Electronics Guide

The GHG Protocol Framework

The Greenhouse Gas Protocol, developed by the World Resources Institute and the World Business Council for Sustainable Development, provides the most widely used framework for corporate GHG accounting. It categorizes emissions into three scopes:

• Scope 1 (direct emissions): Emissions from sources owned or controlled by the organization, including on-site fuel combustion, company vehicles, and fugitive emissions from refrigerants or process gases.
• Scope 2 (energy indirect emissions): Emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the organization. The GHG Protocol Scope 2 Guidance requires reporting under both a location-based method (grid-average emission factors) and a market-based method (reflecting specific electricity contracts and instruments).
• Scope 3 (other indirect emissions): All other indirect emissions occurring in the value chain across fifteen defined categories, including purchased goods and services, transportation, employee commuting, use of sold products, and end-of-life treatment. For electronics companies, Scope 3 typically represents the largest portion of total emissions.

Electronics-Specific Considerations

Carbon footprint assessment in the electronics industry presents distinctive challenges:

• Semiconductor manufacturing: Fabrication facilities (fabs) use potent fluorinated greenhouse gases, including perfluorocarbons (PFCs), hydrofluorocarbons (HFCs), nitrogen trifluoride (NF₃), and sulfur hexafluoride (SF₆), for plasma etching and chamber cleaning. These gases have global warming potentials hundreds to tens of thousands of times higher than carbon dioxide; SF₆, for example, has a 100-year global warming potential on the order of 24,000.
• Complex supply chains: Electronics products draw components from numerous suppliers across multiple tiers, making comprehensive Scope 3 accounting particularly difficult.
• Product use phase: The electricity consumed by electronic devices during their operational lifetime often dominates lifecycle emissions, especially for energy-intensive products such as servers and large displays.
• Data availability: Obtaining accurate emission factors for materials and components, particularly from suppliers in regions with limited disclosure requirements, can be difficult, so companies frequently rely on spend-based or industry-average estimates that carry significant uncertainty.

Assessment Methodologies

Organizations can employ several complementary methodologies:

• Corporate carbon footprint: Measures total organizational emissions, providing the basis for corporate climate targets and reporting.
• Product carbon footprint: Quantifies emissions associated with a specific product throughout its lifecycle, following standards such as ISO 14067 or PAS 2050.
• Facility-level assessment: Detailed measurement of emissions from individual manufacturing sites, enabling targeted reduction efforts.
• Supply chain carbon mapping: Identifies emission hotspots throughout the value chain to prioritize engagement with high-impact suppliers.

Target-Setting Approaches

The SBTi offers several methods for setting targets:

• Absolute contraction approach: Reduces absolute emissions by a fixed percentage each year, regardless of business growth. This is the simplest and most transparent method.
• Sectoral decarbonization approach (SDA): Allocates the global carbon budget to sectors based on their decarbonization potential, setting intensity-based targets that follow sector-specific pathways.
• Physical intensity approach: Sets targets based on emissions per unit of physical output, suitable for homogeneous product portfolios.
• Economic intensity approach: Uses economic metrics such as revenue or value added as the denominator, though this is less favored for 1.5-degree pathways.

Near-Term and Long-Term Targets

The SBTi Corporate Net-Zero Standard distinguishes between different target timeframes:

• Near-term targets: Cover a 5-to-10-year horizon and focus on rapid, immediate reductions. Under the cross-sector pathway, 1.5-degree alignment requires a linear annual reduction of roughly 4.2 percent in absolute Scope 1 and 2 emissions.
• Long-term targets: Set for 2050 or earlier, representing a commitment to net-zero emissions. They require deep reductions, typically at least 90 percent across Scopes 1, 2, and 3, before any residual emissions are neutralized.

A complete net-zero target under the standard comprises four elements: a near-term science-based target, a long-term science-based target, mitigation beyond the value chain, and the neutralization of any remaining residual emissions with permanent removals.

Scope 3 Requirements

For most electronics companies, Scope 3 emissions are the majority of the carbon footprint. The SBTi requires companies whose Scope 3 emissions exceed 40 percent of total emissions to set Scope 3 targets; near-term targets must then cover at least 67 percent of Scope 3 emissions, and long-term targets must cover the substantial majority of value-chain emissions. Meeting these targets means engaging suppliers on climate action, designing more energy-efficient products, and accounting for end-of-life emissions.

