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November 07, 2001
Greenhouse Gas Protocol Initiative Creates Global Emissions Standards
    by William Baue

An international consortium of government agencies, NGOs, and businesses creates its own set of standards for reducing greenhouse gas emissions in advance of the Kyoto Protocol.

In a June 2001 speech, President George W. Bush defended his administration's decision to flout the Kyoto Protocol, calling the treaty "unrealistic" and "fatally flawed in fundamental ways." Predictably, he proposed "the power of markets" and "the promise of technology" as the keys to counteracting the buildup of greenhouse gases (GHG), the most egregious threats to environment health.

Interestingly, two organizations-the World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD)-had already initiated this market-based approach to combating environmental deterioration. Inspired by the Kyoto Protocol, the groups started collaborating in 1998 to establish the Greenhouse Gas Protocol Initiative, or the GHG Protocol.

The groups' mission was to reduce global emissions of the six greenhouse gases identified by Kyoto negotiators as the prime contributors to global warming: carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexaflouride (SF6).

The GHG Protocol identified one of the main obstacles to global reduction of greenhouse gas emissions: standards that varied from nation-to-nation, company-to-company, and even department-to-department within companies. Instead of waiting for the Kyoto Protocol to implement standards, the initiative appealed to national governments, non-governmental organizations (NGOs), and companies to develop these standards through internal cooperation, not external regulation.

The GHG Protocol, which was officially released on October 23, 2001, strives to create "transparency" and "inclusiveness"-terms that require a little unpacking. The former term implies not so much invisibility as ubiquity.

"In the future, greenhouse gases will need to be accounted for on a company's balance sheet in the same way as other assets and liabilities," says WRI president Jonathan Lash, suggesting that environmental audits will become as commonplace as financial audits.

The GHG Protocol defines transparent information as reliable and relevant. The initiative synchronized its standards with existing ones, such as the World Wildlife Fund's Climate Savers Program and the Global Reporting Initiative, to promote uniform standardization and enhance credibility.

An illustration of transparency: The petroleum company BP Amoco (ticker: BP) had been collecting GHG data for about four years before it realized the disparate nature of its methods. Recognizing this inefficiency, BP consolidated its internal reporting into one central database, which receives spreadsheets automatically e-mailed from 320 individual BP facilities and business departments. BP's GHG data is now "transparent": standardized, centrally-located, and even externally audited. BP's internal standards exemplify the goal of GHG Protocol standards.

As for "inclusiveness," the initiative encourages participation by stressing the competitive advantage of employing environmentally-sound business practices, as well as the inevitability of government regulation and public pressure to address environmental issues. The GHG protocol anticipates these issues, enabling companies to proactively find solutions.

Inclusiveness also refers to the comprehensive scope of the standards, which cover the entire life cycle of manufacturing-from raw material extraction to product consumption to waste recycling. The protocol divides GHG emission into three scopes, ranging from GHGs produced directly by the manufacturing company to more indirect sources of GHG emission, such as employee travel and commuting.

Participants include Ford (F), Dow Chemical Company (DOW), and DuPont (DD), which volunteered along with about 30 other companies to "road test" the initiative. The protocol's website provides all member companies with calculation tools to facilitate the computation of GHG emissions, allowing companies to monitor and modify their production methods. In all, more than 350 organizations and companies joined the GHG Protocol Initiative.

Compliance with the GHG Protocol confirms a degree of social responsibility on a company, an important consideration in making socially responsible investment decisions. Although compliance does not paint the whole picture of a company's social responsibility, it is an important component.


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