers a framework for quantifying the potential environmental impacts of a product from cradletograve (i.e., from growth/extraction of raw material inputs all the way through a product’s disposal), allows us to make that determination.
 


Benefits of
LCAs?
 

Unlike GHG footprints or other Environmental, Social, & Governances (ESG) metrics that typically quantify enterprise-level impacts and show year-to-year progress, LCAs often focus on the potential environmental impact at a specific product or a facility level. Such information can be important to customers, suppliers, employees, investors, and regulatory entities. 

ClimeCo has performed a variety of LCA projects across multiple industries and scopes. The goals of an LCA can vary; the following two projects provide examples of two different approaches to LCAs that ClimeCo has recently completed for our clients.  

Wide-angle bottom view of a contemporary construction of an oil refinery or a modern fuel factory facility in an industrial zone, with a round bridge, plenty of pipes, iron beams, tanks, and stairs


LCA Example #1

Confidential Industrial Manufacturer: Benefits of Practice Change vs. Historical Performance at a Facility 

ClimeCo carried out a cradle-to-grave carbon intensity (CI) LCA for four products made at an industrial facility.  

The Objective: Communicate Carbon Capture Benefit 
One of the many applications of an LCA is its ability to demonstrate the environmental benefits achieved by adopting different operational practices. A detailed analysis of GHG emitted through the product lifecycles showed the reduction in CIs achieved by capturing previously vented process CO2 for sequestration. These CIs, and their recent reductions, will be used in customer communications and marketing efforts, differentiating the environmental “value” of the products from those offered by competitors.    

Another Use: Evaluate Decarbonization Options 
LCAs can be a reliable methodology for demonstrating GHG benefits achieved through existing decarbonization actions – as was the case for the scenario above – and for evaluating various potential reduction measures prior to their implementation. When used in combination with tools like Marginal Abatement Cost Curves (MACC), LCAs can help assess reduction pathways along with their associated monetary cost.  

Financial Incentive Opportunities 
Identifying GHG performance improvement opportunities can open doors to participate in current and upcoming federal- and state-level programs that come with significant financial incentives. These include California’s Low Carbon Fuel StandardCanada’s Clean Fuel Standard, or the IRS carbon sequestration tax credit (45Q), each requiring full product LCAs.   

J-Band asphalt paving roads and reducing need for maintenance

LCA Example #2

J-Band® – Benefits of Product vs. Alternatives 

ClimeCo collaborated with Asphalt Materials, Inc. (AMI) to complete an LCA-based sustainability assessment of J-Band®, AMI’s void reducing asphalt membrane (VRAM) product.  

The Product 
AMI designed J-Band to reduce road maintenance and extend the lifetime of asphalt pavement roads by strengthening the longitudinal (centerline) joint, traditionally a problematic site for road deterioration. The deterioration results from the intrusion of air and water due to inherently lower asphalt mixture density at the joint. Over time, the joint naturally becomes the weak link in the entire road surface, requiring periodic repairs before complete road replacement. To combat this, J-Band® is a polymer-modified asphalt product applied to the prepared surface prior to applying the new hot-mix asphalt (HMA). When the HMA pavement lifts are applied, heat from the hot-mix drives J-Band® into the available voids, sealing the joint area from below. Due to established jurisdictional practices and specification requirements, J-Band® is used in a smaller percentage of asphalt paving projects in the U.S., with traditional solutions, such as joint adhesive, pave wide trim back (PWTB), and infrared (IR) heaters, being more common.  

The Product’s Competitive Edge: Performance and Cost 
AMI has demonstrated that J-Band® creates a better joint compared to the alternatives, eliminating the need for frequent, significant joint repair, and prolonging the life of the road by at least three additional years. Based on this performance, AMI has shown that J-Band® has a lower lifetime cost, with its upfront costs surpassed by reduced asphalt materials, fuel, and labor costs.  

A Sustainability Edge, too? 
Is the same true for J-Band’s lifetime environmental and social impacts? The product requires energy and material inputs to manufacture and apply – are these impacts surpassed by the benefits of reduced maintenance and extended road lifetime? ClimeCo completed a comparative LCA, evaluating J-Band against three traditional longitudinal joint solution alternatives to answer this question. The comparative LCA approach meant impacts common to all alternatives could be excluded, such as from the production of hot-mix asphalt, transporting the asphalt to the job site, and the paving equipment. The following table shows the life cycle stages included in the analysis.  

Life Cycle Analysis Stages

The Analysis 
ClimeCo quantified GHGs, criteria air pollutants (AQ), and worker safety impacts across road manufacturing, product transport, joint solution application, and road maintenance. The developed calculator tool clearly documents assumptions and data sources. It is customizable for key project details, such as project length, distance to the project site, and distance to perform maintenance. 

The Results 
Under the assumed baseline conditions, J-Band demonstrated better sustainability performance on all metrics compared to the longitudinal joint solution alternatives. For more information on this project scope and results, please see the following PowerPoint presentation.   


Using LCAs for a More Sustainable Future
 

As these two project examples show, LCAs can be targeted to answer specific questions and meet specific needs. However, because each LCA is context-specific and fine-tuned to its application, one LCA cannot be compared to another. To manage this limitation, ClimeCo’s standard practice is to use conservative assumptions and to be transparent with methodologies, ensuring trustworthy, well-documented LCA results that align with reality.   

Whether you are looking to enhance a product or process, develop sustainability marketing claims, or meet regulatory or reporting requirements, ClimeCo has the expertise in applying LCAs to support informed decision-making across these areas. 


About the Authors

Gary Yoder is a Vice President at ClimeCo, providing environmental compliance services to many clients. He specializes in the complexities of air quality compliance but also supports ClimeCo’s sustainability projects and initiatives. Gary holds a Bachelor of Science degree in Geography/Pre-Meteorology from Ohio University and a Master of Science degree in Meteorology from North Carolina State University. 

