The fight against climate change and the need to understand the environmental impact of human activities have led to the development of various tools and methods to measure and track greenhouse gas emissions. Among these tools, the concept of CO2 equivalent (CO2e) has emerged as a key means to quantify and compare emissions of different greenhouse gases in terms of their global warming potential.
The idea behind CO2 equivalent is to create a standardized measure to compare emissions from various resources used in production, such as electricity, water, or raw materials, using CO2 as a reference.
This article explores how CO2 equivalent consumption is integrated into an ABC model and why this is crucial for companies looking to reduce their carbon footprint.
The ABC model, or Activity-Based Costing, is a method of cost accounting that allocates indirect costs by identifying the activities performed by an organization. It also helps understand which activities consume resources and how these activities contribute to the organization's total costs. Applied to the environmental context, the ABC model and its consumption network judiciously attribute CO2e emissions to each specific activity, providing a clear view of the main sources of these emissions.
If you want to know more about the ABC Method, we recommend reading our article on the Activity-Based Costing (ABC) method to better understand its concepts and functioning.
Measuring CO2 equivalent consumption is essential for several reasons:
Understanding which activities are the most polluting helps target reduction efforts.
By identifying inefficient or highly energy-consuming processes, companies optimize their operations, thus reducing emissions and costs.
Many environmental regulations require detailed reporting on greenhouse gas emissions.
More and more organizations seek to demonstrate their commitment to environmental sustainability, which improves their public image and attracts eco-conscious customers.
Integrating CO2 equivalent (CO2e) consumption into an ABC model requires a thorough understanding of the organization's resources and activities. Here's how to proceed to include this environmental dimension while leveraging the ABC model's resources:
Resources can include electricity, water, raw materials (such as steel and plastic), fuel, etc. This step recognizes the CO2 equivalents to be recovered or calculated.
For certain activities, consumables have CO2 equivalents not present in your ABC Model Resources: complete your model by adding new resources and consume them through the relevant activities.
Measure or estimate the CO2e emissions associated with each resource. For example, measure electricity consumption in kWh and use the appropriate emission factor to convert this consumption into CO2e. Similarly, evaluate water consumption and the CO2e emissions associated with the treatment and distribution of this water.
Use the collected data to attribute the environmental costs (CO2e emissions) to each activity. This step is based on the use of the previously identified resources. For example, if an activity consumes a large amount of electricity, the corresponding CO2e emissions will be attributed to this activity.
Examine the results to identify the most polluting activities and determine strategies to make them more efficient or replace them with less polluting alternatives. This involves adopting greener technologies, improving energy efficiency, or reducing resource consumption.
Here are some examples of converting consumptions into CO2 equivalents (CO2e) for electricity, water, and raw materials used in production. These conversions are based on emission factors specific to each resource:
Resources can include electricity, water, raw materials (such as steel and plastic), fuel, etc. This step recognizes the CO2 equivalents to be recovered or calculated.
The carbon footprint of water consumption mainly comes from the energy used for pumping, treatment, and distribution of water.
CO2e emissions associated with raw materials vary widely depending on the type of material and the production process.
Imagine a company producing 1000 chairs made of steel and plastic, with the following consumptions:
| Resource | Quantity | Emission Factor (kg CO2e) | Total Emissions (kg CO2e) |
|---|---|---|---|
| Electricity | 10,000 kWh | 0.46 kg CO2e/kWh | 4600 kg CO2e |
| Water | 500 m³ | 0.344 kg CO2e/m³ | 172 kg CO2e |
| Steel | 2000 kg | 1.85 kg CO2e/kg | 3700 kg CO2e |
| Plastic (HDPE) | 500 kg | 1.9 kg CO2e/kg | 950 kg CO2e |
| Total | 9422 kg CO2e |
Integrating CO2 equivalent consumption into an ABC model helps organizations better understand and manage their greenhouse gas emissions. By identifying the most polluting activities and resources and optimizing processes, organizations not only reduce their environmental impact but also achieve substantial savings. In an increasingly environmentally conscious world, this approach is beneficial not only for the planet but also for the long-term viability of organizations.
