When, just over twenty years ago, three large corporations stated in a document that climate change was a cause for concern and that companies should act, the corporate world was not sure how to take that first step. The statement, published in the 1998 Safe Climate, Sound Business report , brought together the World Resources Institute (WRI), General Motors, Monsanto (now Bayer) and British Petroleum (BP).
In a consensus, they indicated that, in addition to government actions, the private sector could also commit to cutting its greenhouse gas (GHG) emissions to curb global warming – and without ceasing to grow economically. A starting point was also established: knowing how much pollution companies dump into the atmosphere was imperative to determine how much it is possible to reduce and, in this way, become more sustainable.
Due to the immense challenge, it would take a few additional years before the first standards with guidelines on how to account for emissions gain an international standard. In this context, the Green House Gas Protocol (GHG Protocol) emerged , in partnership with WRI and the World Business Council for Sustainable Development (WBCSD), which began to offer standardized global structures to measure and manage GHG emissions from public sector activities. and private, as well as mitigation actions.
Since then, the GHG Protocol has been widely adopted and the number of companies concerned with drawing up inventories of their emissions has increased. In Brazil, for example, only 14 companies were part of the Brazilian GHG Protocol Program in 2008. In 2019, that number was 153. Gas accounting, on the other hand, is not without problems. The top-down method, the most used in this process, is full of simplifications, since the calculations of emissions are made on the consolidated data of the companies. Due to the lack of detail, the chance of errors and the risk of greenwashing are considerable, according to experts.
It is in this context of the absence of more accurate tools to measure the impact of the private sector on the climate crisis that DEEP was founded in 2019. Created by business administrator and technology manager Paulo Mirada and aeronautical engineer Arthur Covatti, the company was born with the aim of to offer an innovative platform to report and audit emissions and, in this way, efficiently guide investment and sustainability actions within organizations.
The measurement for inventory, carried out according to the bottom-up approach, takes place in real time using software specially developed by DEEP. “This would be impossible to do without the software we created,” comments Covatti.
One of the innovations is taking advantage of the effort that companies already make in their financial accounting to generate data on carbon emissions calculated by DEEP's software. “Our bottom-up approach takes all the financial and non-financial facts, every detail, and the emissions account is built on top of that. If a fuel purchase, for example, is in Brazil, the multiplicative factor (GHG emissions) is used, which considers the mixture of alcohol, for example”, details Covatti.
By using all the detailed information in the companies' financial system, no detail is left out in the inventory. “The software is capable of measuring all scopes and is sure that it is not forgetting anything. Everything that was consolidated in the company's net income, in that revenue, it is possible to measure how it was reflected in carbon emissions, water consumption and other impact metrics”, explains Covatti.
According to the GHG Protocol, the calculation of emissions made for the inventory occurs in three categories. In the so-called scope 1, direct emissions of greenhouse gases from sources that belong to or are controlled by the organization are considered. Scope 2 covers indirect emissions linked to the purchase of energy. Scope 3 also accounts for indirect emissions related to the company's activities, but which occur outside it, such as the supply chain. The reporting of this third scope in the inventory, however, is optional. “The company can be very organized, have a good control of scopes 1 and 2, but scope 3 is very difficult”, comments Vítor Loures, Head of Methodologies at DEEP. At this point DEEP also offers a differential. “We are able to reach scope 3 well and have a vision of the value chain.
The DEEP method's level of detail is also capable of comparing the environmental efficiency between units and departments of the same company. The software allows the final consolidation process to separate information from each party, the founders explain. “The intelligence of the software is to use all the effort that the company has already put into its apportionment accounting between units and consolidate it in the right way”,
adds Covatti.
With the worsening of the climate crisis and the urgency of cutting global emissions, organizations' carbon inventories must adapt to new times. The expectation is that large companies will also begin to impose this as part of their supplier policies. This concern grows as environmental, social and governance factors, known by the acronym ESG (Environmental, Social and Governance), are taken increasingly seriously by investors around the world.
“The next five years will be very transformative. It will be the time to see if the ESG concern makes sense, if companies are actually acting to cut their emissions and be more sustainable, if this will all be regulated or if it will be via the market”, analyzes Loures. Ahead of that time, DEEP already has the technology available so that organizations are clear about their impact on the environment and that they can transform data into sustainability management.
