Businesses today need to know and understand their carbon footprint in order to make progress toward becoming a more sustainable and eco-friendly business. Once you know your carbon footprint, you can measure the progress of your sustainability program and green initiatives by tracking the reduction of your carbon footprint. You can also use it to determine the amount of carbon offsets to purchase in order to get to carbon neutral

With this in mind, in this Green Business Bureau article, we get into the details of how a business’s carbon footprint is calculated. You’ll understand what products and processes emit greenhouse gases (GHGs), including the carbon-containing gases carbon dioxide and methane. Your carbon footprint can then be managed once understood. A business can then consider all the aspects of their business that produce carbon, including fossil fuels, land clearance and the production and consumption of food, manufactured goods, materials, wood, roads, buildings, transportation and other services.


Carbon Dioxide, CO2, bears the most responsibility for anthropogenic climate change. Colorless and odorless, this gas and other  GHGs are imperceptible to our senses. It’s for this reason that methods for quantifying carbon dioxide effluent have been developed. The aim is to inventory emissions for an entity or product during a given period.

A carbon footprint is defined as a measure of the total GHG emissions caused directly or indirectly by a person, organization, product, or service. In this sense, the scope covered in carbon footprinting can be vast. E.g. Organizations may account for the carbon footprint of a given product or service, which would contribute to but be different from the carbon footprint of the business as a whole. 

At present, calculating a carbon footprint is completely voluntary, but has gained traction due to increasing stakeholder interest. For instance, consumers are asking for sustainable brands and in return, businesses are looking to green up their image. Other organizations prepare carbon footprint data for binding regulations that may be introduced in the future.


The average carbon footprint for a person in the United States is 16 tons, one of the highest rates in the world. Globally, the average carbon footprint is closer to 4 tons. The United Nations has a set a goal to keep earth’s global temperature from increasing more than 2 degrees Celsius this century. According to a majority of scientists and studies, this would limit climate change and the harsh weather patterns and consequences associated with a warmer planet.

To have the best chance of avoiding a 2℃ rise in global temperatures, the average global carbon footprint per year needs to drop to under 2 tons by 2050.


To understand how to calculate a carbon footprint, you must understand some basic principles of carbon accounting. These principles will be applied to produce a carbon footprint report, either at an organizational level or at a product/service level. 

GHG Emission Inventory 

A GHG inventory is a document that lists the quantities of GHG emissions from an entity – an organization – during a given period – usually a year. GHG inventories also apply to products whereby the climatic impact of a product is calculated over its lifecycle – from the product’s design to end-of-life waste processing. 

Drawing up a GHG emission inventory makes it possible to identify emission sources and prioritize emission reductions accordingly. GHG emission inventories also give third parties context for a given emission reduction strategy, plus the effectiveness of this strategy can be compared over time. 

You can use your GHG emission inventories to write your carbon footprint report.

Units Of Measurement

When writing your carbon footprint report, you’ll express GHG emissions as tCO2e. But what does this unit of measurement mean? 

tCO2e stands for tonnes (t) of carbon dioxide (CO2) equivalent (e). “Tonne” is a fancy way of writing metric ton, or 2,200 pounds. “Carbon dioxide equivalent” is a standard unit for counting greenhouse gas (GHG) emissions regardless of whether they’re from carbon dioxide or another gas, such as methane.

Converting Greenhouse Gases To CO2 Equivalents

As we know, anthropogenic GHG emissions are mainly carbon dioxide (CO2). But there are other GHGs that contribute significantly to human-induced global warming such as methane (CH4), nitrous oxide (N20), refrigerant gasses (HFCs, PFCs, and CFCs), sulfur hexafluoride (SF6), water vapor (H20), and ozone (O3). What’s the relevance of these different GHGs to carbon footprinting? 

Different GHGs have different fundamental structures and properties, meaning they’ve different IR absorbing capacities. That is, the greenhouse gas effect caused by each separate GHG differs.

Because CO2 is the main culprit when it comes to human-induced climate change, every GHG is translated into a CO2 equivalent. This translation is based on the global warming potential (GWP) of a given GHG. The higher the GWP of a given GHG, the higher the greenhouse gas effect caused by that GHG.

The GWP of CO2 is 1, as CO2 is compared to itself. The GWP of CH4 is 21 according to the latest estimates. This means that 1 tonne of CH4 has the global warming potential of 21 tonnes of CO2. This measure is often represented as tCO2e (tonnes of CO2 equivalent).

