What are Greenhouse Gas Emissions?

Why Should Organizations Track Greenhouse Gas Emissions?

In a corporate context, greenhouse gas (GHG) emissions refer to the total amount of climate change-causing gases released into the atmosphere as a result of a company's activities. This measurement is often referred to as an organization's Corporate Carbon Footprint. Calculating the Corporate Carbon Footprint is often the first step in a business's journey towards environmental sustainability.

GHG emissions are reported in tons as carbon dioxide equivalent (CO₂e), taking into account the global warming potential (GWP) of various gases. This measurement forms the basic data set for carbon footprint management and reduction.

As a key component of environmental sustainability, emissions management refers to the responsibility of the organization to minimize its environmental impact and contribute to the health of ecosystems. This includes reducing pollution and waste, conserving natural resources such as energy, and mitigating the contribution to climate change.

What are Greenhouse Gases?

Although the sources do not list specific greenhouse gases (CO₂, CH₄, N₂O, F-gases) individually, all these gases make up the total greenhouse gas (GHG) emissions for which the organization is responsible. These emissions are measured in Carbon Dioxide Equivalent (CO₂e) in accordance with international standards.

Corporate emissions are categorized and tracked by Scope, thus determining which activity generates how much GHG emissions:

Direct Greenhouse Gas Emissions (Scope 1): Emissions emitted directly from sources owned or controlled by the organization. For example, emissions from fuel combustion in vehicles owned by the organization, fuel consumption in boilers in facilities, or chemical processes in the production process (such as calcination in cement).
Indirect Greenhouse Gas Emissions (Scope 2): Indirect emissions from the production of purchased electricity, steam, heat or cooling energy.

Accurate tracking of these GHG emissions is vital for measuring the organization's environmental performance and resilience to climate risks.

Why are GHG Emissions Important from an Organizational Perspective?

Tracking greenhouse gas emissions is no longer just an environmental choice, but a fundamental requirement for long-term financial soundness and competitiveness.

Risk Management and Financial Soundness

Emissions carry risks that affect financial performance. These risks include the following:

Transition Risks: Regulatory changes, such as carbon pricing, or market shifts, such as a shift in consumer preferences towards green products. For example, the European Union's introduction of the Border Carbon Adjustment Mechanism (CBAM) creates direct financial risk by increasing the cost of carbon-intensive products.
Reputational Risk: Inadequate environmental management practices can lead to heavy fines, reputational damage or supply chain disruptions (e.g. the more than €32 billion fines incurred by VW in the Dieselgate scandal).

Academic research shows that companies with strong environmental and social performance generally have better long-term returns and lower levels of risk.

Compliance and Transparency

Measuring and reporting greenhouse gas emissions is becoming internationally mandatory. Transparency shows investors and stakeholders how corporate value is created.

Competitive Advantage and New Market Opportunities

Organizations that invest in emission reductions become future-proof. Promoting products with a low carbon footprint provides a competitive advantage, facilitates access to green financing sources and supports new market openings.

Regulatory and Compliance Requirements (CBAM, ISO 14064)

The two main mechanisms that mandate the tracking of corporate GHG emissions are international standards and regulations:

ISO 14064-1 Standard: This standard sets out the requirements for GHG inventory (Scope 1, 2, 3), monitoring and reporting at the corporate level. Compliance with ISO 14064-1 ensures that the facility establishes a Monitoring, Reporting, Verification (MRV) system in accordance with national and international standards. This standard forms the basis for a reliable calculation of emissions.
Carbon Regulatory Mechanism at the Border (CCRM/CBAM): A legal obligation for companies importing covered products such as iron and steel, cement, aluminum, fertilizer, hydrogen and electricity into the EU. CBAM requires the calculation and reporting of embedded emissions (SEE) (both direct and indirect emissions) of imported products. The transitional period has been in place since October 1, 2023 and compliance is critical ahead of financial obligations starting after 2026.
ISSB and TSRS: With IFRS S2 (Climate-related disclosures), the International Sustainability Standards Board (ISSB) requires companies to disclose climate risks that may affect their corporate value, including metric disclosure of Scope 1, 2, and 3 greenhouse gas emissions. In Turkey, the Turkish Sustainability Reporting Standards (TSRS), published in 2023, requires this transparency and compliance with modeling close to the EU ESRS and ISSB standards.

How Does the Emission Measurement and Reporting Process Work?

