Carbon Accounting (also known as Greenhouse Gas Accounting) is a form of measurement that allows companies to measure, analyse and track how many Greenhouse Gas (GHG) emissions are released into the atmosphere every year.
This is extremely important to both government and corporation net-zero targets because an accurate assessment of the current level is essential to any plan to effectively reduce emissions and achieving sustainability goals (this is the reason we created our carbon accounting software!).
With Net Zero emissions becoming an ever more important goal, Carbon Accounting enables businesses to measure their carbon footprint and work towards this goal.
A Carbon Footprint is the measurement of how many greenhouse gases are released into the atmosphere.
Carbon footprints can be attributed to a company or a corporation, as well as more specific categories like activities and products.
The measurement with which people use to gauge this is Carbon Dioxide Equivalent (CO2e). Although this is named after Carbon Dioxide it applies to all greenhouse gases and is the metric with which emissions are measured against.
This includes direct emissions such as travel and manufacturing but it also includes indirect emissions as well. For example if you are making a specific product, you have to factor in the full life cycle with which it applies to.
Essentially it includes all emissions that came from producing the raw materials to create your product and all emissions that come from how people use the product. A good example is the automotive industry.
Greenhouse Gas emissions are gases that trap heat when they are released into the atmosphere contributing to climate change and global warming.
The main greenhouse gas is Carbon Dioxide (CO2) however there are others which, although released in much smaller quantities, are much more harmful.
The main four types of greenhouse gases are as follows:
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Energy Consumption can be broken down into two main types of emissions, specifically direct and indirect.
When it comes to waste generation, there are two significant contributors to the Greenhouse emissions produced, we have the landfill element, and then we have the waste treatment plants.
Water usage has a much greater impact on Carbon emissions than a lot of people realise. There are three main areas that should be noted. We have energy for water supply and energy for wastewater treatment.
When it comes to company emissions, transport is one of the biggest contributors to a brands CO2e and can be broken down into four main areas:
The process of manufacturing is a big contributor to Carbon emissions, most prominently due to the energy-intensive. It can be broken down into three main categories:
Finally we have Carbon emissions from the supply chain itself, specifically including everything from raw material extraction all the way through to product delivery, with each stage also contributing to emissions.
Once a company or organisation has fully accounted for the Carbon emissions there are two main options when it comes to reducing or offsetting the amount of Carbon that has been released. Those options are Carbon Offsets and Carbon Sequestration.
Carbon Offsets are the original Offset scheme that the BNG scheme was modelled on. The premise is simple, a reduction in GHG emissions can happen in one place or location to compensate for carbon emissions produced in another spot.
These are measured through the same metric of CO2e and are bought and sold as assets through various market systems. These are done through various reduction projects aimed at reducing as many emissions as possible. Good examples of this are things like reforestation efforts, methane capture from landfills or renewable energy projects such as wind, solar etc.
To ensure the quality and validity of these carbon credits they are then verified by independent third parties to ensure the legitimacy and to try and avoid false credits being sold. Once all verified, they are then able to be traded as credits and companies and individuals can buy them to offset their various GHG emissions.
If this is done properly the benefits can be substantial, as they can play a strong role in achieving Carbon neutrality and has the added economic benefit of encouraging investment in various sustainable projects.
The challenges are that there have been a lot of examples of double-counting of reductions as well as questions being raised around the credibility and additionality of projects. A good example of this is people promising to not cut down forests that were never going to be cut down in the first place.
The second option is Carbon Sequestration. This is the process of capturing CO2 from the atmosphere and storing it. In this way we reduce the amount of CO2 in the atmosphere and reduce the impact on climate change.
The best and most efficient way is biological sequestration. This can be done through forests and woodland, with trees and plants absorbing Carbon Dioxide and storing it within its biomass reducing CO2.
Alongside this you also have geological sequestration. This is where you utilise things like underground storage where you take CO2 from industrial processes, compress it and inject it into rock formations below ground, thus reducing atmospheric CO2.
Geological also includes EOR which stands for Enhanced Oil Recovery where CO2 is deliberately placed into oil fields to help the extraction of more oil before also being stored underground.
Finally, you also have something called technological sequestration. Direct air capture as well as carbon capture are both options from a technological perspective that allow the storage of CO2 before it reaches the atmosphere.
