How fashion companies cheat emissions reporting

A deep-dive into GHGP and an interview on loopholes with Action Speaks Louder

Welcome to another issue of The Crisps – your newsletter on anti-greenwashing and honest fashion communication. You can support us by subscribing to a free or pro subscription, liking, sharing, or commenting on our posts.

---

Fashion plays a pivotal role in the fight against climate change. However, the industry's complex and decentralized supply chains pose significant challenges to accurate emissions accounting. Tracking greenhouse gas (GHG) emissions across all stages of production from raw material sourcing to disposal is critical for understanding and mitigating the environmental impact of fashion.

While precise emissions accounting is essential to moving beyond greenwashing and backing up green claims, loopholes in the Greenhouse Gas Protocol (GHGP) allow companies to paint a picture of progress where there is little to none. How severe the problem is, was covered in a recent report by Action Speaks Louder. It was also the report that inspired us to dive into this topic in more detail for you – and with Action Speaks Louder.

What to expect in today’s pro section:

We spoke to Ruth MacGilp, Campaign Manager at Action Speaks Louder about the loopholes of the GHGP, how lobbying affects the framework, and how brands use loopholes to paint a picture of emission reduction. Plus, we dive into two other topics:

• How have brands skewed their emissions reduction in the past?

• Which actionable recommendations are there for brands?

All the best,

Tanita & Lavinia

---

In 1998 the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) set out to develop a framework for measuring and reporting emissions across industries. Now the framework is under review for the first time in a decade, offering a chance to change existing loopholes. Before we dive into the loopholes, let’s look at how the GHGP works in detail.

The Standards

The GHGP is composed of different standards to cover the range of emission sources and reporting needs:

🔹 The Corporate Accounting and Reporting Standard guides organizations on measuring and reporting GHG emissions from operations. It also includes guidance on setting boundaries and categorizing emissions.

🔹 The Scope 3 Standard focuses on indirect emissions across a company’s entire value chain, including upstream (supplier) and downstream (customer) activities.

🔹 The Project Protocol is designed for specific emission reduction projects and helps to identify and track emissions against project targets.

🔹 The Policy and Action Standard assesses the GHG impact of specific policies and actions, enabling policymakers to measure and manage GHG effects more effectively.

Scopes of Emissions

Emissions are divided into three categories (or "scopes") to clarify responsibility and track direct vs. indirect emissions across an organization’s operations and value chain.

🔸 Scope 1: These are direct emissions from sources that an organization owns or directly controls. For example fuel combustion in company vehicles and heating systems or emissions from manufacturing processes.

🔸 Scope 2: This scope includes indirect emissions from the consumption of purchased electricity, steam, heat, or cooling. Although these emissions occur at the utility's facilities, the organization that uses the energy is responsible for them.

🔸 Scope 3: This scope covers all other indirect emissions from activities outside of Scope 1 and Scope 2. These include emissions from the entire value chain, such as employee commuting, waste disposal, transportation, and supplier activities. Scope 3 is often the largest category, capturing emissions beyond an organization's direct control.

Calculation Methodology

The GHGP provides standardized methods to calculate emissions across scopes. Calculations are often based on activity data (such as kilometers driven, and tons of fuel used) multiplied by emission factors (quantifying emissions per unit of activity). Specific methodologies include Mass Balance, which tracks the total material flow through an operation to identify emission points, the Emissions Factor Approach, which uses established emissions factors to convert activities into emissions (e.g., kilowatt-hours of electricity to CO₂ equivalent), and Direct Measurement, which measures emissions directly from equipment or facilities with specialized devices, such as Continuous Emission Monitoring Systems (CEMS).

Inventory Boundary Setting

Organizations must set boundaries for the inventory they measure and report. These include:

🔸 Organizational Boundaries define which parts of the organization will be included, for example, the entire company vs. specific locations.

🔸 Operational Boundaries determine which scopes will be reported (Scope 1, 2, and/or 3).

Companies can choose between the equity share approach (based on ownership) or the control approach (based on operational control) to decide how emissions are allocated within organizational boundaries.

Reporting Requirements and Verification

Part of the GHGP are also specific requirements to ensure transparent, complete, consistent, accurate, and relevant reporting. Companies must disclose:

1. Base Year: The reference year for tracking emissions changes over time. The base year is often fixed to compare future progress.

2. Emissions Reductions: Documentation on actions taken to reduce emissions, allowing stakeholders to track the effectiveness of mitigation strategies.

3. Recalculation Policy: Guidance on recalculating base-year emissions when structural changes like mergers affect emissions significantly.

Verification is recommended to ensure accuracy, either internally (self-assessment) or externally through third-party verification services.

Emissions Reduction and Goal Setting

The GHGP also encourages organizations to use their emissions inventory to set reduction targets¹:

🔹 Science-Based Targets: Aligning emission reductions with climate science, such as the targets outlined in the Paris Agreement to limit global warming to 1.5°C or 2°C.