The Importance Of Time In CO2 Footprint Calculations

To measure the global warming potential of a given chemical, you also need to consider the period in question. This is denoted by N in the formula GWPN. So back to our methane example, 1 tonne of CH4 emitted over 100 years is equivalent to 21 tonnes of CO2 emitted over 100 years. Yet the GWP20 of CH4 is equivalent to 56 tonnes of CO2 emitted over 20 years. Unless otherwise stated, N is set at 100 years by convention.

It’s important to note that there are several caveats to consider when thinking about the GWP of a given GHG. We’ve mentioned the main extenuating factors below: 

  1. The global warming potential factor is an estimation under the assumption that the time a GHG spends in the atmosphere is fixed. Yet, in reality, this varies depending on how saturated a given GHG sink is. 
  2. The period considered (N) will affect the GWP of a given GHG. For instance, we’ve seen how the GWP of methane is higher over 20 years than it is for 100 years. If you consider a 500 year period, the GWP of CH4 is significantly reduced to 6.5. This variation in GWP is caused by the amount of time a GHG spends in the atmosphere relative to CO2.
  3. GHGs can have indirect greenhouse gas effects not considered in GWP estimates. For instance, once in the atmosphere, CH4 reacts with ozone, a reaction that increases the GWP of CH4 by ~50%. This phenomenon is called climate feedback.

Global Warming Potential (GWP) Measurement Standards

Due to these caveats, the adoption of a standard set of GWP values has been slow and cautious. Over the years there have been numerous amendments to the standard GWP figures, with IPCC publishing GWP measures in 1995 (SAR), 2001 (TAR), 2007 (AR4), 2013 (AR5 and AR5 with climate feedback considered).

New GWP values have been approached with caution due to the emphasized importance of consistency when using this data across organizations. It wasn’t until 7 years after their release that AR4 GWP values were accepted as standard. The US Environmental Protection Agency’s GHG rule required the application of AR4 GWPs.

On an organizational level, it’s best practice to follow the GHG Protocol. This is a comprehensive global standardized framework that’s used to measure and manage GHG emissions. The protocol states that the corporate standard is to use the most recent GWP values, but does go on to say that corporations can choose to use other IPCC Assessment Reports.  

Emission Factors 

Calculating exact measures for GHG emissions would exhaust both time and money, and it’s for this reason that companies calculate emission estimations based on activity data. Activity data represents production and is used to reflect fossil fuel energy demand. For instance, the activity data could be the number of liters of diesel consumed, or the tonnes of iron ore used in an industrial process. 

Activity data is then multiplied by what’s called an emission factor. Emission factors are used to determine the quantity of GHGs emitted during a given activity. Emission factors are calibrated to measure an activity’s CO2 equivalent. Hence emission factors are represented by kg CO2e/accounting unit of activity. You can look up the emission factors associated with a given activity from IPCC’s emission factor database.

Carbon Footprint Example

To explain further, let’s work through an example. Let’s say you wanted to calculate the greenhouse gas impact from two main activities associated with your business:

  1. Heating the office space
  2. Running five fleet vehicles 

Heating the office space and running five fleet vehicles uses 5000 liters of diesel fuel each year. We can look up the emission factors associated with burning diesel to find it is 2.66 kg CO2e/liter. From this we can estimate the GHG emissions associated with heating the office space and running the five vehicles, as follows: 

(5000 + 5000) * 2.66 = 26,600 kg CO2e/year

The idea is that you use emission factors like this to determine the GHG emissions associated with the main activities of your business. We say main because this is where things can get a bit tricky. The question of the area of application is fundamental to carbon accounting and brings up the concept of boundaries

Note that the emission factors will change on a country-to-country basis depending on the energy sources used to generate electricity in a given territory. Emission factors are lower in countries that have a growing share in renewable energy

The Concept Of Setting Boundaries

The GHG Protocol and the International Organization for standardization have worked to distinguish between two sets of boundaries, organizational boundaries, and operational boundaries. 

  • Organizational boundaries: These define the geographical limits of a study (organizational entities and sites). 
  • Operational boundaries: These specify the activities, products, and services covered. This is known as scope, and the GHG Protocol and ISO recognize three main scopes

Scope 1 refers to direct GHG emissions. That is, emissions that are owned or controlled by the reporting organization. Examples include emissions from the production of electricity, heat, or steam; transportation of merchandise, or fugitive emissions due to problems with seals. 

