## BE18: Product GHGs

Products emit no greenhouse gases

### 1. Ambition

A Future-Fit Business sells no goods or services that emit greenhouse gases as a direct consequence of their use.

#### 1.1 What this goal means

There is no longer any doubt that the systematically increasing concentration of greenhouse gases (GHGs) in the atmosphere resulting from combustion and other human-caused processes is contributing to climate change and ocean acidification. Companies should respond accordingly, to ensure that their products cause no GHG emissions when used as intended.

Nature can safely absorb some human-made GHGs every year, but the imperative is for companies to eliminate all product-related GHG emissions. That’s because we are dangerously close to reaching atmospheric GHG levels that will be catastrophic for society, and any attempt to divide up the remaining carbon budget across companies is likely to be too complex, contentious and/or time-consuming to result in the scale and speed of reduction that is now needed.

Products powered by electricity may indirectly cause GHG emissions if the electricity derives from fossil fuels, but the products are not themselves forcing that. The focus here is on products that emit GHGs as a direct consequence of their use.

To be Future-Fit, a company must ensure that none of its products emit greenhouse gases.

#### 1.2 Why this goal is needed

As with all Future-Fit Break-Even Goals, a company must reach this goal to ensure that it is doing nothing to undermine society’s progress toward an environmentally restorative, socially just, and economically inclusive future. To find out more about how these goals were derived based on 30+ years of systems science, see the Methodology Guide.

These statistics help to illustrate why it is critical for all companies to reach this goal:

• Products whose operation requires combustible fuels contribute significantly to total GHG emissions. The transport sector produced 7 billion tonnes CO2e of direct GHG emissions in 2010 – almost a quarter global energy-related emissions. [131]
• Even at the end of their useful life some products emit large amounts of GHGs. More than 7 billion tonnes CO2e of refrigerant gases are contained in equipment that is currently in use, 99% of which will be released during the life cycle of that equipment. [132]

#### 1.3 How this goal contributes to the SDGs

The UN Sustainable Development Goals (SDGs) are a collective response to the world’s greatest systemic challenges, so they are naturally interconnected. Any given action may impact some SDGs directly, and others via knock-on effects. A Future-Fit Business can be sure that it is helping – and in no way hindering – progress towards the SDGs.

Companies may contribute to several SDGs by eliminating products that emit greenhouse gases, and actively encouraging their suppliers to do the same. But the most direct links with respect to this goal are:

Support efforts to strengthen resilience and adaptive capacity to climate-related hazards and natural disasters, and to integrate climate change measures into company policies, strategy and planning.

### 2. Action

#### 2.1 Getting started

##### Background information

Goods and services whose use results in GHG emissions include170:

• Combustible fuels (e.g. diesel, coal, end-of-life tires when sold for energy recovery).

• Equipment powered by combustion (e.g. cars, ships and trains containing internal combustion engines, kerosene lanterns, diesel-powered generators).

• GHGs which are themselves sold as products (e.g. refrigerants).

• Manufactured products that contain GHGs which may be emitted during use or which (without specialist processing) will be released after use (e.g. air conditioners or refrigerators containing hydrofluorocarbons).

• Services whose provision causes GHG emissions which do not fall under the definition of a Scope 1 or Scope 2 emission (e.g. leased machinery that runs on fossil fuels).

Eliminating the emissions of all such products (or phasing out products that cannot be redesigned) is a major systemic challenge, which in some cases will require the transformation of entire sectors. Any company whose goods or services emit GHGs must rise to this challenge, through its own research and development efforts, and through collaboration with partners across its value web.

###### How might the company’s products cause GHG emissions?
• Do issues relating to use-phase GHG emissions enter into the company’s research and development processes?
• Does the company sell combustion fuels, or equipment that is designed to be powered by such fuels?
• Does the company sell greenhouse gases (for example as refrigerants), or substances, components and/or equipment from which greenhouse gases could escape?
###### What opportunities exist to reduce or eliminate such GHG emissions?
• Could products powered by combustion fuels be redesigned to use electricity instead, so that renewable energy sources may be used?
• Could products with embedded greenhouse gases be redesigned, or could equivalent functionality be delivered in alternative ways?
• If there are no currently available alternatives, what technical or regulatory changes would be needed to make a solution possible in the future? What might the company do to pursue such changes?
##### How to prioritize

