ET Carbon Rankings Methodology
The ET Carbon Rankings score companies each year according to their greenhouse gas emissions intensity (total emissions/$m revenue). Carbon-efficient companies are at the top; carbon-intensive companies are at the bottom.
- Companies are analysed carefully to measure their greenhouse gas emissions on a comparable basis with other companies (the greenhouse gas emissions- intensity metric of tonnes of carbon dioxide equivalent per million dollars of revenue). The analytical framework for gathering this information is based on the Greenhouse Gas Protocol, the most widely used international accounting tool for greenhouse gas (GHG) emissions.
- Data sources include annual reports, sustainability reports and company websites. The completeness of the data and whether the information has been audited by an independent third party is also recorded. For each company, a Scope 1 (direct emissions) and 2 (emissions from the purchase of electricity) intensity figure is calculated based on the total disclosed Scope 1 and 2 emissions divided by USD million of revenue (Scope 1 and 2/$m revenue). The same applies to Scope 3 (indirect emissions either of the company’s supply chain or its customers).
- How do we handle missing data? In cases where a company is not reporting complete information, we assume that they are in line with the worst company in the sector. The highest reported emissions-intensity figure from a disclosing company within the most appropriate sector industry is applied to the non-disclosing company. This inference is carried out at the most granular industry level possible. For Scope 3, the inference system is applied to each category. This is not an estimate of the company’s emissions; rather it is a means of penalising non-disclosure in order to provide an incentive for disclosure.
- The ET Carbon Rankings integrate the Sustainable Industry Classification SystemTM (SICS®) from SASB®, the Sustainability Accounting Standards Board®. The SICS categorises 10 sectors and 80+ industries in accordance with their resource intensity, sustainability impact, and sustainability innovation potential.
Greenhouse Gas Protocol Scope 1, 2 & 3 emissions
The Greenhouse Gas Protocol, developed by the World Resources Institute and the World Business Council on Sustainable Development, sets the global standard for how to measure, manage, and report greenhouse gas emissions.
- Scope 1 Emissions – direct emissions from a company’s operational activities.
- Scope 2 Emissions – indirect emissions generated from the purchase of electricity, steam and heat.
- Scope 3 Emissions – all other emissions over which the company has influence but not control, such as the distribution of goods, transportation of purchased goods, transportation of waste, disposal of waste, employee commuting, business travel or investments.
- Public, complete Scope 1 and 2 data, third-party assurance.
- Public, complete Scope 1 and 2 data, no third-party assurance.
- Incomplete Scope 1 and 2 data, no third-party assurance.
- No public data.
- Complete data is defined as data covering at least 95% of a company’s worldwide Scope 1 and 2 emissions within an appropriately chosen reporting boundary. Where there is only partial data available, the ET Carbon Ranking methodology accepts a company reporting extrapolated data to achieve 100% coverage for their operations, as this is permissible under the GHG Protocol Corporate Standard, providing the end result is a faithful reflection of a company’s emissions.
- Incomplete data is defined as data which represents less than 95% of a company’s worldwide operations; data that is expressed as an intensity metric, such as the amount of CO2 emitted per product produced, rather than as an absolute figure; or data which is not reported clearly under the GHG Protocol definition of Scopes 1, 2 and 3.
- Assured data is defined as having a bona fide independent assurance statement without significant qualification.
- Public data is defined as freely available information reported in a company’s sustainability report, annual report, or sustainability-related section of its website (or any other relevant section of the company’s website).
- Third-party reporting on behalf of a company, which may involve restrictions or permissions (e.g. reporting to the CDP), is not defined as publicly and freely available.
Overcoming the lack of data:
- In the case where a company is reporting a carbon emissions figure for a Scope 3 category, e.g. business travel, this number is accepted. In the case where a company is reporting each of the 15 Scope 3 emissions disclosure categories, each of these emissions figure totals are accepted.
- In the case where a company is not reporting a carbon emissions number for any given Scope 3 emissions category, the ET Index Research inference system is applied. The highest reported Scope 3 emissions-intensity figure for that Scope 3 category, within the most granular industry level possible, is applied to the non-disclosing company. This is the same logic that is applied across the universe for Scope 1 and 2 emissions and is designed to make use of as much reported Scope 3 data as possible. It also enables Scope 3 data to be included in the overall calculation of a company’s carbon footprint, even though the data disclosed is not yet perfect across the board.
- Where no data is available for a given Scope 3 category at the sector level, the highest reported emissions intensity for that category, from any company in the Rankings Universe, is used. This is irrespective of the sector.
- Where ET Index Research has not directly analysed a company an inferred value using the industry average is applied across Scope 1, 2 and 3 emissions for that company, based on analysed ET Index Research carbon data.