The benefits of sequestration are significant. It can have an enormous impact on reducing the CO2 in the atmosphere with biological in particular such as reforestation having direct other environmental benefits also.
However the technological methods can be extremely expensive and when it comes to geological storage there is the risk of leaks if not implemented correctly. The importance of all of these methods lies in monitoring and accountability.
There are a variety of Carbon Accounting methodologies and standards, the most important of which are as follows:
The GHG Protocol is the most widely used carbon accounting method internationally for both government and leaders to understand, measure and manage their GHG emissions.
ISO 14064 is a framework that both measures and reports greenhouse gas emissions and removals
The Carbon Disclosure Project is a specific disclosure system that enables all participating companies, states, regions, or countries to measure and manage their environmental impacts including their Carbon emissions.
The Climate Registry provides businesses and companies with tools and resources to measure and reduce their Carbon emissions and other GHG that work across different sectors and borders.
The GRI is a set of standards that helps companies and corporations understand exactly what their environmental impact is, including their Carbon emissions, and then report them
Finally we have the Carbon Trust Standard which certifies what the organisations measure, manage and reduce when it comes to their Carbon emissions and improving the environmental impact
Supplier-specific data method is a Scope 3 emissions calculation method. It uses emission numbers and data directly from suppliers to calculate the GHG emissions that are associated with the products or services that they supply. The aim of this method is to make it that much more accurate and be even more granular to get the actual supplier information.
The benefit of going with something like this is that it is a much more accurate way to approach what is traditionally the hardest part of the process. It also provides a much more transparent understanding of the specific emission sources in the supply chain. Because of this, suppliers are encouraged to take on a more proactive role in managing and reducing their emissions which has a ripple effect on the reduction efforts.
The challenge to this is that, logistically, some suppliers may lack the skill set or even just be unwilling to provide such data. It is also a lot of work to gather the necessary emissions data as well as ensure consistency due to multiple suppliers being involved. Finally there is a secrecy element as many companies are right concerned about privacy and sharing data.
Activity-based method, in the context of carbon accounting, involves calculating Carbon Dioxide and other GHG emissions based on the activities or processes that produce the relevant GHG. Activities include energy use, waste generation and some of the other activities that are mentioned on this page above.
The benefit of using this way is that it provides a very detailed and accurate emissions breakdown. It also makes it easier to identify the areas that are releasing the most emissions making reduction strategies that much more effective.
The downside is that it is a lot of work and requires a significant amount of data gathering and then also analysing the results.
The spend-based method, rather than being based on activities, is focused on the actual financial cost of using certain goods and services. It issues the economics to factor in emission factors to infer the amount of emissions based on monetary spending.
The benefit of this is that it is much easier to implement when detailed enough data is not available. It allows for the provision of broad estimation of emissions and so is particularly useful when it comes to initial assessments and organisations with less direct information. It also requires less data gathering which can be extremely time-consuming.
The challenge is that this approach is less accurate and specific than the activity-based version. Alongside this, the reliance on economic emissions factors can not always be accurate as they vary significantly depending on market forces.
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Scope 1, Scope 2 and Scope 3 are the three main categories when it comes to Carbon Accountancy and are the three ways with which you can categorise each greenhouse gas (GHG) emission of the company or organisation in question. They are the cornerstones of the GHG Protocol which is the Internationally acclaimed standard when it comes to measuring these types of emissions.
Scope 1 is the easiest of all a company’s Carbon emissions to track and control. These are the emissions that are directly caused and released due to the company’s activities. Good examples of these are as follows:
Scope 2 covers all indirect CO2 or GHG emissions from the generation of owned sources. This means any activity that happens to things before they reach the company in question. The most common example of this is in things like the generation of purchased electricity as well as any heating or cooling required as well.
Scope 3 is similar to Scope 2 in that it categorises indirect emissions, however unlike Scope 2, it focuses on the emissions that happen in the journey after the product or service in question leaves the company in question’s control. Scope 3 is often the largest category and also the most complicated and difficult to fully account for due to the range of emission sources and the complexity of getting the right data.
Good examples of what would come under Scope 3 are as follows:
Corporate carbon accounting is a hugely important part of a company’s approach these days and provides a huge amount of benefits.
An internal reporting for Carbon accounting serves several specific goals. The first is providing a purpose, allowing to inform specific decision making, tracking performance to see how the business is doing as well as to help identify operational improvements.