###### What are the best opportunities for making progress?
• Which products are likely to emit the greatest amounts of GHGs over their lifetime? Improvements to these products are likely to have the greatest absolute impact.
• Which products are most vulnerable to changing societal pressures (e.g. changing customer demands and behaviours)?
• Which products are most vulnerable to regulatory changes (e.g. upcoming climate legislation)?
• Which GHG-emitting products address a societal need which could technically be met in a different, non-GHG-emitting way? Are other companies already pursuing such alternative solutions?
• The IPCC has identified seven major GHGs that make up the vast majority of human-caused climate change. Countries that have signed up to the Kyoto Protocol are responsible for reporting on emissions of these gases at a minimum. When starting to assess their products, companies might start with these gases as they are the most globally significant, and will help companies align with global reporting.
###### Is the company actively working to reduce the use-phase GHG emissions of its products?
• Has any commitment been made to reduce or eradicate GHG emissions arising from product use? If so, are plans to achieve those commitments sufficient to significantly reduce and eventually eliminate those GHG emissions over time?
• If current targets are insufficient, how might they be amended? Whose authorization would be needed, and who must be involved in the design and implementation of adequate controls and incentives? If no targets exist, how might they be put in place?
###### Could the company find ways to exceed the requirements of this goal?
• Beyond what is required to reach this goal, is the company able to do anything to ensure that the environment is free from pollution?171 Any such activity can speed up society’s progress to future-fitness. For further details see the Positive Pursuit Guide.

The next section describes the fitness criteria needed to tell whether a specific action will result in progress toward future-fitness.

#### 2.2 Pursuing future-fitness

##### Introduction

Progress toward future-fitness is assessed in terms of the percentage of revenue that is generated from products which do not emit GHGs.

If any product does emit GHGs, the company must also consider the extent of those emissions across the expected lifetime of that product.

###### General guidance on estimating lifetime use-phase GHG emissions

For existing products or product lines, companies can leverage historical information to estimate the lifespan of their products. Repair or warranty claim rates, sales data from repeat customers, and results from quality testing or product certification procedures may contribute to an understanding of a product’s life expectancy and usage rate. If more specific data is unavailable, amortization rates for asset classes the product belongs to (from accounting or tax regulations) may be used to estimate lifespan. For more information on how to calculate lifetime use-phase GHG emissions see these helpful tools.

In all cases, the company should document the method used, along with a brief explanation of why this choice was made.

###### Guidance on applying Global Warming Potentials

If a product releases more than one type of greenhouse gas the company should convert each amount to derive a total CO2 equivalent figure.

The GHG Protocol defines a Global Warming Potential (GWP) as “a factor describing the radiative forcing impact (degree of harm to the atmosphere) of one unit of a given GHG relative to one unit of CO2.” GWPs are used to calculate the CO2 equivalent of known greenhouse gases172 [134]. Consistent with the GHG Protocol, companies must use the 100-year GWP values from the latest Intergovernmental Panel on Climate Change (IPCC) Assessment Report173 as conversion factors when measuring their GHG footprint.

As an example, the IPCC identifies the Global Warming Potential of one unit of methane (CH4) over 100 years is 28 times greater than one unit of carbon dioxide (CO2), so methane’s GWP is 28. Carbon dioxide has a GWP of 1 as it is the standard against which all other GHGs are measured.

###### Guidance on identifying emissions factors

As noted in the GHG Protocol, “direct measurement of GHG emissions by monitoring concentration and flow rate is not common.” Normally, direct measurement takes place only in facilities with Continuous Emission Monitoring Systems (CEMS), such as power plants. Instead of direct measurement, many companies calculate GHG emissions by applying documented emission factors to activity data (e.g. tonnes of coal consumed or cubic meters of natural gas burnt).

Identifying the right emissions factors is challenging and varies according to the substances and equipment involved. As an example, emissions will vary based on the type of diesel combusted and type of generator used.

Where questions exist, companies should refer to emissions factors published by official government bodies, including the EPA in the US, DEFRA in the UK and the IEA internationally.

##### Fitness criteria

A company must verify that its goods and services do not cause the emission of GHGs, and – until it reaches this point – it must estimate the extent of any such emissions caused as a result of its sales.

Companies can measure their company-wide progress towards future-fitness on this goal using the steps described in the Assessment section below.

