GHG & Impact Estimator

Companies focus on double dividend

In recent years, the sustainability impact of business activities has become increasingly important for companies in various industries. Capital invested in green solutions has also experienced a sharp increase. These trends are driven by awareness among investors, customers and other stakeholders. Reporting on the amount of greenhouse gas emissions reduced is also becoming almost the norm for most established companies and financial institutions – and may soon become mandatory.

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Many new companies are now looking to not only build on an environmentally and socially responsible structure and follow ESG criteria, but to create a positive social and environmental impact with their business idea.These companies thus have the opportunity, together with the economic one, to achieve a double dividend. Achieving impact is initially just the intention. But what about the ability, the skill, to achieve positive sustainability impacts, to measure them and thus to convince investors and customers of its impact?

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Impact needs data and appropriate tools

The amount of greenhouse gas emissions reduced has become an important metric for evaluating companies and investments. However, studies show a clear need for qualification and support. In addition to sufficient time, financial, and technical capacity, the appropriate data, methods, and tools to measure and communicate impact are often lacking. Existing methods for sustainability assessment usually have a focus on the past and are primarily suitable for established and large companies due to the use of historical company data.

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Climate change, in particular, is pushing all stakeholders to reduce GHG emissions as quickly as possible and on a large scale, with limited resources. Young and innovative companies play a relevant role and capital as well as funding should be directed towards solutions with high climate protection potential. This requires a forward-looking and quantitative assessment method for a wide range of solutions in order to obtain the necessary key figures as a basis for decision making.

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Making climate protection investable with software

This forward-looking assessment must be directionally sound as well as cost- and time-efficient. The use of software can facilitate such impact assessments and management, especially for young companies, by simplifying data collection and analysis, quantifying individual climate change contributions, and producing comparable results. To achieve these benefits, digital solutions must meet the following criteria:

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Accessibility: appropriate impact assessment software should be user-friendly and require minimal technical knowledge or training to operate.
Affordable: The software should be cost-effective, with a pricing model that is accessible to young companies that may have limited budgets for impact assessments.
Customizable: The software should be flexible to reflect the specific needs of companies so that it can cover the impact of a variety of business models.
Scalable: It should be scalable so that the company can grow and expand its impact over time as resources and priorities change.

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ImpactNexus, the Borderstep Institute and SDG INVESTMENTS have developed a digital tool that enables the identification of a company’s key sustainability impacts – the so-called GHG & Impact Estimator tool. Within the framework of the tool, the goals and results of the company’s activities as well as the stakeholders affected by them are examined in detail. In addition, an alignment takes place with existing international frameworks, such as the Sustainable Development Goals(SDGs), the EU taxonomy or the IRIS standard.

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Companies can pursue different solution approaches to achieve their impact goals. For solutions in the area of climate protection, the GHG & Impact Estimator offers a more in-depth quantitative assessment of future climate protection potentials.

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Unlike traditional “GHG footprinting,” which looks at quantities of GHG emissions already emitted by a product or company, this tool focuses on the future planned reduction of GHG emissions by the products and services. The result shows an order of magnitude of the planned GHG reduction to be achieved by a company’s products or services. This enables directionally sound identification of climate solutions with high climate mitigation potential.

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The free software tool can flexibly reflect the specific needs of different climate solutions so that it can cover the impact of diverse business models. It provides a simple calculation structure for GHG reduction potential, focusing on the most material aspects of impact. This results in an user-friendly and time-efficient process that leads to a directionally sound result.

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Methodology

GHG reduction potential has become an important metric for evaluating companies and investments. The GHG & Impact Estimator was designed to help companies obtain a reliable estimate of their projected future GHG reductions in a time- and cost-effective manner. The assessment methodology builds on established methodological standards and frameworks (including GHG Protocol, Project Frame, IMP). The goal of the assessment is to estimate the GHG mitigation potential triggered by the climate solution. The result is an order of magnitude estimate of the projected GHG mitigation amount rather than the result of an exact and detailed calculation as achieved by a comprehensive life cycle assessment (LCA). All data are entered or selected by users in the form of self-reported information and are not verified by third parties.

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5 steps to the quantified GHG reduction potential

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(1) Description of a climate solution

Users describe the innovative product or service that will lead to a reduction in GHG emissions. To do this, they need information and evidence about the climate problem that the climate solution will solve, as well as information about the innovative product or service.

For a climate solution to be relevant for quantifying GHG reduction potential, it must result in a reduction in GHG emissions from the status quo that it triggers. If there are multiple climate solutions in the business model, more than one can be calculated. In the end, these are added together to determine the total GHG reduction potential.

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(2) Identification of the impact profile

The impact profile of a climate solution describes how the climate solution triggers a reduction in GHG emissions. By selecting the most appropriate of five impact profiles, users receive specific guidance that provides critical information in the next steps.

The following five impact profiles can be selected: Circular Economy, Raw Materials and Manufacturing, Transportation and Logistics, Product Application, Customer Empowerment.

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(3) Setting up the fair comparison

Users create a fair comparison scenario that reflects both the status quo and the functional unit that is the basis for the comparison. The comparison scenario must represent the realistic, established status quo, not the scenario with the worst climate performance. Here, users are supported with detailed guidance to set up a truly fair comparison. The functional unit to be selected is the basis of the calculation on which all assumptions are based.

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(4) Make quantified assumptions for the scenarios

For the projected GHG reduction potential, the key emission differences between the two scenarios must be identified and quantified. Users now compile the data for calculating the relevant GHG emissions of the two scenarios. The reference unit is always the functional unit defined in step 3. GHG emissions that occur in the same amount in both scenarios are neglected. The user must provide its own consumption data and make educated assumptions. In addition, reference values for the consumption of energy, transport, raw materials and/or materials in the comparison scenario are determined and linked to the corresponding GHG factors. Guiding questions, examples, and references, as well as links to external databases, help to capture all necessary values. The GHG factors are provided through an interface to the emission factor database of https://climatiq.io

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Thus, the scenarios do not represent the total GHG emissions of the product or company, but only include the GHG emissions where the climate solution differs in a relevant way from the reference scenario.

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(5) Input of expected growth scenario

Users enter an annual expected growth scenario based on the functional unit for the next 5 years and the impact period of the climate solution.

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Result

Results are summarized on a dashboard that includes GHG reduction potential both graphically and as a number in tons of CO2e saved (rounded interval +/- 10%), peer-to-peer benchmarking, impact profile, and a clear and understandable presentation of assumptions, data sources, and methodology. This dashboard can be exported as a pdf file. It is important that the assumptions are made transparent and verifiable. This transparency about the assumptions and data sources, as well as consistency in the calculation logic, leads to better comparability of different climate solutions.