7 Predictions for the Future of Carbon Accounting

Key Takeaways:

Carbon accounting has evolved from national reports in the 1990s to company-level frameworks like the GHG Protocol, with Scope 3 now taking centre stage.
Pressures are shifting from voluntary to mandatory, with frameworks aligning and technology enabling accurate, large-scale carbon management.
The future of carbon accounting lies in transparency: live dashboards, AI-powered accuracy, government mandates, and even consumer-facing tools like product labels.

Carbon accounting is reshaping how organisations approach climate strategy. By measuring direct and indirect emissions, businesses can set credible reduction targets and plan for long-term change. This process transforms sustainability from a vague goal into concrete decision-making. The result is clear emission reduction, stronger emissions reduction pathways, and measurable environmental impact.

This article delves into the history of carbon accounting, and how this has developed into the current day landscape. We jump into the key challenges that businesses, organisations and individuals face, the trends we see emerging. Uncover our 7 predictions for the future of carbon management, from carbon labels on packaging to climate credit scores.

What is the History of Carbon Accounting?

In the late 80s to early 90s, with global warming fears and international climate talks arising, climate scientists emphasized the importance of measuring our GHGs.

Not long after Kyoto, the IPCC (Intergovernmental Panel on Climate Change), a UN-backed scientific body, started making emissions inventories in the form of national reports.

Come 2001, the GHG Protocol released its first corporate framework, a toolkit for companies to report and measure in a standardised way.

With the EU ETS (Emissions Trading Scheme) scheduled to launch in 2005, the large, heavy-emitters began preparing by hiring consultants, engaging auditors and starting inventories.

Mid 2000s, attention shifted from Scope 1 (direct) and Scope 2 (indirect) to a third category that had pretty much gone unnoticed. Scope 3 emissions, the largest of the three, gained traction and forced retailers to demand supplier data beyond in-house operations.

The Current Carbon Accounting Landscape

In today’s landscape, most large companies in developed markets have systems in place to measure Scope 1 and Scope 2. This includes carbon accounting software, plus consultants or internal sustainability teams.

Pressures for Scope 3 are escalating, with regulations from the UK’s SECR to the EU’s CSRD making reporting unavoidable.

To aid the transition from voluntary to mandatory, many of the dominating frameworks (GHG Protocol, CDP, TCFD, SBTi, and more) are aligning to create a consistent system.

Once a messy patchwork of rules, this move makes it easier for software providers to optimise their platforms for everyone, and for companies to understand how to effectively reduce emissions.

Climate Change Challenges

Carbon emissions are the primary driver of global warming. By adding greenhouse gases to the atmosphere, emissions trap heat, raise global temperatures, and trigger cascading effects.

Businesses matter here: while individuals can reduce their footprint, companies operate at a scale where measurement and reduction can make a real difference. Carbon accounting software allows businesses to do so.

Scientists agree that reducing greenhouse gas emissions is essential, but it isn’t enough on its own. Significant amounts of carbon must also be removed from the atmosphere. It’s important that software is sound and accurate, leaving no room for double-counting or greenwashing.

At the same time, climate change brings specific risks that make carbon accounting urgent for businesses, from rising sea levels to biodiversity loss. Each of these disrupt major markets and supply chains, making carbon management not only essential for climate change, but for global economies.

Key Challenges in Carbon Accounting

When it comes to carbon accounting, the variability of methodologies definitely presents challenges.

This need for industry specific precision makes it harder for people to benchmark their environmental performance, track progress over time, identify leaders in the space, and inform stakeholders of consistent data.

When understanding something’s carbon footprint, i.e. a product, a service, or an organisation’s footprint, you must first define what’s being measured. The point here is that different definitions of the unit lead to entirely different carbon footprints, making comparison and accuracy difficult.

When it comes to carbon accounting, defining the emissions’ scope is far from simple. Challenges arise with low data quality, manual data entry, missing data, time lags and more.

Identifying emission factors is challenging because it can be outdated, heavily variable, and values differing between different sources.

Emerging Trends

There are many emerging trends in carbon accounting software aiming to streamline the process, shifting CAS from a convoluted system to a more seamless one.

One of the biggest challenges has always been data collection, and real-time automation is now transforming static annual reports into API-powered dashboards.

This means businesses no longer wait months to see their footprint, they can track changes as they happen. AI has also erupted into CAS, handling anomaly detection, auto-estimation, and eliminating the admin grunt work that once slowed humans down.

Meanwhile, satellites and optical sensors are being used to monitor land use, track deforestation, and reveal whether a business’ supply chain is contributing to environmental damage.

The Role of Technology

Technology is the backbone of carbon accounting. Shifting from voluntary to mandatory, the sheer volume of carbon reporting required cannot be handled manually.

With global supply chains, wades of emissions data, and layers of complex reporting, only technology makes it possible for CAS to be delivered accurately at a major scale.

Without technology, greenwashing can easily rise in self-reporting without any verification or auditing. With tech, digital trails audit every data point, methods used, and force businesses to be accountable.

A primary part of carbon accounting is obtaining emissions data. Data gaps, overestimations, siloed systems and complicated supply chains make it challenging, whereas technology facilitates the seamless aggregation of complex data.

7 Predictions for the Future

1. Live Carbon Dashboards for Shoppers

In today’s world, data and truths are hidden behind black boxes. Shopping is everyday life, economies are thriving, and no one thinks twice about the carbon footprint of their actions.

