Significance of the CO2 footprint of businesses and products: The examination and reduction of the CO2 footprint of companies and products play a pivotal role in a global economy that is increasingly focusing on sustainability and climate protection. The CO2 footprint of businesses and products indicates how much greenhouse gas (GHG) emissions are released in connection with a company's operations or the production of a product. It allows businesses to better understand, manage, and reduce their environmental impact. Considering GHG emissions is becoming more critical, as they significantly impact climate change and the rise of legal and market-driven requirements. When calculating the CO2 footprint, we adhere to common frameworks:

• GHG Protocol: The Greenhouse Gas (GHG) Protocol is an internationally recognized tool for quantifying and reporting greenhouse gas emissions. It divides emissions into three scopes (direct emissions, indirect emissions from purchased electricity, and other indirect emissions).
• ISO Standards: Particularly ISO 14064 and ISO 14067 are standards that deal with the quantification and reporting of GHG emissions and the CO2 footprint of businesses and products. Calculating the CO2 footprint is essential for medium-sized enterprises to develop an effective climate strategy. When determining this footprint, specific aspects for the SME sector must be considered:
  • Resources: Medium-sized businesses often don't have the same resources as large companies. Therefore, they should ensure they use efficient and cost-effective methods for data collection and analysis.
  • Industry and Business Model: Depending on the sector and business model, the main sources of emissions can vary. A manufacturing operation has different emission sources than a service company.
  • Data Quality: Especially in the SME sector, not all data may be directly available. Estimates or industry average values are an option. However, it is crucial to continuously improve the data quality.

Benefits for the business:

• Reputation and Brand Value: Responsible emission management can enhance the company's image.
• Risk Management: Businesses can mitigate regulatory risks and prepare for future legislative changes.
• Cost Savings: Identifying and reducing emissions can lower operating costs.
• Investor Relations: A growing segment of investors prefers environmentally conscious companies.
• Social Responsibility: Companies have a duty to society to combat climate change.

When we conduct a project to calculate a Corporate Carbon Footprint, it will include the following steps:

• Define objectives: Determine why the footprint is being calculated (e.g., reporting, cost savings).
• Determine Scope: Decide which emissions (Scope 1-3) should be considered.
• Identify Data Sources: Determine where the required data will come from.
• Data Collection: Quantify emission sources (e.g., electricity consumption, operating materials).
• Calculate Emissions: Using the collected data and selected methodology, calculate the emissions.
• Analyze Results: Identify main emission sources and potential reduction measures.
• Develop Reduction Strategy: Based on the analysis, create a strategy to reduce emissions.
• Reporting: Produce a report on the Carbon Footprint and planned reduction measures.
• Monitoring and Review: Regularly review the footprint and adjust reduction strategies as needed.

The aim of such a project is to support companies in offsetting their unavoidable CO2 emissions through certified climate protection projects, making a significant contribution to global climate protection. The following steps are central in the project process:

Determination of the CO2 footprint:

• Before unavoidable emissions can be offset, the company's CO2 footprint must be determined. This includes all direct and indirect emissions resulting from the company's business activities.

Emission reduction:

• Before offsetting, emissions should be reduced as much as possible through internal measures, e.g., using renewable energy.

Selection of climate protection projects:

• Based on the determined CO2 footprint and the company's preferences, a selection of certified climate protection projects is proposed. These can include both global and local projects.
  • Certified climate protection projects must meet various requirements:
    • Additionality: The project must provide emission savings beyond what would have happened without the project.
    • Verifiability: Emission reductions must be measurable and verifiable. This requires regular monitoring and reporting.
    • No double counting: It must be ensured that emission reductions achieved by a project are not sold or claimed multiple times.
    • Permanence: Especially with reforestation projects, it must be ensured that CO2 binding is permanent.
    • Reality: Emission reductions must be real and not just hypothetical.
    • Positive social and ecological side effects: Projects should also have positive social or ecological impacts.
    • Stakeholder participation: Local community should be involved in project planning and implementation.
    • Transparent documentation: All project aspects should be transparently documented and made accessible to the public.
    • Independent review: An external and independent third party should regularly check compliance with all requirements.
    • Regulatory compliance: The project should comply with the standards and regulations of internationally recognized certification bodies.

Local climate protection projects:

• There is the option to invest in local climate protection projects that have a direct positive impact on the community and the environment. An adaptation of the claim "climate neutrality" is appropriate in this case.

Documentation and transparency:

• It is important to transparently and comprehensibly document all investments in climate protection projects.

Monitoring and verification:

• The effectiveness of selected climate protection projects should be regularly checked and verified.

Communication:

• The company's efforts in climate protection should be proactively communicated without, however, using the claim "climate neutral". Instead, it could be emphasized that the company "actively contributes to climate protection".

Stakeholder involvement:

• Engaging stakeholders, such as employees, customers, and suppliers, can help increase acceptance of climate protection measures.

As experienced sustainability consultants, we have developed a clearly defined process to assist companies in developing and implementing an ESG strategy.

Kick-off Meeting:

• We begin with a kick-off meeting to understand the company's specific requirements and goals and to gain an initial overview of the existing sustainability performance.

ESG Assessment:

• We conduct a comprehensive ESG (Environmental, Social, Governance) assessment of the company to identify strengths, weaknesses, and potentials.

Goal Setting:

• Based on the results of the ESG assessment, the identification of material sustainability topics for the company (following the double materiality principle), and a stakeholder analysis, we jointly define clear and measurable sustainability goals for the company.