Understanding the Terminology

• Carbon neutral: A balance between carbon emissions produced and carbon emissions removed from or avoided in the atmosphere, typically through a combination of emission reductions and carbon credits. Carbon neutrality can be claimed for specific scopes, products, or activities and does not by itself require deep absolute reductions.
• Net-zero: A more rigorous standard requiring deep decarbonization across all emission scopes (typically a 90-to-95-percent reduction) with the small remainder balanced by permanent carbon removals. Net-zero emphasizes actual emission reductions over offsetting.
• Climate positive / carbon negative: Going beyond net-zero to remove more carbon from the atmosphere than is emitted, creating a net positive climate impact.

Developing a Net-Zero Strategy

A credible net-zero strategy for an electronics organization typically includes:

1. Comprehensive baseline: Accurate measurement of current emissions across all three scopes.
2. Science-based near-term targets: Validated reduction targets for the next 5 to 10 years.
3. Long-term net-zero commitment: A 2050-or-earlier target for net-zero across the value chain.
4. Detailed transition plan: Specific initiatives, investments, and milestones for achieving the targets.
5. Governance and accountability: Board-level oversight and executive compensation linked to climate performance.
6. Transparent reporting: Regular disclosure of progress against targets.

Avoiding Greenwashing

As climate commitments have proliferated, scrutiny of their credibility has intensified, and regulators in several jurisdictions now restrict unsubstantiated "carbon neutral" and "net-zero" marketing claims. Organizations should ensure their strategies:

• Prioritize actual emission reductions over offsetting;
• Include comprehensive Scope 3 emissions;
• Rest on concrete action plans and committed investment;
• Use high-quality, verified carbon credits only for genuinely unavoidable emissions;
• Are independently validated where possible.

Types of Carbon Credits

• Avoidance and reduction credits: Projects that prevent emissions that would otherwise occur, such as renewable energy projects, methane capture from landfills, or avoided deforestation (REDD+).
• Removal credits: Projects that actively remove carbon from the atmosphere, including afforestation and reforestation, soil carbon sequestration, bioenergy with carbon capture and storage (BECCS), and direct air capture (DAC).

Quality Criteria

High-quality carbon credits should meet several criteria:

• Additionality: The emission reduction would not have occurred without the project funding.
• Permanence: The reduction or removal is durable, with mechanisms to address reversal risks.
• Verification: Independent, third-party verification by accredited bodies.
• No double counting: The emission reduction is claimed only once and is not also counted toward another entity's targets.
• Co-benefits: The project delivers additional environmental and social benefits.

Standards and Registries

Several standards and registries provide frameworks for developing and verifying credit projects:

• Verified Carbon Standard (Verra): One of the largest voluntary carbon market standards.
• Gold Standard: Emphasizes sustainable development co-benefits alongside emission reductions.
• American Carbon Registry (ACR): Operates both compliance and voluntary market programs.
• Climate Action Reserve: Focuses on North American offset projects.
• Clean Development Mechanism (CDM): A United Nations mechanism established under the Kyoto Protocol, now transitioning toward the Article 6.4 mechanism under the Paris Agreement.

The Mitigation Hierarchy

Best practice positions credits as the final step in a mitigation hierarchy:

1. Avoid: Eliminate emission sources where possible.
2. Reduce: Minimize emissions through efficiency and technology.
3. Substitute: Replace high-carbon activities with low-carbon alternatives.
4. Compensate: Offset only residual, unavoidable emissions.

Procurement Options

• On-site generation: Installing solar panels, wind turbines, or other renewable generation at company facilities. This provides direct control and a visible commitment but can be limited by site characteristics.
• Power purchase agreements (PPAs): Long-term contracts to buy electricity directly from renewable projects. A PPA can be physical (electricity delivered to a specific location) or virtual (a financial contract for difference settled against market prices).
• Green tariffs: Utility programs that supply renewable electricity, often backed by specific renewable projects.
• Energy attribute certificates: Tradable certificates representing the environmental attributes of renewable generation, such as Renewable Energy Certificates (RECs) in North America and Guarantees of Origin in Europe. Unbundled certificates are purchased separately from the underlying electricity and offer the least additionality.