The corporate emissions inventory is conducted in accordance with standards such as the GHG Protocol and ISO 14064-1. The calculation process usually consists of three main stages:

Data Collection: In this stage, data from the organization's operational activities (activity data) are collected. This includes all inputs that create environmental impact such as fuel consumption, electricity consumption, amount of raw materials, water use. Accurate and facility-level data collection (for Scope 1 and 2) is the main input for CBAM reporting.
Application of Emission Factors: The collected activity data is multiplied by internationally recognized emission factors. These factors indicate how much GHG emissions a unit of activity (e.g. 1 liter of fuel) causes. Platforms like CimpactPro use a centralized library of more than 20,000 factors that are continuously updated according to EU standards to eliminate the risk of users using incorrect or outdated factors.
SEE Calculation and Reporting: The system calculates the Specific Embedded Emissions (SEE) (tons CO₂e/ton of goods) of the organization or product as a result of these multiplications. These results are then converted into standardized outputs such as an audit-ready PDF report or an XML format uploadable to the EU portal.

Establishing MRV (Monitoring, Reporting, Verification) infrastructure is vital to ensure that the reporting process is auditable and ensures consistency across periods.

Emission Classification: Scope 1, 2, 3 Description

The GHG Protocol and ISO 14064-1 divide the emissions for which organizations are responsible into three main categories:

Scope	Description	Examples	Reporting Importance
Scope 1 (Direct)	Direct GHG emissions from sources owned or controlled by the organization.	Natural gas/coal combustion in facilities, vehicle fuel in the company fleet, gases released from chemical processes (such as cement production).	Core requirement of CBAM and ISO 14064-1; under operational control of the organization.
Scope 2 (Energy Indirect)	Indirect emissions from consumption of purchased electricity, steam, heating or cooling.	Emissions during the production of energy consumed from the electricity grid at the power plant.	Directly related to the organization's energy efficiency and renewable energy strategies.
Scope 3 (Value Chain Indirect)	All other indirect emissions in the organization's value chain, but from sources outside its control (suppliers, customers).	Production of purchased goods and services, employee commuting, customer use of products sold, waste disposal.	Often the largest part of the corporate carbon footprint; standards such as IFRS S2 require disclosure of these emissions.

It is critical for organizations to track all Scopes, not just direct GHG emissions (Scope 1), to manage supply chain risks (such as water scarcity, raw material price).

What Can Organizations Do to Reduce Emissions?

Reducing corporate GHG emissions is possible with a holistic approach that combines environmental, financial and strategic dimensions.

Strategic Goal Setting

Science-Based Targets: Institutions can set net zero emissions commitments through frameworks such as the Science Based Targets Initiative (SBTi), aligned with the Paris Agreement's 1.5°C target.
Shadow Carbon Pricing: Setting an internal carbon price (shadow price) within the organization to guide investment decisions (e.g. €50-100/tCO₂e). This makes low-carbon projects more financially attractive.

Operational Efficiency and Energy Transition

Energy Efficiency: Focus on energy efficiency projects to cut costs and reduce emissions in the short term.
Transition to Renewable Energy: Investing in renewable energy sources (Solar Power Plant/GES or Wind Power Plant/RES) or entering into long-term power purchase agreements (PPAs) in the long term to zero Scope 2 emissions. For example, Ørsted has transformed from a coal-based company to a wind energy leader in ten years, reducing its emissions by 86% and improving its financial performance at the same time.

Circular Economy and Materials Management

Waste and Resource Reduction: Moving away from the traditional "take-make-dispose" model and adopting a circular economy model that designs products for reuse, recycling and remanufacturing. This can reduce the need for raw materials and waste, lowering the environmental impact while saving costs. Companies such as Interface, Inc. have saved tens of millions of dollars by using recycled materials and reducing waste.

Supply Chain (Scope 3) Management

Sustainable Procurement: Collaborate with suppliers to manage their own greenhouse gas emissions (Scope 3), provide training or incentives to suppliers, and include environmental standards such as ISO 14001 in selection criteria. Managing carbon risk along the value chain is vital to prevent supply shocks.

To support these mitigation strategies, organizations can manage all GHG emissions data under a single MRV (Monitoring, Reporting, Verification) system through integrated platforms such as CimpactPro, accelerating regulatory compliance and eliminating the risk of error in strategic decisions.