Water Accounting and Other Sustainability Accounting Methods



Water use and pollution is by no means the only aspect of sustainability that poses risks for companies and must be measured and assessed. Companies must also understand the contribution of their greenhouse gas (GHG) emissions to climate change; the impacts of their energy use on business costs, the environment, and human health; and a number of other resource uses and emissions. As such, several accounting methodologies akin to those analyzed in this report have been developed for other sustainability issues, such as GHG emissions or natural resource depletion.

The interactions and linkages between many of these sustainability issues are becoming more and more clear, particularly among water, carbon, and energy. Climate change— heightened by corporate GHG emissions— drastically changes the hydrologic cycle, leading to more frequent and severe drought and flood events and contributing to water scarcity. Transporting or pumping water for irrigation or desalinating it for other uses is often incredibly energy intensive. Likewise, creating energy often (as in the case with hydroelectric dams) severely damages aquatic systems, displaces communities, and creates human health concerns. These inextricable links between these three sustainability issues have become known as the “Water-EnergyCarbon Nexus”. Companies are now increasingly concerned with understanding the ways in which these resource uses and emissions interact with and affect one another and how these linkages might inform a company’ assessment of impacts and risks.

This section will provide a synopsis of accounting methods for other sustainability issues as a basis from which to explore how public perception and understanding of those methods might confuse water accounting, as well as how different sustainability accounting methods interact with one another and are compatible. It will focus on carbon accounting and ecological footprinting, as they are perhaps the most established and widely recognized of these methods.


Carbon Accounting

Carbon accounting (commonly referred to as “carbon footprinting”) measures the total amount of GHG emissions caused directly and indirectly by an individual, organization, event, or product. This measurement is divided by the various types of GHG emissions (e.g., carbon dioxide, methane, ozone, nitrous oxide) and can be assessed for any type of carbon emitting entity (e.g., individual, city, nation, product, company, etc.).

A carbon footprint of a company or product ideally includes emissions from all stages in the value chain. A specific methodology for corporate carbon footprinting has been developed in the WRI-WBCSD GHG Protocol (and subsequently adopted as the basis for an ISO standard). Several methodologies exist for product carbon footprinting.

Three different scopes have been described for carbon footprinting. Scope 1 is the direct GHG emissions of an organization. Scope 2 is Scope 1 plus upstream GHG emissions associated with the production of energy used by the organization. Scope 3 is Scope 2 plus the life cycle GHG emissions of all the products purchased by an organization. The Scope 3 carbon footprints are simply the climate change results of all LCAs.

Carbon accounting is fundamentally an assessment of impacts, rather than a strict measurement. After measuring the amount of emissions for each type in real masses, each mass is multiplied by a characterization factor that “weights” that mass based on the type of gas emitted, using factors developed by the Intergovernmental Panel on Climate Change (IPCC). The characterization factors are based on the relative global warming potential—their contribution to climate change per unit—of each greenhouse gas. Once this weighting occurs, all the masses are expressed in terms of carbon dioxide equivalents which allows for comparison and aggregation of different types of emissions across different products, facilities, and companies. Companies use this to assess the impacts of different types of emissions and evaluate the extent to which their entire business, their products, or their facilities contribute to climate change in order to prioritize areas for improvement and to assess business risks.

Carbon footprinting has led to the concept of carbon offsets: the idea that one can pay others to reduce their pollution for less money than required to reduce their own pollution. Offset schemes have been criticized on a number of fronts. Of particular concern are issues related to “additionality” (i.e., would the carbon reduction project have occurred without the offset?) and whether they lead to actual improvements in the atmosphere. There are also questions about the actual methods of accounting for carbon emissions, especially as they relate to land use changes and biofuels. Despite these concerns, the potential to offset water use is even more questionable than the potential to offset carbon emissions due to the extent to which impacts differ depending on the location and timing of use.

Due to the presence of characterization factors, carbon footprinting is often an integral part of an LCA. However, the carbon footprinting approach is fundamentally different from water footprinting (as defined by the WFN) which only provides volumetric measures of different types of water from different locations. The WFN’s water footprinting includes no characterization factors that allow different types and sources of water to be compared based on their impacts. That said, a number of LCA practitioners, applying the characterization methods of Frischknecht or Pfister, are including water resource results (which they are dubbing “water footprints”) as part of broader LCAs showing the trade-offs among different impacts (e.g., water use and land-use related impacts). Due to the present confusion around terminology, any conclusions made about “water footprinting” based on one’s understanding of carbon footprinting should be scrutinized carefully.


Ecological Footprinting

The Ecological Footprint (EF) is a resource accounting tool used widely by governments, businesses, educational institutions, and NGOs to measure the biological capacity of the planet that their activities or products require (Global Footprint Network 2009). Biological capacity is defined as the area of productive land and sea required to produce the resources consumed by humans and to neutralize the subsequent waste. An understanding of biological capacity can help these entities better manage their operations and communicate with stakeholders. An EF compares human demand on nature to the availability of nature. It therefore can be considered an impact assessment (though quite different in appearance than impacts assessments for water use), rather than a straight measurement like that seen in water footprinting. The methodology of the water footprint has been inspired by that of the EF, but was adapted by Prof. Hoekstra to waterspecific circumstances. The current EF method also reflects the reality of data limitations for describing biocapacity demand of water.

An EF is categorized into a number of different individual footprints (i.e., Food, Mobility, Housing, and Goods and Services). The Footprints can also be divided into the various land types that are needed (i.e., forest, grazing area, fisheries, etc.). The common measurement unit of both Ecological Footprint and its counterpart, biocapacity, is global hectares. These hectares correspond to biologically productive hectares with world average productivity. Ecological Footprinting is most often used in educational or communication settings to help quantify ideas like “sustainable development.” The tool is also increasingly being applied in policy settings.

Ecological footprinting does not include water footprinting or any other form of water accounting; current assessments only capture freshwater impacts indirectly. While the carbon footprint is a direct subcomponent of the EF, despite the similarities in terminology, EF and water footprinting are not directly linked methodologically. The main reason is that each unit of water use has a distinct demand on biocapacity depending on the local context. Such calculations have not been possible due to the aforementioned data limitations.


Compatibility of sustainability accounting methodologies

Neither carbon accounting nor ecological footprinting assess water use or pollution. Similarly, water footprinting and other water accounting methods do not account for carbon or other sustainability issues such as energy use. However, as mentioned earlier, the links between these different sustainability issues in terms of impacts to watersheds, ecosystems, and communities, as well as in terms of business risks, are undeniable. Insofar as companies and products are concerned, LCA is the most well-established and well-suited system through which to assess different sustainability issues and their common and different impacts. Done properly, carbon accounting is streamlined as part of an LCA such that GHG emissions and their contribution to climate change can be integrated into broader product assessments. Because of this, LCA is well-positioned to allow carbon-related impacts to be compared with other types of environmental impacts (including those related to water use and pollution) incurred in a product’s life cycle.

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