Alongside this it provides internal stakeholders, specifically management and also employees, with access to information as to how it is all going. Internal reports also provide the content that is required, details data, confidential information and action plans against each point. The priority is honesty. It also tends to follow a more flexible layout as it isn’t required to abide by regulatory standards that external reports do and it allows a company to utilise its personality.
External reports are a much more formal report as to what it is going on. The priority is to ensure compliance is met and manage any reputational benefits or negatives that come about from it. It is also to ensure transparency as greenwashing is a common accusation and the external report is a great way to counteract that.
It also provides the reassurance to stakeholders including investors that the company is on the promised track, providing financial stability.
The data is often in a more summary format providing the relevant and most necessary details with more data availability upon request. It is often released annually and is in a prescripted format based on regulatory requirements, often requiring third parties to verify that everything has been disclosed honestly and accurately.
This is an overview of the carbon accounting process:
How do you actually identify the emission sources? First, you have to define the actual boundaries.
This can be done through either the equity share approach or a control approach. The former is when emissions are accounted for based on the share of the equity of the operation. The latter is where emissions are accounted for only if the business in question has financial or operational control over the operation.
But how do you actually identify specific emission sources and how do you actually measure carbon emissions?
You have several different types of specific emission sources:
How it works is you will collect data on everything from fuel usage, raw material input, and waste output as just some examples and you then use specific measurement tools such as meters, sensors and emission factors to quantify emissions.
You then use these to calculate and convert all of the activity data into CO2 equivalents. Using tools such as the GGP (Greenhouse Gas Protocol) the EPA’s emission factors as well as other regional databases you can then calculate exactly how many emissions you have as a CO2e Unit equivalent.
Reporting is one of the most important parts of the process for the following reasons:
The first point to note is that more and more, Carbon Accounting is becoming a compulsory piece of auditing for a lot of companies.
However, beyond that, accuarate carbon accounting is a critical tool for businesses in today’s sustainability-focused world.
It involves tracking, measuring, and managing greenhouse gas (GHG) emissions to understand a company’s environmental impact.
As climate change continues to be a global concern, carbon accounting helps organisations mitigate their environmental footprint, reduce carbon emissions, comply with regulations, and meet growing demands from stakeholders for transparency.
For one thing, as touched on above, it is compulsory for a lot of sectors and countries. However, beyond that businesses should embrace carbon accounting to remain competitive and responsible in an evolving market.
With increasing regulatory pressures, investor expectations, and consumer demand for sustainable practices, tracking carbon emissions is a key revenue-generating strategy even when it is optional.
Carbon accounting helps businesses comply with regulations, manage risk, and enhance their market position by demonstrating environmental responsibility which leads to positive embracing throughout different demographics. In doing so, they build resilience against climate-related disruptions and future-proof their operations.
Accurate carbon accounting is key for any company to reduce their carbon footprint (total greenhouse gas emissions). By quantifying emissions, companies can set tangible goals for reduction and identify key areas to improve. Whether it’s transitioning to electric vehicles for transportation, upgrading to energy-efficient equipment, or sourcing materials sustainably, carbon accounting offers actionable insights into where the biggest gains can be made. Over time, this leads to reduced environmental impact and better alignment with global sustainability goals. The best part of it is that not only is it better for the environment it has a hugely positive impact on a company’s bottom line.
One of the primary benefits of carbon accounting is cost savings. By tracking energy usage, fuel consumption, and other carbon-intensive activities, companies can identify inefficiencies and areas where emissions—and costs—can be reduced. Simple steps like optimising energy use in operations, switching to renewable energy, or improving logistics efficiency can lead to significant savings. Over time, minimising waste and unnecessary energy consumption reduces operational expenses, making the business leaner and more profitable.
Alongside this, showing a sustainable approach to business not only increases the calibre of recruitment and longevity of how long people choose to stay at the organisation but brands that have a positive green impact are a huge buying consideration for many consumers showing it has a direct impact on revenue.
Carbon accounting provides the data needed to implement effective mitigation strategies. Once businesses understand their emissions profile, they can prioritise actions to reduce their carbon footprint. Whether switching to greener energy sources, investing in energy-efficient technologies, or restructuring supply chains to reduce Scope 3 emissions, carbon accounting helps businesses take targeted actions. This type of approach allows a company to be proactive, reducing potential challenges further down the line and allowing them to get in front of their highest emission sources. In this day and age, ignorance is not the defence it once was and it is important for companies to be aware.