### 3. Assessment

#### 3.1 Progress indicators

The role of Future-Fit progress indicators is to reflect how far a company is on its journey toward reaching a specific goal. Progress indicators are expressed as simple percentages.

A company should always seek to assess its future-fitness across the full extent of its activities. In some circumstances this may not be possible. In such cases see the section Assessing and reporting with incomplete data in the Implementation Guide.

##### Assessing progress

This goal has one progress indicator. To calculate it the following steps are required:

• Assess the fitness of individuals products.
##### Assessing the fitness of individual products

A product is 100% fit only if it does not force the user to emit GHGs, otherwise it is 0% fit. If a product has not been assessed and if it is not clear whether it emits GHGs or not, it is 0% fit.

##### Calculating company progress

The company’s aggregated progress can be calculated as a revenue-weighted sum of the fitness of each product.

This can be expressed mathematically as:

$F=\frac{\sum_{p=1}^Pf_p*R_p}{\sum_{p=1}^PR_p}$

Where:

 $F$ Is the progress toward future-fitness across a category of physical goods (or services), expressed as a percentage. $f_p$ Is the fitness of product p. $R_p$ Is the revenue generated by product p. $P$ Is the total number of products in the company’s portfolio.

For an example of how this progress indicator can be calculated, see here.

#### 3.2 Context indicators

The role of the context indicators is to provide stakeholders with the additional information needed to interpret the full extent of a company’s progress.

Total estimated lifetime use-phase GHG emissions from products sold

In addition to the progress indicator, to reflect the full extent of its products’ GHG impacts, the company must report the total estimated lifetime use-phase GHG emissions that are expected to accrue from the products sold during the reporting period.174

The lifetime use-phase GHG emissions must be estimated for each product, and then multiplied by the number of units sold. Finally, these per-product totals should be summed to derive the company-wide use-phase GHG emission footprint.

This context Indicator can help demonstrate how the company is making its products more emission-efficient over time, even if it is not yet able to shift sales towards emission-free products.

For an example of how context indicators can be reported, see here.

### 4. Assurance

#### 4.1 What assurance is for and why it matters

Any company pursuing future-fitness will instil more confidence among its key stakeholders (from its CEO and CFO to external investors) if it can demonstrate the quality of its Future-Fit data, and the robustness of the controls which underpin it.

This is particularly important if a company wishes to report publicly on its progress toward future-fitness, as some companies may require independent assurance before public disclosure. By having effective, well-documented controls in place, a company can help independent assurers to quickly understand how the business functions, aiding their ability to provide assurance and/or recommend improvements.

#### 4.2 Recommendations for this goal

The following points highlight areas for attention with regard to this specific goal. Each company and reporting period is unique, so assurance engagements always vary: in any given situation, assurers may seek to evaluate different controls and documented evidence. Users should therefore see these recommendations as an illustrative list of what may be requested, rather than an exhaustive list of what will be required.

• Document the methods used to assess whether the company’s products emit GHGs during the use phase or at end-of-life. Describing how these were identified can help assurers to assess whether the company’s approach runs the risk of failing to identify product GHG emissions.
• Retain references to data sources used to determine revenues generated by each product or product category. This can help assurers to understand and verify the weighting calculations performed to obtain the company’s progress indicator.175
• For products which do emit GHGs, document the method used to calculate lifetime emissions, including the GWP and emissions factor values used, and their sources. This can help assurers to understand and verify the calculations performed to determine the company’s context indicator.

For a more general explanation of how to design and document internal controls, see the section Pursuing future-fitness in a systematic way in the Implementation Guide.

#### 5.1 Example

ACME Inc. sells lemonade products. It supplies to large retail companies and to small independent kiosks, which sell the lemonade on to consumers. As part of its strategy, ACME begins selling branded coolers to its high-volume customers to display products in their stores. To date it has sold 100 coolers to customers, earning a total of $100,000 in revenue. The total revenue of the company in the reporting period is$1,130,000.

However, ACME discovers that the coolers use hydrofluorocarbons (HFCs) as a refrigerant, a potent greenhouse gas with very high Global Warming Potential. While the refrigerators are powered by electricity, which allows users to run them using clean power, ACME finds out from the manufacturer that each unit is likely to emit an average of 1,000 tCO2e on disposal, based on the recycling facilities available in its sales regions.