When you buy a dress, you think about how great you’ll look, not about the sweatshop that made it or the old vehicles that delivered it to your door, burning fuel. Data is tucked away in annual reports and written strategically for investors. Not for everyday consumers.

Now imagine a live carbon dashboard; a shopping cart with a screen that shows you, as you scan your items, exactly how many emissions they carry and where they come from. So you know exactly what you’re buying, who you’re paying, and what values you’re supporting.

This isn’t far off – the tech is already there, and it could be mainstream reality in 5 – 10 years.

2. Climate Credit Scores

Stage one is making companies transparent and accountable for their footprints. When this is standardised and normalised, we will reap the rewards.

But with the planet in this state, individual carbon accounting could too be a far-off reality. With that in mind, it isn’t hard to picture how this could extend to our personal lives.

Imagine carbon credit scores for everyone; alongside getting thorough credit checks for a new mortgage, you also have to pass a carbon rating level.

The glowing issue here would be that if organic is triple the price, low-income demographics are denied basic life perks while others buy their way into a greener score.

In this hypothetical future, however, carbon accounting would likely be globally mandated. That means our cheap, bargain products’ supply chains would be exposed, lowering sales and upping prices.

On the flip side, the genuine companies’ green actions would be illuminated, upping sales and lowering prices.

A dystopian nightmare or a utilitarian solution?

3. Governments Mandate Scope 3 Reporting

Currently, Scope 1 and 2 are a requirement for large companies in developed economies. Scope 3 remains largely voluntary – while taking up the vast majority of overall emissions in some cases.

By extending reporting laws, businesses would be forced to reveal the larger portion of their emissions. The fashion, food, tech, and automotive industries are a few of the many that would take an immense hit from this.

Opaque, vast supply chains would suddenly be brought into light, bringing direct action where it needs to be.

Picture carbon wards in supply chains – clean records getting fast tracked, while polluters business’ plummets as people purchase near identical products from the ones doing it right.

Edging its way into EU and US rules, we can expect this to be mandatory by the early 2030s worldwide.

4. Carbon Labels on Every Package

Currently, there are a handful of brands featuring footprint labels in an unstandardised format.

Imagine if every product label had an extra table alongside the nutritional information to show the product’s exact carbon footprint.

This could be broken down into packaging, transport, production or more. The totals in kg CO₂e could be matched with a traffic light system, allowing for instant consumer judgement.

By the time this could be a reality, carbon accounting would ideally be mandatory, rolled out and widespread. That means that this data is credible, verified and trusted, with no room for greenwashing.

If carbon literacy became pop-to-the-shops normal, it would shape not just awareness, but every purchase we make.

5. Loans Linked to Carbon Intensity

For a company to get a loan in today’s landscape, they look into financial health, credit history, business plans and such.

About 43% of SMEs in the UK are using some form of external finance (which includes bank loans, overdrafts, credit cards etc.) as of Q2 2024.

What if an additional term was the business’ carbon intensity?

If a steel company emitted 1 tonne CO₂ per tonne of steel, they might qualify for a loan of £10 million. If it was 10 tonnes per they instead, they may only get £2 million.

Banks would be allowing sustainable business to thrive, and penalising pollution. In turn, they’d earn more themselves.

With supported companies avoiding carbon taxes, escaping fines, and proving clean supply chains, repayment is safer and stronger.

6. Real-Time Dashboards Replace Annual Reports

Commonplace today is a company curating annual reports of how many emissions they have let off, reduced, offset, and the year’s footprint in depth.

This means that the data can be outdated by the time it’s published. Placed together strategically, the report might appeal largely to the eyes of investors but not so much consumers.

Real-time carbon dashboards for companies wouldn’t be made for anyone in mind, but for full transparency into the company’s actions. Data could come from IoT sensors, APIs, smart meters or more.

This way, carbon data is no longer an annual PR stunt but a live tool with every emission visible, companies are made accountable, and greenwashing is rendered impossible.

7. AI Delivers Accurate Scope 3 Emissions

While making up 70-90% of most companies’ footprints, Scope 3 data is largely based on averages, estimates, patchy sources and overflows of inputs.

With AI technology, massive datasets might be analysed in fractions of time. This would fill in the gaps, pick up anomalies, and determine smart estimates based on masses of data.

When changing the speed, scale and accuracy of carbon accounting, vague estimates transform to accurate figures, and businesses can pinpoint hotspots with precision.

FAQs

What is carbon accounting?

Carbon accounting is a software enabling the measurement, reduction and offsetting of an entire company, building, product or project’s carbon emissions.

Why are there different carbon accounting methods?

There are different carbon accounting methods to accommodate a broad range of companies from tiny startups to conglomerates ensuring carbon accounting is accessible for all.

Is carbon accounting required by law in the UK?

Under SECR (Streamlined Energy and Carbon Reporting), it’s a legal requirement to do carbon accounting if your company is ‘large’: over 250 employees, £36 million in turnover, or £18 million in balance sheet total.

How do businesses become net zero?

They use Carbon Accounting Software to measure and understand their carbon footprint, target and reduce heavy-emitting areas, then offset any unavoidable emissions to achieve carbon goals.

How do I start carbon accounting?

Have any more questions? Book in your own 30-minute free demo at this link!