Introduction
Imagine you are taking a photo. What do you want to capture in that photo? The well-defined scope is like deciding the boundaries of your photo. It’s about being clear on what you want to include and exclude.
This blog provides specific details and instructions on how to do establish scope of a product inventory. It’s like following a recipe book to make sure your dish (in this case, your inventory) turns out just right.
Requirements
Companies shall account for carbon dioxide (CO2 ), methane (CH4 ), nitrous oxide (N2O), sulfur hexafluoride (SF6 ), perfluorocarbons (PFCs), and hydrofluorocarbons (HFCs) emissions to, and removals from, the atmosphere. Additional GHGs included in the inventory shall be listed in the inventory report.
- Accounting for Greenhouse Gases (GHGs): Companies need to keep track of six specific gases emitted during a product’s life cycle. Additionally, they should account for any other greenhouse gases listed by the Intergovernmental Panel on Climate Change (IPCC) if emitted during the product’s life cycle. Any extra gases accounted for should be transparently reported.
- Removals from the Atmosphere: Sometimes, certain products or processes can take carbon dioxide (CO2) out of the air. This often happens when plants absorb CO2 during photosynthesis. Companies must account for these removals in their product greenhouse gas inventory. This could also occur when a product absorbs CO2 during use or when CO2 from the air is used during a manufacturing step.
- Defining the Studied Product, Unit of Analysis, and Reference Flow: Companies need to clearly define what product they are studying, the characteristics and services provided by that product (unit of analysis), and the amount of the product they are basing their study on (reference flow).
Final Products vs. Intermediate Products:
- Final products are goods or services consumed by end-users. Companies should define the unit of analysis for final products based on the product’s function, duration of service, and expected quality level. For all final products, companies shall define the unit of analysis as a functional unit.
- Intermediate products are used in making other goods or services. For example, a plastic resin turned into car parts. Since the final function of intermediate products may be unknown, the unit of analysis is defined as the reference flow or the amount of the product being studied. For intermediate products where the eventual function is unknown, companies shall define the unit of analysis as the reference flow.
Guidance
1. Choosing the Studied Product :
- Initial Review: Companies start by looking at all the products they make, sell, buy, or distribute. They should choose a product that emits a significant amount of greenhouse gases (GHGs) and is strategically important for the company’s goals.
- Methods to Identify GHG-Intensive Products: Corporate GHG inventory results can help identify intensive products. If this data isn’t available, companies can use environmentally extended input-output (EEIO) tables or physical/economic factors to estimate GHG intensity. However, using physical or economic factors alone is the least preferred method.
- Further Evaluation: Companies might dig deeper into a group of products to find where emissions can be reduced along the product’s life cycle. This involves assessing the company’s influence on suppliers and customers, researching supplier relationships, and considering potential for innovation in design, material, or manufacturing.
- Unclear Choice: If it’s still unclear, companies should choose a product with the largest anticipated strategic impact and GHG reduction potential in its life cycle.
2. Defining the Unit of Analysis:
- Critical Step: Defining the unit of analysis is crucial because it directly affects subsequent steps and results in the GHG inventory.
- Influence on Inventory Steps: The unit of analysis influences aspects such as the product’s use profile, data collection, avoiding allocation, and how results are reported.
- Identifying the Function: Function is the service a product provides. Companies ask questions like why the product is created, what purpose it serves, and what defining characteristics or quality it has. If multiple functions are identified, the functional unit should be based on the one that best reflects what the product was designed to do.
- Defining the Functional Unit and Reference Flow: A well-defined functional unit includes the magnitude of the function, duration or service life, and expected quality. Two approaches: define the reference flow first and then determine the functional unit based on the amount of product, or define the functional unit first and then determine the amount of product needed to fulfill it.
- Efficiency Improvements: For reporting efficiency improvements over time, companies should define the functional unit so that, as improvements are made, the reference flow needed to fulfill the same functional unit decreases.
3. Defining the Unit of Analysis for Intermediate Products and Services:
- Intermediate Products: For known functions of final products, define the unit of analysis as a functional unit. For unknown functions of final products, the unit of analysis is the reference flow, and it should be meaningful for GHG inventory results.
- Services: Defining the unit of analysis for services follows similar procedures as for goods. Magnitude, duration, and quality parameters may be based on sector rules, industry average data, or a company-specific reference flow.
For example, a home insurance company may define its functional unit as the provision of premium home insurance coverage for one year, specifying the magnitude and quality of the insurance.
