Benchmarking carbon emissions helps companies understand how they are performing relative to their peers. Our methodology includes:

1. Sector Definition
2. Data Normalization
3. Statistical analysis

1. Sector Definition

Standard industry classification systems exist per country or per application (e.g. equity investing). They also exist in various degrees of granularity. The choice of system and granularity level depends on the volume of available data. Given that carbon disclosure is only in its early days, the number of companies reporting carbon emissions is relatively small compared to the overall economic activity. It is also important to take a global approach given the predominence of global corporations within the few hundreds of companies that are publicly disclosing their CO2 levels.

Our approach has been to adopt the international standard industry classification (ISIC 2006) sponsored by the United Nations. Its granularity level allows us to have at least 3 companies per sector in order to have a representative sample level. A range of countries such as the UK have adopted the ISIC as their top-level classification definition.

2. Data normalization

Common denominators across companies and countries

Intensity ratios express GHG impact per unit of physical activity or unit of economic output. A physical intensity ratio is suitable when aggregating or comparing across businesses that have similar products. An economic intensity ratio is suitable when aggregating or comparing across businesses that produce different products. Many companies historically tracked environmental performance with intensity ratios. Examples of intensity ratios include:

• product emission intensity (e.g., tonnes of CO2 emissions per electricity generated)
• service intensity (e.g., GHG emissions per function or per service)
• sales intensity (e.g., emissions per sales)

The challenge in the above approaches lies in the very definition of the common denominators: how do you determine the granularity with which you account for products? How do you account for highly fluctuating currency exchange rates?

There is also a practical element to defining common denominators: are they publicly disclosed, do definitions stay consistent year over year?

We have analyzed the ratio turnover/employee across many sectors and across many company sizes within these sectors. For this analysis, we considered:

• 1.64 Million businesses
• 9 tiers of company employement sizes (e.g. 50-99, 99-249,...)
• 60 different sectors

We concluded that employees are a reliable proxy for economic activity within main sectors, especially given that at this stage, it's mainly large companies who are engaged in carbon disclosure.

Additional benefits of using employees as the common denominator include:

• it eliminates macro-economic effects and currency exchange assumptions
• its definition is well established and rules for accounting for temporary staff are well defined
• it eleminates accounting discrepancies across countries
• it enables us to compare sectors globally

International normalization for purchased electricity

Companies purchasing electricity from their local providers depend on how environmentally clean their providers are. The average Ton CO2 emissions per MWh electricity varies widely between coal-fired plants and nuclear plants. Our goal is to help companies benchmark the aspects over which they have control and we therefor normalize the TCO2 per MWh across countries. For example, for a company located in the UK, we apply the average TCO2/MWh of the utilities in the UK to any international company included in the benchmark. The most up to date TCO2/MWH factors per country that we use can be viewed here.

3. Statistical analysis

Our database contains several thousand data points for companies and sectors and allows us therefor to provide meaningful statistical data such as median and average CO2 efficiencies per sector. Please contact us to find out more about this analysis.