RE100 and Corporate Renewable Commitments

RE100 is a global initiative, led by the Climate Group in partnership with CDP, that brings together companies committed to 100 percent renewable electricity. Members must:

• Set a public goal to source 100 percent renewable electricity by a specified date;
• Report progress annually using credible tracking mechanisms;
• Follow RE100 technical criteria for what qualifies as renewable.

Many leading electronics companies have joined RE100, including major semiconductor manufacturers, consumer electronics brands, and large technology firms.

24/7 Carbon-Free Energy

An emerging frontier in procurement is 24/7 carbon-free energy (CFE): matching electricity consumption with carbon-free generation on an hourly basis rather than through annual volume matching. This approach:

• Addresses the intermittency of wind and solar;
• Drives investment in energy storage and in diverse, dispatchable clean sources;
• Gives a more accurate representation of the actual carbon impact of consumption;
• Accelerates grid decarbonization by creating demand for round-the-clock clean energy.

This goal is particularly relevant to data center operators, whose continuous loads are poorly represented by annual matching and whose electricity demand is rising sharply with artificial-intelligence workloads.

Supplier Engagement Strategies

• Disclosure requirements: Requiring suppliers to measure and report their emissions, often through platforms such as CDP's supply chain program.
• Target-setting expectations: Encouraging or requiring suppliers to set their own science-based targets.
• Capacity building: Providing training, tools, and support to help suppliers reduce emissions.
• Collaborative initiatives: Participating in industry programs, such as those run by the Responsible Business Alliance and clean-energy buyer coalitions, that aggregate demand for supplier climate action.
• Preferential procurement: Favoring suppliers with strong climate performance in sourcing decisions.

Key Focus Areas for Electronics

Supply chain decarbonization in electronics should prioritize:

• Semiconductor manufacturing: Wafer fabrication is extremely energy-intensive and uses potent process gases.
• Raw material extraction: Mining and processing of metals and rare-earth elements.
• Component manufacturing: Production of displays, batteries, and other major components.
• Transportation and logistics: Particularly air freight for time-sensitive shipments.
• Packaging: Materials production and end-of-life impacts.

Supplier Sustainability Programs

Effective supplier sustainability programs include:

• Clear expectations communicated through supplier codes of conduct;
• Regular assessment through questionnaires and audits;
• Performance tracking and benchmarking;
• Recognition and incentives for strong performers;
• Defined consequences for non-compliance or lack of progress.

Physical Risks

Physical risks arise from the direct impacts of a changing climate:

• Acute risks: Increased frequency and severity of extreme weather events such as floods, tropical cyclones, wildfires, and heat waves that can damage facilities, disrupt operations, and interrupt supply chains.
• Chronic risks: Longer-term shifts in climate patterns, including sea-level rise, water scarcity, and rising temperatures, that may affect site suitability and operating conditions.

Electronics manufacturing is particularly exposed because production is concentrated in climate-sensitive regions (East Asia and coastal locations) and because the precision and cleanliness requirements of fabs make them acutely sensitive to disruption.

Transition Risks

Transition risks arise from the shift to a lower-carbon economy:

• Policy and legal risks: Carbon pricing, emission regulations, product efficiency standards, and litigation related to climate impacts or disclosures.
• Technology risks: Disruption from low-carbon technologies and the possibility of stranded assets as markets shift.
• Market risks: Changing customer preferences, commodity price volatility, and shifts in demand patterns.
• Reputational risks: Stakeholder perception of climate performance and commitment.

Climate Opportunities

The transition to a low-carbon economy also presents opportunities:

• Growing markets for energy-efficient electronics and renewable energy technologies;
• Cost savings from improved resource efficiency;
• New products and services that enable climate solutions;
• Enhanced brand value and stronger stakeholder relationships;
• Improved resilience and business continuity.

Key Adaptation Strategies

• Facility resilience: Hardening physical infrastructure against extreme weather, improving drainage and flood protection, and enhancing cooling systems for higher ambient temperatures.
• Supply chain diversification: Reducing concentration risk by qualifying alternative suppliers and manufacturing locations.
• Business continuity planning: Developing robust plans for maintaining operations during climate-related disruptions.
• Water management: Addressing water scarcity in water-intensive semiconductor manufacturing through recycling, reuse, and watershed stewardship.
• Insurance and financial protection: Securing adequate coverage for climate-related losses.