🔹 Setting Intensity vs. Absolute Targets: Organizations may choose absolute targets (for example, reducing total emissions by 20%) or intensity targets (such as reducing emissions per production unit by 15%).

🔹 Carbon Offsetting: Companies can use offsets to mitigate emissions that are hard to eliminate. The protocol provides guidance on credible carbon offsetting.

What role does the GHGP play for fashion brands?

Regulatory measures like the EU Corporate Sustainability Reporting Directive (CSRD) are emerging to ensure that fashion brands adhere to clear, industry-wide reporting standards. Directives like the CSRD reinforce the GHGP’s importance in holding brands accountable for their environmental impact while promoting accurate reporting as a benchmark of corporate integrity and commitment to sustainability. But the GHGP is currently under review and lobbying is doing its best to water it down.²

---

In our next issue

We dive into another exciting and often greenwashed topic: Sustainable Packaging Claims! Let us know how familiar you are with the topic already and make sure to subscribe to receive it directly to your inbox.

---

Welcome to our pro section!

In this issue’s pro section, we look at the following topics:

• We talked to Ruth MacGilp from Action Speaks Louder about the loopholes companies use to underreport emissions.

• Examples of how brands have skewed their emissions reduction in the past

• Which actionable recommendations are there for brands?

---

For this issue, we spoke to Ruth MacGilp, Campaign Manager at Action Speaks Louder. The advocacy organization works to hold corporations accountable for their environmental claims and pushes for stronger regulations and more responsible business practices to support a sustainable future through campaigns, policy advocacy, and public engagement. In our interview, we discuss how companies use loopholes to underreport their emissions and how lobbying impacts fashion’s sustainability claims.

The Greenhouse Gas Protocol plays a central role in how emissions are reported across industries, including fashion. What are the most significant loopholes in the GHGP that allow fashion brands to underreport their emissions?

The loopholes in the GHGP enable all companies to massively underreport their emissions. This means they can get recognition for reaching their climate targets on paper while no tangible progress has been made to reduce fossil fuel consumption, increase renewable electricity consumption, or decrease greenhouse gas emissions.

Firstly, Scope 3 emissions, which include emissions from a company’s supply chain and, in fashion's case, can contribute up to 99% of a company's total emissions, don’t have to be fully disclosed. Instead, it is up to the company to define which categories are relevant for them to report upon or to include in their climate targets.

Secondly, parts of a company’s electricity emissions from their direct operations (scope 2) can also be hidden in vague Scope 3 categories which are impossible to verify. The 'market-based' accounting approach of the GHGP (as opposed to a more accurate 'location-based' approach) further enables misleading emissions reporting.

Thirdly, under the GHG Protocol, businesses are allowed to purchase cheap renewable energy credits to claim high levels of renewable energy consumption, while not actually consuming any additional renewable energy at all. This works similarly to carbon offsets, and does nothing to help accelerate the green transition.

(This video may be helpful if you want to understand the complex issue even better!)

Your report discusses corporate lobbying efforts, such as those by the Emissions First Partnership (EFP), that aim at weakening emissions accountability standards. Could you explain how this lobbying impacts fashion’s sustainability claims and what can be done to counter their influence?

The Emissions First Partnership (EFP) is pushing for new accounting rules that would allow companies to underreport their emissions by up to 90%. EFP founders, such as Amazon and Meta, are also major funders of the GHGP. 

One of the changes that EFP is pushing is to enable an approach known as ‘carbon matching’, which aims to remove the requirement within current GHGP standards that renewable energy credits are purchased within the same regional market as a company’s electricity-consuming operations occur. This would allow companies to report emission reductions which only exist on paper, rather than undertaking the critical work of decarbonising the grids from which they actually draw power. The EFP is also proposing a fundamental change to emissions accounting, arguing we should no longer focus on concrete clean energy inputs, but instead focus on emissions theoretically avoided. This approach would formally allow carbon offsets within Scope 2 electricity emissions accounting.

This is just one example of corporate lobbying that lies beneath the surface of companies claiming to be leaders in sustainability. In fashion, there are countless trade associations, multi-stakeholder initiatives, lobbying groups, and certification schemes whose activities do not necessarily align with the companies' messaging around their sustainability efforts, and provide a safe harbour for inaction, delay and distraction from meaningful decarbonisation. To counter this negative influence, companies must assess their affiliations with associations that diverge from their own environmental targets and claims, following clear guidance on transparency and accountability from the UN’s Integrity Matters report. You can find out more about this issue in our recent blog post.

What are the key opportunities within the ongoing review of the GHGP to create more robust and transparent emissions reporting standards for the fashion industry?

Our main recommendations for the GHGP review is to close the most serious loopholes and weaknesses within the GHGP, which are enabling corporate users to underreport emissions in their formal sustainability reporting and associated promotional materials and overstate their renewable energy investments.