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Accounting Service for Scope 3 GHG Emissions

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Multifaceted Support for Strategies to Apply New Accounting and Reporting Standards for GHG Emissions Under New Standards

Rising International Demands for Disclosure of Company GHG Emissions

Amid accelerating initiatives to tackle global warming and other forms of climate change, there has been an increasing demand for companies to calculate and disclose GHG (Greenhouse Gas) emissions related to their business activities.

Leading these demands have been institutional investors and the Carbon Disclosure Project (CDP), an international organization seeking the disclosure of information related to climate change. The CDP asks the world's leading companies to disclose information on matters like climate change risks and opportunities, and GHG emissions and emission reduction strategies. It also evaluates this information from the perspective of an investor and publicizes score results, and it has had no small impact on Japanese companies.

The CDP relies largely on the GHG Protocol to account for and report GHG emissions. The GHG Protocol is the most widely used international accounting standard for government and business leaders to quantify and report greenhouse gas emissions. A partnership between the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol is working with businesses, governments, and NGOs around the world.

Until recently, the GHG Protocol had covered the Scope 1 as all direct GHG emissions and the Scope 2 as indirect emissions from the consumption of energy. In October 2011, the Scope 3 standard or “other indirect emissions” was issued. This standard covers the entirety of corporate value chains.

The Scope 3 standard requires companies to determine and report to investors and other stakeholders not only direct GHG emissions but also indirect GHG emissions from their supply chains.


Source: Prepared by MHIR based on the Corporate Value Chain (Scope 3) Accounting and Reporting Standard

What the Scope3 Standard Means for Japanese Companies

Demands to disclose GHG emissions are on the rise throughout the world and this presents both risks and major opportunities for Japanese companies.

In complying with the Scope 3 standard, which requires the calculation of GHG emissions across a broad expanse of business activity, it is essential to have the means to identify GHG emissions throughout entire supply chains. For companies that do not already have date–collecting systems in place, arranging them could be a major undertaking. On the other hand, companies that have been proactive in working with suppliers to identify and reduce GHG emissions have an opportunity to use the results they have achieved to date to win international approval by showing the world that they are in compliance with the internationally recognized Scope 3 standard.

The Scope 3 standard considers not only negatives in terms of GHG emissions but also positives in the form of contributions to reducing GHG emissions. For example, a company that has developed energy–saving products that reduce electricity consumed from product usage can include in its GHG emissions calculation the amount of emissions reduced through the adoption of its products.

Japanese companies generally have high environmental awareness and not a few have promoted cutting–edge initiatives to reduce GHGs. Furthermore, Japan's energy–saving technologies, which are among the world's most advanced, have contributed greatly to the reduction of society's overall GHG emissions. The appearance of the Scope 3 standard, therefore, could be seen as an opportunity for Japanese companies to make visible the GHG reduction results they have already achieved and show them to the world.

Mizuho Supporting Efforts to Reduce Emission Disclosure Risks and Seize Opportunities

What Japanese companies must now do is carefully determine whether growing demands for GHG emissions disclosures are a risk or an opportunity, and consider strategies for responding. Mizuho offers various forms of support to help companies sort out these matters.

MHIR has long been a leader in helping governments develop policies and companies achieve goals when it comes to making GHG emissions, and the results of emission reduction, visible. Drawing on the expertise and know–how gained from that experience, MHIR provides a broad range of services that help companies calculate Scope 3 GHG emissions and provide information to the CDP.

In July 2011, MHIR launched its “Accounting Service for Scope 3 GHG Emissions”. This service focuses on the need to examine strategies for responding to risks associated with company supply chain GHG emissions and making the most of opportunities. With this service, the customer company calculates GHG emissions within the most restrictive scope and terms allowable, and MHIR considers and recommends directions for the customer company to take in complying with the disclosure standard.

MHIR also helps companies conduct internal seminars on the Scope 3 standard and CDP for management and suppliers, provides information on, and advisory services related to, the Scope 3 standard and CDP, and offers consulting services for strategically applying the Scope 3 standard.

Applying expertise developed over many years, Mizuho will continue to provide multifaceted support for companies striving to further environmentally conscious management efforts and for the development of frameworks for controlling climate change. Mizuho is committed to helping to enhance the standing of Japanese companies in the global market and advance GHG emissions reduction initiatives.

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