Scenario Analysis

Scenario analysis helps organizations understand potential climate impacts under different warming pathways. Common reference scenarios include:

• 1.5-degree Celsius scenario: Aggressive mitigation limits warming, implying significant transition risks but more moderate physical risks.
• 2-degree Celsius scenario: The Paris Agreement upper bound, achieved with meaningful but ultimately insufficient mitigation.
• 3-to-4-degree Celsius scenario: Limited mitigation action, with severe physical risks and broad societal disruption.

Organizations should assess their exposure and resilience under multiple scenarios to inform strategic planning.

The Four Disclosure Pillars

The recommendations, carried forward into IFRS S2, are organized around four thematic areas:

1. Governance: The organization's governance of climate-related risks and opportunities, including board oversight and management's role.
2. Strategy: The actual and potential impacts of climate-related risks and opportunities on the organization's businesses, strategy, and financial planning.
3. Risk management: How the organization identifies, assesses, and manages climate-related risks.
4. Metrics and targets: The metrics and targets used to assess and manage relevant climate-related risks and opportunities.

Typical Disclosures

Within each pillar, the framework calls for specific disclosures:

• The board's oversight of climate-related risks and opportunities;
• Management's role in assessing and managing climate-related risks;
• Climate-related risks and opportunities identified over the short, medium, and long term;
• The impact on the organization's businesses, strategy, and financial planning;
• The resilience of the strategy under different climate scenarios;
• The processes for identifying, assessing, and managing climate-related risks;
• The integration of those processes with overall risk management;
• Scope 1, 2, and 3 greenhouse gas emissions;
• Climate-related targets and performance against them.

Regulatory Developments

Mandatory climate disclosure, generally aligned with the TCFD pillars and increasingly with IFRS S2, is advancing unevenly across jurisdictions:

• United Kingdom: TCFD-aligned reporting is mandatory for large companies and financial institutions, and the government is developing UK Sustainability Reporting Standards based on the ISSB framework.
• European Union: The Corporate Sustainability Reporting Directive (CSRD) and its European Sustainability Reporting Standards (ESRS) require climate disclosure, although the 2025-2026 "Omnibus" simplification package narrowed the scope to the largest undertakings and postponed reporting timelines for later waves.
• United States: The Securities and Exchange Commission adopted climate disclosure rules in March 2024, but those rules were stayed amid litigation and never took effect; the Commission has since moved to rescind them. California's climate disclosure laws (SB 253 and SB 261) remain a separate state-level requirement.
• Japan: Climate disclosure aligned with the framework is required for Prime Market listed companies, with the Sustainability Standards Board of Japan developing standards based on IFRS S1 and S2.
• Other jurisdictions: Comparable requirements, many adopting the ISSB standards, are emerging in Australia, Canada, Hong Kong, Singapore, Brazil, and elsewhere.

Implementation Best Practices

Effective climate disclosure involves:

• Establishing clear governance structures with board-level accountability;
• Conducting thorough climate risk assessments, including scenario analysis;
• Integrating climate considerations into strategic planning and capital allocation;
• Building robust data systems for emissions tracking and reporting;
• Engaging with stakeholders on climate strategy and performance;
• Continuously improving disclosure quality and completeness.

Phase 1: Foundation (Months 1-6)

• Establish a governance structure and secure executive sponsorship;
• Conduct a comprehensive GHG inventory across all scopes;
• Perform an initial climate risk assessment;
• Benchmark against industry peers and best practices;
• Engage key stakeholders on climate strategy.

Phase 2: Strategy Development (Months 6-12)

• Set science-based emission reduction targets;
• Develop a detailed decarbonization pathway;
• Identify priority initiatives and investment requirements;
• Create a supplier engagement program;
• Establish the metrics and reporting framework.

Phase 3: Implementation (Year 2 and Beyond)

• Execute the renewable energy procurement strategy;
• Deploy energy efficiency projects;
• Engage suppliers on emission reduction;
• Implement climate-resilient practices;
• Report progress through standardized climate disclosure.

Continuous Improvement

• Monitor progress against targets;
• Update strategies as the science and regulations evolve;
• Expand scope to address additional emission sources;
• Strengthen stakeholder engagement;
• Share best practices across the industry.