Strategy Development:

• We develop a tailor-made ESG strategy that takes into account both business requirements and identified sustainability potentials.

Action Plan:

• We create a detailed action plan outlining implementation steps, responsibilities, timelines, and necessary resources for the ESG strategy's deployment.

Training:

• To ensure successful implementation, we offer training sessions for management and employees to provide the necessary knowledge and skills for the ESG strategy's rollout.

Implementation:

• If desired, we accompany the company in executing the action plan and ensure that the defined objectives are achieved. Regular monitoring and reporting are essential to measure progress and adjust the strategy if necessary. We support in establishing an effective reporting system and conduct regular reviews to adapt the ESG strategy to changing conditions and new developments.

Benefits for the Company:

• Reputation Boost: A clear ESG strategy enhances corporate image and improves perceptions among customers, investors, and other stakeholders.
• Risk Minimization: Addressing ESG criteria can identify and minimize business risks early on.
• Competitive Advantage: Companies with a clear ESG strategy are often more attractive to customers, investors, and talents.
• Long-term Value Creation: An ESG strategy can enhance company performance and ensure long-term value generation.

Especially small and medium-sized enterprises (SMEs) often face unique challenges when developing and implementing an ESG strategy. Resources in terms of time, money, and expertise are regularly limited. Nonetheless, it's crucial for SMEs to pursue a clear ESG strategy to remain competitive and establish future viability. As consultants, we can play a pivotal role by bringing our expertise and experience to support SMEs in developing and implementing a tailor-made ESG strategy without excessively tying up internal resources.

We support your company in all matters of external communication on sustainability with your stakeholders. A special focus is on regulatory requirements for companies, especially sustainability reporting (CSRD) and the Supply Chain Due Diligence Act (LkSG).

Sustainability Reporting (CSRD)

• In November 2022, the EU directive Corporate Sustainability Reporting Directive (CSRD) was adopted, one of the world's most ambitious regulations for sustainability reporting by companies.
• The CSRD affects all companies listed on an EU-regulated market, except micro-companies. Non-capital market-oriented companies are affected if they meet two of three criteria:
  • Balance sheet total over 20 million euros
  • Net sales over 40 million euros
  • Number of employees over 250
• Approximately 50,000 companies in the EU will be affected by CSRD, including about 15,000 companies in Germany. For affected companies that have not previously been subject to sustainability reporting, the first report according to CSRD is to be prepared for the reporting year 2025.
• The European Financial Reporting Advisory Group (EFRAG) developed the reporting obligations. Their draft European Sustainability Reporting Standards (ESRS) includes twelve categories in the fields of Environment, Social, and Governance (ESG) that companies must report on, such as:
  • The company's climate objectives and strategy,
  • Responsibility taken by the board and supervisory board regarding sustainability,
  • The role of GHG emissions in executive compensation,
  • Energy consumption and the energy mix,
  • Internal guidelines on climate protection and adaptation to climate change,
  • Levels of Scope 1, 2, 3, and total GHG emissions,
  • Key climate-related impacts, risks, and opportunities for the company,
• The CSRD is based on the principle of double materiality. Companies consider not only the effects of sustainability aspects on their economic situation but also the effects of their business activities on sustainability in the environment and society.
• The CSRD also requires companies to disclose ESG information along their entire value chain. The CSRD states that sustainability information can no longer be published in a separate, non-financial report but must be an integral part of the company's management report.
• Sustainability reporting according to CSRD must also be externally audited. Initially, a limited assurance audit is sufficient.
• The CSRD also envisions a uniform, electronic reporting format that should be readable by humans and machines.

Supply Chain Due Diligence Act (LkSG)

• The Supply Chain Due Diligence Act (LkSG) was adopted by the federal government in 2021 and came into force in January 2023.
• The aim of the law is to require companies to review and improve their supply chains with regard to human rights and environmental aspects.
• The law differentiates in the supply chain between "direct" and "indirect" suppliers. The former will be more affected as the customer has more influence on the supplier.
• The human rights defined in the LkSG are based on 11 internationally recognized agreements, including ILO core labor standards. The law identifies specific human rights risks in supply chains, including child and forced labor, torture, slavery, labor protection violations, wage inequality, denial of fair wages, and environmentally relevant human rights violations like pollution or land dispossession.
• Companies must explain in an annual report how they implement due diligence in their business practices, including a risk management system, regular risk analysis, and specific prevention and remedy measures for the protection and improvement of human rights and environmental aspects.
• The law applies to companies regardless of their legal form if their central administration, main branch, or statutory seat is located domestically.
• The LkSG applies from 2023 for companies with at least 3,000 domestic employees and from 2024 for companies with at least 1,000 employees.
• The Federal Office for Economic Affairs and Export Control (BAFA) is responsible for monitoring compliance with LkSG requirements and has the authority to conduct audits and impose sanctions.

AIM – Advice in Motion GmbH will work closely with your company to ensure that you navigate the complex landscape of sustainability and supply chain regulations with confidence and clarity. Our expertise and deep understanding of these regulations will ensure that your business not only complies with the requirements but thrives in this new regulatory environment.

The information provided here is given to the best of our knowledge and belief, but without any guarantee or warranty for the accuracy, completeness, or timeliness of the statements. The content is for informational purposes only and does not constitute legal advice. The author assumes no liability for damages or losses resulting from the use of the provided information.