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Carbon accounting is the foundation of tangible climate impact. Measuring your organization’s carbon footprint allows you to identify your largest sources of emissions, take informed action to reduce your environmental impact, and optimize resource allocation for the greatest carbon impact. In this article, we will explore what organizations should be aware of–from the importance of measurement, to understanding how to get started, and ultimately how to achieve the benefits of carbon accounting. 

What is Carbon Accounting?

Carbon accounting is simply quantifying carbon emissions from various activities. It has many names, some of which you may be more familiar with than others: carbon measurement, greenhouse gas accounting, GHG inventory, GHG accounting, emissions management, a carbon footprint, and more.

Despite carbon being included in the name, carbon accounting actually measures all of the greenhouse gasses (GHGs) included under the 1997 Kyoto Protocol (the first international treaty to limit emissions). Through carbon accounting, all of the GHGs are converted into a standard unit of measure called carbon dioxide equivalent (CO2e) to make easy comparisons across emissions producing activities (e.g. combusting fuel in your company-owned vehicle vs. the emissions from your business travel), organizations, and industries. Because carbon dioxide is the most prominent GHG, all other GHGs are scaled to its impact. For more information on GHGs, visit this link.

Carbon accounting platforms like Climate Vault can help you measure your carbon emissions and automatically make the conversion to CO2e for you.

Why Measure Your Organization’s Carbon Footprint?

Measuring your organization’s carbon footprint offers several key benefits:

  1. Impact Awareness: Measuring your organization’s carbon footprint is the first step towards understanding the extent of impact your organization may have on climate change. Carbon accounting provides valuable insights, such as identifying opportunities for improving operational efficiency and environmental performance (energy efficiency = cost savings). This can help escalate sustainability initiatives within your organization.
  2. Compliance with Regulations: Until recently, measuring the carbon footprint of a business was primarily a voluntary best practice. However, globally there are a number of disclosure regulations coming into force, or are in development, that are shifting previously voluntary reporting into mandated emissions disclosures. By measuring your carbon footprint, you ensure compliance with these regulations and avoid potential penalties. Even if you’re not a business that is directly mandated to publicly disclose your emissions, you may be in the value chain of a business that is regulated–this means your regulated client may approach you for emissions data so they can be in compliance.
  3. Target Setting and Progress Tracking: Having accurate carbon accounting in place is the foundation of setting, and measuring progress toward, tangible climate goals and targets. Measuring your emissions enables your organization to compare performance year over year against industry benchmarks, best practices, and peers. This facilitates identifying mitigation opportunities, learning from others, driving continuous improvement, and increasing your sustainability ambitions.
  4. Reputation and Brand Image: Measuring your emissions and implementing strategies to reduce your carbon footprint demonstrates your commitment to sustainability, enhances your brand’s reputation, and can give you a competitive advantage.Increasingly, stakeholders are demanding transparency and action on an organization’s climate-related risks and opportunities, putting pressure on companies to publicly share data and metrics on their climate impact. Customers, employees, and stakeholders are prioritizing environmental issues and are more likely to support organizations that take proactive steps to reduce their carbon footprint. 

Carbon Accounting Considerations 

When it comes to measuring your organization’s carbon footprint, there are several elements to consider:

  1. Setting Organizational and Operational Boundaries: When creating a GHG inventory, it’s important to begin by determining which company operations you’ll be measuring emissions for and which emissions sources you’ll include. This is especially important for complex business structures such as: subsidiaries, joint ventures, and franchises. Boundaries help you measure emissions consistently throughout the company.
  2. Carbon Accounting Tools and Software: Utilizing carbon accounting tools and software help streamline and automate the data collection and analysis process. These tools calculate emissions, identify emissions hotspots, track progress, and generate reports in line with international standards and reporting frameworks.
  3. Data Collection + Stakeholder Engagement: Because emissions data is most often decentralized, carbon accounting requires working with a diverse set of stakeholders from all facets of your organization. You will need to engage the relevant individuals who can provide data for: fuel consumption, electricity usage, transportation and logistics, waste management, supply chain purchases, and more. 
  4. Internal Controls: When dealing with the complexity of accounting for your organization’s carbon, it’s vital to stay organized, so you will want to create clearly documented data collection protocols and processes, and systematic checks to ensure data accuracy, accountability, and consistency. Controls help reduce risk.
  5. Verification: With several upcoming regulations requiring assurance on disclosed GHG emissions, your organization, if not already subject to the regulations, may want to engage a third-party assurance provider to review and verify your calculations.

