ESG ESG Climate Change & Carbon Management 1 — Questions and Answers
Question 1: What are 'Scope 3 emissions' in the GHG Protocol Corporate Standard?
- Emissions from company-owned vehicles only
- All indirect emissions in a company's value chain not covered by Scope 2, including upstream suppliers and downstream product use (Correct answer)
- Emissions from third-party logistics providers only
- Emissions offset through carbon credits
Correct answer: All indirect emissions in a company's value chain not covered by Scope 2, including upstream suppliers and downstream product use
Scope 3 covers 15 upstream and downstream categories including purchased goods, business travel, employee commuting, and end-of-life product treatment—typically the largest share of a company's footprint.
Question 2: What criteria must emissions reduction targets meet to be certified by the Science Based Targets initiative (SBTi)?
- Reduce absolute emissions by 50% within 10 years
- Align with the level of emissions reductions required to meet Paris Agreement goals, following SBTi methodology validation (Correct answer)
- Offset 100% of Scope 1 and 2 emissions with verified carbon credits
- Achieve net-zero across all Scopes within 5 years
Correct answer: Align with the level of emissions reductions required to meet Paris Agreement goals, following SBTi methodology validation
SBTi validates that targets are grounded in climate science—specifically aligned with pathways to limit warming to 1.5°C—using sector-specific methods and covering relevant emission scopes.
Question 3: What is the primary difference between 'carbon neutral' and 'net-zero' claims?
- Carbon neutral applies only to products; net-zero applies to companies
- Carbon neutral typically involves offsetting residual emissions; net-zero requires deep absolute reductions with only minimal residual offsetting (Correct answer)
- Carbon neutral is certified; net-zero is self-declared
- They are legally identical terms with no meaningful distinction
Correct answer: Carbon neutral typically involves offsetting residual emissions; net-zero requires deep absolute reductions with only minimal residual offsetting
Carbon neutrality often relies heavily on carbon offsets to balance residual emissions, while genuine net-zero (per SBTi/IPCC) requires 90-95% absolute emission reductions before any residual neutralization.
Question 4: What is an 'internal carbon price' (ICP) and how is it used?
- The price a company pays for carbon credits on voluntary markets
- A shadow price applied to carbon emissions in internal business decisions to incentivize low-carbon investment choices (Correct answer)
- The cost per ton charged to a company's customers for embedded carbon
- A regulatory fee imposed by state governments on large emitters
Correct answer: A shadow price applied to carbon emissions in internal business decisions to incentivize low-carbon investment choices
ICPs embed a hypothetical cost on carbon in capex decisions, project approvals, and business cases, steering internal investment toward lower-emission options before external carbon pricing applies.
Question 5: What does 'carbon accounting' under the GHG Protocol require companies to select before calculating emissions?
- A certified carbon accounting software
- An organizational boundary approach: equity share, financial control, or operational control (Correct answer)
- A third-party verifier approved by the GHG Protocol
- A sector-specific emissions factor database
Correct answer: An organizational boundary approach: equity share, financial control, or operational control
The GHG Protocol requires companies to define organizational boundaries using one of three consolidation approaches, which determines which operations' emissions are included in the inventory.
Question 6: What is a 'climate transition plan' as expected under emerging disclosure frameworks?
- A plan for relocating operations to avoid physical climate risks
- A detailed, time-bound plan showing how a company will align its business model with a net-zero economy (Correct answer)
- A contingency plan for climate-related business disruption
- A plan for transitioning the workforce to green jobs
Correct answer: A detailed, time-bound plan showing how a company will align its business model with a net-zero economy
Climate transition plans outline the specific actions, investments, governance changes, and interim targets a company will take to decarbonize in line with science-based pathways.
ESG ESG Climate Change & Carbon Management 1
What are 'Scope 3 emissions' in the GHG Protocol Corporate Standard?