Scope 2 emissions include the indirect emissions that are purchased and used by an organization. For instance, this includes electricity used by an organization that’s sourced from outside the business.

Scope 3 emissions cover other indirect emissions that are a consequence of the activities from the reporting company but arise from sources owned or reported by another company. Examples include emissions from an employee’s commute, outsourced manufacturing activities, and emissions from the use of products and services sold by the company.

Scope 1,2 and 3 Emissions: They All Matter

It’s a common misconception to confuse the idea of scope with the idea of responsibility. Following this logic, if a company rents a poorly insulated building, then that business will have high scope 1 emissions, as they are in control of these emissions. Now, compare this to a manufacturer using a Just-In-Time stock management system with the suppliers located in a different geographical area. The scope 1 emissions might be low due to a small warehouse, but this business is responsible for significant scope 3 emissions due to a strategic choice. 

The main purpose of defining boundaries using scope emissions is that it enables the consolidation of emissions from different companies and avoids double counting. Thinking about the latter, scope 1 emissions are the only emissions that can be added up without double counting. Scope 2 and 3 emissions are scope 1 emissions for another company. 

Calculating the carbon footprint for an organization

The GHG Protocol encourages organizations to account for, and publish their scope 1 and 2 emissions, at a minimum. 

To calculate their carbon footprint, companies need to use the emission factors associated with every identifiable scope 1 and 2 activity. The carbon footprint of organizational activities under scopes 1 and 2 are then reported. 

In the United States, the EPA obliged facilities emitting more than 25,000 tonnes of CO2 to publish their emissions from combustion or industrial processes. Thanks to this initiative, the United States has an inventory of emissions linked to transport, heating, and air conditioning in the service sector.

Calculating the carbon footprint of products 

To carry out a precise inventory of a company’s indirect emissions, a business needs to calculate the carbon footprint for all significant purchases and investments. Plus, calculating the carbon footprint at a product level allows comparisons to be made between different products. The carbon footprint of products produced by a company can be added to the organization’s carbon footprint disclosure. 

To calculate the carbon footprint of a product, you need to conduct a product life cycle assessment (LCA). This demands making an inventory and evaluating the flow of materials and emissions, and the impacts associated with a product from design to waste processing. 

Carrying out an LCA is an iterative process. Below we’ve listed the four stages you need to follow to conduct a product Life Cycle Assessment (LCA).

  • Stage one – Define the goal and scope of the study: The aim here is to specify the target audience and the reasons for the study. Your aim could be to identify the main environmental impacts of a product over another, choose a government environmental policy, or improve a product’s ecodesign. It’s also vital during this stage to provide a precise definition of the product’s function. For instance, many would argue the function of beech wooden flooring is different from, say, lino flooring. On defining the product function, the limits of the system can then be studied which are broken down into elementary processes (extraction, raw materials, transportation, and processing). 
  • Stage two – Analysis of the life-cycle inventory: The analysis stage of the life-cycle inventory involves recording all the flows, of which there are two types: 
    • Economic flows: The flow of material, energy, and services between elementary processes and systems.
    • Elementary flows: Flow into the environment, such as raw materials extracted and waste returned. 
  • Stage two analysis is often the most complicated due to the amount of data to be collected. Some professionals have assembled data on the environmental impacts of materials in the upstream section of a product’s life cycle. This information is then made available to their clients so they can include it in their LCAs. 
  • Stage three – Life-cycle impact assessment: The life-cycle impact assessment involves converting an inventory of flows into a series of clearly identifiable impacts. 
  • Stage four – interpretation: The interpretation stage aims to draw conclusions and specify the limits of analysis. When specifying limitations, it’s important to think about what assumptions have been made during the LCA analysis. 

How Green Business Bureau membership can help 

As a trusted authority to green business, the Green Business Bureau provides online solutions to help purpose-driven organizations of all sizes manage their environmental impact. 

When you sign up for GBB, you’ll conduct an EcoAssessment which will help you institute initiatives to lower your carbon emissions. You can then use these initiatives to support your sustainability program by identifying where your GHG emissions are coming from. As you work through GBB’s EcoAssessment and carbon-friendly targets, you’ll drive carbon reductions in your business, supporting the green economy of today and our future.

About the Author

Jane Courtnell

With a Biology degree from Imperial College London and further studies at Imperial College’s Business School, Jane Courtnell has an enthusiasm for science communication and how biology can be used to solve business issues, such as employee wellbeing, culture, and business sustainability.

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