A crucial function of carbon accounting is the ability to monitor and review progress over time. Carbon Accounting is the cornerstone of this because only when you fully understand how emissions work and where you are at as an organisation can you then begin to implement emission reduction strategies, carbon accounting tools help them track improvements and adjust their approach as necessary. Regular monitoring ensures that companies stay on course to meet their sustainability goals and adjust quickly if strategies are not yielding the expected results. This process also supports better decision-making, as businesses can continually optimise their efforts based on real-time data rather than guesswork which is where misinformation can sneak into the public discourse.
As governments worldwide impose stricter regulations on reducing carbon emissions, businesses must ensure regulatory compliance. Carbon accounting helps organisations stay ahead of the curve by providing the necessary data to meet reporting obligations, such as those outlined in the European Union’s Emissions Trading Scheme (ETS) or the UK’s Streamlined Energy and Carbon Reporting (SECR). Carbon Accounting is the best way to stay on the right side of this. Not least because, by maintaining accurate and transparent emissions data, companies can avoid penalties and fines, and also avoid any reputational damage associated with non-compliance which can have an extremely negative impact on sales and revenue.
Effective risk management is another critical benefit of carbon accounting. Climate change poses risks to business operations, supply chains, and financial performance. By understanding their emissions and environmental impact, companies can better anticipate regulatory changes, carbon pricing mechanisms, and the physical risks of climate change, such as extreme weather events. Carbon accounting is one of those rare options where not only will it be a revenue driver for the business, but it actively helps the world in the face of environmental challenges. Definition of a win-win!
Businesses that adopt carbon accounting early steal a march on their various competitors. Not only, as mentioned above, do consumers significantly prefer brands that are transparent and proactive in this regard, but it also makes a huge difference to morale internally. As consumers increasingly prefer sustainable brands and governments introduce more stringent regulations, companies that can demonstrate a low-carbon footprint or significant progress toward reducing emissions will stand out. These businesses are better positioned to win contracts, gain customer loyalty, and attract environmentally conscious investors, giving them a clear edge over competitors lagging in sustainability efforts.
Stakeholders come in many forms these days. Whether investors, customers, and employees, have rising expectations for corporate responsibility and will price assets accordingly. Carbon accounting allows companies to meet stakeholder expectations for environmental transparency. Investors are increasingly looking for ESG (Environmental, Social, and Governance) performance as a measure of a company’s long-term viability, while consumers prefer brands that prioritise sustainability. Employees, too, want to work for companies that reflect their values. Transparent carbon accounting helps businesses build trust and credibility with all stakeholders.
A company’s brand reputation is increasingly tied to its environmental impact. Businesses that can demonstrate a strong commitment to reducing emissions through carbon accounting build a reputation for responsibility and leadership in sustainability. It is important to be proactive and publish with easy to find documentation as consumer attitudes to organisations these days are very much of the ‘guilty until proven innocent’ mindset. Companies that ignore carbon management risk damaging their brand, facing backlash from consumers, investors, and the media. By adopting carbon accounting practices, businesses not only reduce their environmental footprint but also strengthen their market position and public image.
Carbon accounting plays a critical role in attracting investment. As more investors incorporate ESG criteria into their decision-making processes, companies that can showcase measurable sustainability efforts are more likely to secure funding. In fact, it is likely that brands with no carbon accounting whatsoever will likely be rejected straight out. Carbon accounting provides the verifiable data that investors need to assess a company’s environmental performance and its long-term viability in a low-carbon economy. Businesses that actively reduce their carbon footprint are seen as lower risk and more attractive to capital providers.
Adopting carbon accounting encourages innovation within organisations. By identifying inefficiencies and areas for improvement, companies are driven to develop new technologies, products, or processes that reduce emissions. Whether it’s through innovative supply chain management, developing carbon-neutral products, or adopting cutting-edge energy technologies, carbon accounting can spark creativity and forward-thinking solutions that enhance both sustainability and competitiveness.
Finally, carbon accounting is vital for ensuring long-term sustainability for all of us. By monitoring and managing emissions, businesses can make informed decisions that align with future environmental trends and reduce their exposure to climate-related risks. Over time, these efforts help businesses build more resilient operations, foster innovation, and meet global sustainability goals. In doing so, they contribute to a more sustainable future while securing their place in an increasingly green economy.
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