It calculates its progress as:

$F=\frac{\sum_{p=1}^Pf_p*R_p}{\sum_{p=1}^PR_p}=\frac{100\%*1,030,000+0\%*100,000}{1,130,000}\approx91\%$

Context indicator

Total estimated lifetime use-phase GHG emissions from products sold: 100,000 tCO2e.

The next year, one of the two sales regions ACME works in implements a hazardous waste pickup service, which collects and safely disposes of end-of-life coolers such that the HFCs don’t escape into the environment. During that reporting period ACME sells 75 refrigerators to customers in the pickup zone, generating $75,000 in revenue, and 75 to customers in a region not covered by the service, also for$75,000. The company again sells $1,030,000 of lemonade in the period, bringing total revenues to$1,180,000.

It can now calculate company-wide progress as:

$F=\frac{\sum_{p=1}^Pf_p*R_p}{\sum_{p=1}^PR_p}=\frac{100\%*(1,030,000+75,000)+0\%*100,000}{1,180,000}\approx94\%$

Context indicator

Total estimated lifetime use-phase GHG emissions from products sold: 75,000 tCO2e.

##### What types of product are not covered by this goal?

In some regions, incineration is a commonly-used way to dispose of post-use goods. Combustion leads to GHGs which (unless captured and sequestered or otherwise utilized) are unavoidably emitted into the environment. In these cases, GHG emissions are due to shortcomings in waste processing, rather than the goods being processed. Hence any physical good that only emits GHGs if it is incinerated after use is not considered within the scope of this goal.

It should be stressed, however, that some goods are sold with the intention of being incinerated, such as fossil fuels or post-use tires that are collected and sold for the purpose of burning in furnaces as a source of energy. Such goods (and any services dependent upon them) are covered by this goal.

Some goods contain only biogenic carbon, produced by living organisms (e.g. wooden furniture or food), which could be released over time through decomposition. These goods are also not considered to be within the scope of this goal.

##### Is revenue-weighting always appropriate?

Some organizations – such as early-stage companies, some charities, divisions of companies operating as cost-centres, or companies working on pre-production development – may determine that using revenue as a weighting approach to assess progress might paint a misleading picture.

Such cases are likely to be rare, because even companies that do not directly sell goods or services still need to meet their costs, and therefore receive some form of monetary capital or in-kind services and labour. These inputs are directed at operational work-streams, which in turn lead to meeting customer needs, so in many cases it is possible to connect indirect funding (as a proxy for revenue) to appropriate downstream user groups.

When this is not possible, or if it is determined that this technique may mislead stakeholders, companies should consider using cost instead of revenue to determine the completeness of their assessment, and as a method for weighting their progress scores.

##### How do I differentiate between a product impact and an operational impact?

Greenhouse gases are considered a product impact rather than an operational impact when:

• Control of the product has passed into the hands of a third party before the impact occurs;
• The extent of the impact is no longer modifiable by the company; or
• The impact accrues from physical goods which are not directly revenue-generating but which are provided to third parties in support of the company’s commercial activities.

Consider the example of the sale of fossil fuel-derived energy. The greenhouse gases associated with this product occur during the generation of the energy, rather than the use of the energy. The impact occurs before the energy is purchased by the third party, and is modifiable by the company. Therefore, the greenhouse gas emissions would be captured by BE06: Operations emit no greenhouse gases rather than BE18: Products emit no greenhouse gases.

For more information, see Differentiating between operational and product impacts in the Implementation Guide.

1. See this frequently asked question for goods which are not considered in scope for this goal. Some companies may be unsure whether to capture a specific source of GHG emissions here, or via goal BE06: Operations emit no greenhouse gases (e.g. a shipping company which occasionally leases vessels to other businesses). Where such uncertainties arise, see Differentiating between operational and product impacts in the Implementation Guide.↩︎

2. This is one of the eight Properties of a Future-Fit Society – for more details see the Methodology Guide.↩︎

3. This includes GHGs regulated by The Montreal Protocol on Substances that Deplete the Ozone Layer. [133]↩︎

4. The latest GWP tables are available via the IPCC website. Companies are encouraged to draw all of their GWP values from the same Assessment Report version, wherever possible.↩︎

5. This is relevant for several Product-related Break-Even Goals.↩︎