Jaskaran Sidhu is an Analyst on ClimeCo’s Sustainability, Policy, and Advisory team based in Toronto. Jaskaran’s work focuses on life cycle analysis and carbon impact quantification for ClimeCo’s corporate clients. Jaskaran holds a Master of Engineering in Mechanical and Industrial Engineering from the University of Toronto and a Bachelor of Engineering in Mechanical Engineering from Panjab University. 

What Are Sustainable Development Goals and How Can You Assess Their Impact?

What Are Sustainable Development Goals and How Can You Assess Their Impact?

What Are Sustainable Development Goals and How Can You Assess Their Impact?


by: Stephanie Hefelfinger and Rebecca Stoops | January 19, 2022

The WaY Project - Women with health insurance

Sustainable Development Goals (SDGs) are a popular topic worldwide, and you’ve probably seen organizations displaying their SDG contributions with these colorful icons. How are they justifying their SDG claims? How can you feel confident when purchasing credits, and what are the levels of assurance for SDG claims? What tools do professionals use to analyze their projects? 

What are SDGs?

The SDGs are 17 key issues that projects, businesses, and governments must target to improve the world by 2030. They were created by the United Nations (UN) Development Program and include targets like No Poverty, Responsible Consumption and Production, and Clean Water and Sanitation.  

Sustainable Development Goals - SDGs interconnect together

This diagram shows how all SDGs are interlinked and depend on each other. Image source: How food connects all the SDGs – Stockholm Resilience Centre 

Case Study of The WaY Project and Available SDG Tools 

In the voluntary credit market, plastic credits have been established to represent 1 metric ton of plastic waste collected from the environment. Projects like this can also offer other benefits that improve the community’s well-being and the environment – these benefits can align with the Sustainable Development Goals. 

The WaY (Women and Youth) plastic collection project in Cote d’Ivoire, developed by Conceptos Plásticos, collects plastic waste that would have otherwise been left in the environment. The plastic is turned into construction bricks, which are used to build schools for local communities. The project focuses on hiring women to increase empowerment and economic opportunities for a heavily underserved population. ClimeCo is partnering with the WaY Project to generate plastic credits from its plastic collection activities.  

It is essential for an organization to provide a good faith effort when presenting their SDG impact claims. When purchasing credits from a project with these claims, we highly recommend that you contact them and ask what steps they took to assess their SDG impact. To help you with this, let us walk you through the public SDG tools we used to determine our project’s biggest SDG benefits.  

The Tools

The SDG Impact Assessment Manager Tool is a free resource developed by the UN Global Compact and B Lab. The SDG Impact Assessment Manager Tool measures a project’s current impact and helps identify which SDGs have the greatest opportunity for improvement, with straightforward suggestions for actual changes. Think of this as an SDG personality quiz for a project.   

This is an example of a question from SDG 10 – Reduced Inequalities, as well as SDG 8 – Decent Work and Economic Growth: 

SDG Impact Assessment Question Example

The SDG Compass was developed by the UN Global Compact, the World Business Council for Sustainable Development (WBCSD), and the Global Reporting Initiative (GRI). Since the UN developed the SDGs at an international and country level, it can be hard to understand how they relate to smallerscale projects. This tool translates each SDG and all the targets into manageable and realistic goals that a project can achieve. The SDG Compass recommends prioritizing SDGs that could potentially affect human rights.  

The Outcome of Our Efforts 

We started with the SDG Impact Assessment Manager ToolThis requires the completion of 15-30 questions for each SDG, which usually takes a few hours to completeThe higher the score percentage (see below), the higher the impact on the goal. While The WaY Project has a positive effect on many SDGs, the results of this tool demonstrate that the largest impact is on SDGs 1, 4, 5, 9, and 10.  

The WaY Project's SDGs Impact Assessment

Next, we used the SDG Compass to study each SDG in greater detailThis explains how our project intends to actively meet the relevant SDGs. 

SDG Compass - How our project intends to actively meet the relevant SDGs.

Next, we created a diagram to see what parts of our project are directly quantifiable and measurable. All impacts are important, but its easier to prove and certify measurable impacts. Gold Standard recommends this step through their tool.

Gold Standard Tool - prove and certify quantifiable and measurable impacts.

Leveraging all three tools, we can see where our project has the biggest impactWe’ve also determined where we can improve. For example, The WaY project should continue encouraging women to use the provided Proper Protective Equipment (PPE) and work with the women to choose improved PPE offerings that fit their cultural attire 

Côte d'Ivoire - The WaY Project

Conclusion 

For those who want greater assurance on SDG claims, there are several credit registries that offer credits with SDG impacts that a 3rd party has verified – Gold Standardthe American Carbon Registrythe Climate Action Reserve, and Verra. At ClimeCo, we want clients to feel confident in our projects and their SDG claimsWe are here to educate and be a resource for understanding SDG claims, finding the right projects for clients’ ESG goals, and helping new projects develop their SDG claims. Feel free to reach out to us if you have any questions; we are happy to help.

ClimeCo - SDGs certified under Gold Standard

This is an example of certified SDGs from a project listed under Gold Standard’s registry. 


About the Author

Rebecca Stoops is a Project Manager at ClimeCo, focusing on plastic credit projects and refrigerant projects for carbon credits. She enjoys hiking, the great outdoors, and cleaning up nature by picking up trash. Stephanie Hefelfinger is a Project Associate at ClimeCo, focusing on plastic credit projects and livestock and composting projects for carbon credits. She enjoys hunting for pretty rocksThey both enjoy getting into the nittygritty details of projects to learn how they operate and their positive impacts on the environment.