Carbon Accounting Overview
What is Carbon Accounting
Carbon accounting, also known as “greenhouse gas accounting”, refers to the methods used to measure and analyze a business’ carbon emissions.
Carbon accounting helps companies find where their emissions come from, so they can fully understand their carbon footprint and set efficient reduction plans.
This is the first step in a business’ sustainability journey and is crucial to achieving Net Zero.
What are the 3 steps of Carbon Accounting
In order to effectively reduce and report on its carbon footprint, a company must follow a 3-step process:
- Measuring emissions:
By using emission factors, carbon accounting tools can measure how much carbon a company emits through its business activities. This includes emissions from scope 1, scope 2, and scope 3;
- Analyzing emissions hotspots:
In order to lower its carbon footprint where it matters most, a company needs to understand where its emissions come from. These can vary greatly across companies and industries: e.g. insurance companies vs. car manufacturers;
- Reducing carbon footprint:
Companies can choose to work with sustainable solutions to lower their emissions after determining their carbon footprint, such as deploying zero-emission cloud solutions for software, or carbon-neutral delivery for e-commerce.
Why is Carbon Accounting Important for Businesses
Become more competitive
New laws on carbon reporting are being announced within both the US and the EU, broadening the scope of companies that have to report on their emissions to every publicly traded company in the United States as well as more than 50,000 businesses in Europe.
Large organizations' decision-making process when selecting suppliers, consultants, and service providers will be significantly impacted by the pressure placed on them to report on their scope 3 emissions.
Already, measuring emissions generates more customer trust.
In the upcoming business environment, a company that makes an effort to report on its carbon emissions and takes action to reduce them will have a considerable advantage.
Attract more opportunities
Implementing a carbon accounting strategy can help companies attract more opportunities, in the form of new customers, partnerships, investors, and talent.
By using autonomous reporting tools, businesses can effectively communicate their actions and commitments to fight climate change. Carbon accounting helps companies quantify and display their achievements in their journey to reach Net Zero, rewarding their efforts to reduce their carbon footprint across Scope 1 to 3.
What Are Scope 1, 2 & 3 in Carbon Accounting
Scope 1 emissions
Direct emissions produced at the firm level by a company are referred to as scope 1 emissions. These emissions are direct GHG emissions from company-owned sources.
Examples include stationary combustion (such as burning fuel for generators), mobile combustion (such as burning fuel in business cars), onsite energy consumption in buildings, and fugitive or process emissions.
Simply put, anything the company consumes and burns that results in GHG emissions.
Scope 2 emissions
The indirect emissions from purchased energy are covered by scope 2.
Even though these emissions were produced elsewhere, in the beginning, they are still a company's responsibility for emissions and must be taken into account as such. In the end, the energy would not have been produced in the first place if the corporation hadn't used it.
Purchased electricity, heating, or cooling are a few instances of scope 2 emissions. These emissions are easily minimized, for example, by using more environmentally friendly energy sources.
Scope 3 emissions
All other indirect emissions fall into scope 3. It includes every carbon emission across a company’s value chain. Scope 3 emissions often account for more than 90% of a company's carbon footprint.
Although these emissions occur from sources not owned by the company, they are a direct consequence of the company’s activities.
These include waste produced during operations, emissions from business travel, or also emissions produced throughout the supply chain, such as acquired materials and more.
How To Get Started with Carbon Accounting
Finding Autonomous Climate Reporting Tools
Carbon accounting can be a heavy process, gathering endless amounts of data and training employees to monitor every detail of their activities.
Moreover, a recent study showed that it is SMEs that struggle the most with implementing positive climate actions into their business activities because of a lack of the right resources.
However, by using autonomous climate reporting software, such as Coolset, SMEs can now effectively and rapidly lower their carbon footprint without wasting their precious time and money on expensive and exhausting audits.
Sharing Emission Analysis with Employees
After having measured its carbon emissions, a company can analyze and understand its carbon footprint and identify emissions hotspots.
Sharing this analysis with all teams across the organization is crucial to stimulate awareness of sustainability and collective motivation to reduce the company’s carbon emissions.
It is also a great way to add value and sense to the work of a company’s employees and partners, as the state of our climate has become one of the top priorities in public opinion. More talents are also now choosing a job based on the company’s transparency about its carbon footprint.
Building a Reduction Plan to Achieve Net Zero
Now that a business has measured and analyzed its carbon emissions, it is time to build a reduction plan in order to become climate positive.
Businesses should use carbon accounting software to understand how much carbon emissions they need to remove from each of their activities. By doing so, they can create a clear and shareable reduction scenario.
Find out what you can do to reduce your business’s carbon emissions.
Carbon accounting is an unavoidable part of a company’s sustainability journey. More than that, considering the actual state of the climate, we all need to participate in the fight to reduce global carbon emissions.
This includes businesses of all sizes and will bring various opportunities if implemented well.
If after reading this article, you want to learn more about carbon accounting and how you can implement it in your company, contact us. We’ve developed the first all-in-one decarbonization platform for SMEs.