Sources of Emissions in Carbon Accounting

Emissions in inventories are organized into 3 scopes.

  • Scope 1 emissions refer to direct emissions that come from the day-to-day activities involved in running your organization in assets that you own or control, such as powering your facilities and your vehicle fleet. Your scope 1 emissions may involve the fuel combusted in your boilers, fugitive emissions from refrigerants or manufacturing processes, and/or emissions from the combustion of fossil fuels in company-owned vehicles. Data for scope 1 emissions is easy to source as it’s typically fuel purchase records.
  • Scope 2 emissions include indirect emissions associated with the electricity, heat, and/or steam that you purchase to run your business. Scope 2 emissions are considered indirect emissions because even though you consume the electricity on-site, the emissions are generated off-site, where you do not have direct control. Data for scope 2 emissions is easy to source as it’s typically utility bills.
  • Scope 3 emissions are indirect emissions from upstream and downstream value chain activities outside the organization’s control, such as purchases from suppliers, operational waste, and employee commuting. It’s important to note that scope 3 emissions are consequences of the activities of an organization, but occur from sources that are not owned or controlled by the reporting organization. Therefore, scope 3 emissions are notorious for being more challenging to gather data on, quantify, and address.

Additionally, according to the Greenhouse Gas Protocol (GHGP), in some industries, scope 3 emissions can be up to 90% of an organization’s total emissions. Because they typically represent the largest contributor to your environmental impact, this makes measuring and understanding your scope 3 emissions very important.

There are 15 categories of scope 3 emissions, but not all categories may be material to your business. Scope 3 emissions are also divided into upstream activities (what it takes to make your product/service) and downstream activities (what it takes to consume your product/service).

Challenges and Limitations

Measuring your organization’s carbon footprint may come with challenges and limitations:

  1. Data Accuracy and Availability: Reliable and accurate data collection can be challenging, especially for complex operations and supply chains. Collaborate with stakeholders early in your carbon accounting, invest time developing and documenting  clear internal controls for your data collection processes to ensure accuracy, and consider carbon accounting tools and software to help.
  2. Complexities of Different Industries: Different industries have unique emission sources and challenges. It’s crucial to consider industry-specific emissions factors and establish appropriate measurement methodologies. Carbon accounting tools like Climate Vault can help you manage these complex inputs to help you simplify the measurement process.
  3. International Standards and Reporting Frameworks: Adhering to international standards, reporting frameworks, and/or regulations can be complex due to varying requirements and guidelines. Be sure to stay up to date with the latest standards and frameworks relevant to your organization, or work with a solutions provider who can help advise you. 

Vault Your Business Forward

Measuring your organization’s carbon emissions is the crucial foundation of any climate action strategy. By understanding and quantifying your carbon emissions, you gain valuable insights that can drive meaningful action towards mitigating your climate impact while also identifying cost savings opportunities in your operations. Now that you have an understanding of general carbon accounting, you’re ready to embrace the challenge, set ambitious goals, and collaborate with stakeholders to build a low carbon future.

Climate Vault can help you measure, reduce, and remove your carbon footprint. Ready to get started? Talk to us.

Climate Vault Solutions simplifies your carbon accounting so that you can spend more time on what really matters: taking steps to reduce your organization’s climate impact, identifying opportunities, and vaulting your business forward.