Carbon accounting is so last year, right? Well, possibly not. Many at the forefront of the sustainability journey started measuring and managing the amount of carbon dioxide their business was emitting many years ago, but many have not yet had the opportunity.
As you would for any improvement you want to make in your business, you first need to understand the current situation. For improvements to your sustainability, carbon accounting will quantify greenhouse gas emissions emitted due to your operations and resources you use so you can determine where the opportunities are to reduce and what your priorities will be for the future. With the new mandatory climate reporting hitting large corporates in the coming fiscal year, businesses are increasingly going to be asked for this data from their supply chains.
Just to be clear, carbon accounting doesn’t have to be done by an Accountant. In fact, it can fall to the procurement team, business improvement team, or a team member that is passionate about sustainability. It does involve numbers so you will need good numeracy.
If you do not have the resources in-house, then net zero carbon consultants like us here at 2XE can help you in:
Carbon accounting is not only about reducing our impact on the environment, but it is also about decoupling business growth from the over-reliance on fossil fuels. By having a process to measure and manage your emissions, you can plan to reduce your business exposure to climate-related risks and promote your business chance of success in the medium- and long-term.
When you hear about ‘net zero’ targets and strategies, it is about limiting the greenhouse gas (GHG) emissions into the earth’s atmosphere. At its very core, the carbon accounting number crunching will help you understand your use of resources (energy, water and waste). You use this usage data along with standardised emission factors to calculate your GHG emissions.
Carbon accounting is not solely about environmental impact; it is crucial for financial performance. In the short term, it helps identify inefficiencies and achieve cost savings through improved resource efficiency. In the medium and long term, it enables businesses to understand and mitigate exposure to various climate-related risks, both physical and transitional. This proactive approach not only supports sustainability goals but also enhances economic resilience and financial stability
Increasingly there is a connection between the ‘E’ and the ‘S’ in ESG. It goes hand in hand, for example when organisations reduce their emissions, that ultimately improves air quality, leading to better health for us all. We are also seeing a significant push from consumers and the market for real action against climate change. So emissions accounting is the first step towards addressing that.
Ultimately, this process is about rallying the team behind the sustainability journey and emphasising the importance of carbon accounting, even if not everyone is directly involved with the numbers. It is about creating systematic processes that provide the C-Suite, Board, and investors with the insights and data they need to make informed decisions.
So, before you dive into the utility bills to get your consumption data, get up to speed on:
You need to determine your organisational and operational boundaries. The first one is simple if you are a solely owned single business, however it does get more complicated if you have subsidiaries or joint ventures, for example. The operational boundary is where ‘scopes’ of emissions come into the conversation. The operational boundary defines which operations and assets (such as buildings and the vehicle fleet), both direct and indirect, are included in the company’s GHG inventory.
Scope 1: Direct emissions from owned or controlled sources (e.g. company vehicles or on-site fuel combustion).
Scope 2: Indirect emissions from the consumption of purchased electricity.
Scope 3: Other indirect emissions in the value chain, including supply chain and product lifecycle emissions.
There are plenty of platforms that can support you in your carbon accounting, including our own net zero management platform however it can also be as simple as using a spreadsheet, especially if you are just starting out.
We have done a lot of research into this, particularly with the explosion of technologies in the market for businesses to subscribe to. What we have found is that there are many platforms to help you input and track historical data, but what about looking forward? What if you are considering expanding your asset base? What impact does that have on your emissions into the future? Scenario analysis is what we are working on here at 2XE and we can’t wait to share more news with you about this soon … watch this space.
Regulatory change is already happening in this area with the new mandatory climate reporting at the national level. While this starts at the ‘big end of town’ with listed companies and larger financial institutions, these organisations will be asking their value chain for their emissions data as part of their Scope 3 reporting … if you provide products or services to these larger companies, then you’ll want to be capturing your emissions already and having an emissions reduction strategy in place. Carbon accounting will need to be your best friend.
The changes in the regulatory environment are, in part, a push from investors for greater transparency of carbon emissions and reduction efforts. Increasingly, they are using ESG criteria to make investment decisions.
The evidence is mounting that consumers, particularly younger demographics, are increasingly seeking more sustainable products and services. And that they are prepared to pay more for them. This is an opportunity for your business.
While yes there are distinctions between the terminology we use, like what is carbon accounting, what is a net zero target, and what it means to be sustainable. These processes will usually all involve numbers.
We know that a carbon accounting process will give you a solid understanding of how you use resources and this will benefit your operations. And for broader industry and supply chain benefit, sharing your emissions data across your supply chain helps everyone. Knowledge is power, right?
