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Finances are tricky to navigate when running a business, but did you know that keeping track of more than just your money, like carbon accounting, is just as important to monitor?
Accurate carbon accounting can help you and your company work towards a greener future and better environmental standards – such as developing an Environmental Management System or acquiring an ISO 14001 certification.
Why is carbon accounting a useful tactic to ensure your company is benefiting the environment?
👉 In this article, we'll explain what carbon accounting is, the methods used for carbon accounting, and how your company can get started with carbon accounting.
Carbon accounting refers to the method used to calculate the amount of carbon dioxide emissions a business produces. Organization often refer to a third party to help them with carbon accounting to reduce their greenhouse gas emissions, carbon emissions, and indirect emissions via various carbon accounting methods.
👉 Carbon accounting is something referred to as greenhouse gas accounting.
Carbon accounting, sometimes referred to as greenhouse gas accounting – is the process in which a company measures the level of carbon dioxide emissions they are responsible for so that they may equally and fairly trade carbon credits between states, companies, and individuals in the carbon market.
💡 Calculating your company's GHG emissions and overall carbon footprint often requires the collection of precise emissions data regarding both your direct and indirect emissions. this can prove challenging but luckily – there are several available types of carbon accounting software to choose from to make calculating your total greenhouse gas emissions easier, including our own platform at Greenly!
Overview of Greenly's interface for offset projects
Carbon accounting is important as it impact our environment, society, and even our global economy.
Here's a breakdown why carbon accounting and reporting is becoming more crucial by the day:
👉 Overall, carbon accounting is important as it encourages companies to better understand their supply chain, scope 3 emissions, and total greenhouse gases produced to make better business decisions for the planet, people, and industry as a whole moving forward.
Several companies around the world have implemented the use of carbon accounting, most often by choosing a carbon accounting software or platform most suitable for their business – examples of these companies include Microsoft, Google, and Apple.
Here is a breakdown of how these three big name companies make the most of carbon accounting:
Microsoft has made their sustainability efforts well known via the use of carbon accounting, such as having pledged to become carbon negative by 2030 and by using extensive carbon accounting measure, monitor, and reduce their emissions. In addition to this, Microsoft is exceptionally interested in renewable energy, energy efficiency, and carbon removal projects – having invested in all three.
Google has also been a well-known leader in the game of sustainability, seeing as they are working towards operating on 100% renewable energy and become carbon-free by 2030. Google uses carbon accounting and their own emission factors to calculate their greenhouse gas emissions. In addition to calculating their GHG emissions, Google has released annual reports to remain transparent with their users, investors, and other stakeholders – as well as having invested in renewable energy projects to boost energy efficiency.
Lastly, Apple is well-aware of their global warming potential and has made a substantial effort to mitigate excess GHG emissions and other indirect emissions. For instance, Apple is working towards carbon neutrality across its entire supply chain and product life cycle by 2030. They also encourage users to make use of their electronic trade-in program before purchasing a new iPhone or laptop to help mitigate waste and boost sales in refurbished products.
👉 In conclusion, carbon accounting is becoming an essential tool for monitor, manage, and mitigate a negative environmental impact created on behalf of businesses. Also, carbon accounting can reap , economic benefits, help companies avoid legal fines, adhere to good CSR policies, and grow more appealing to future customers and investors. Ultimately, carbon accounting can help us to fight against climate change, promote sustainable development, and help keep businesses relevant.
The main goal of carbon accounting is to assign a set value to the carbon dioxide and greenhouse gas emissions produced so that they can be accurately, numerically depicted as a financial value in the carbon market.
Additional key objectives of carbon accounting include:
💡Remember, the Greenhouse Gas Protocol was developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD).
👉 Because so many companies are trying to reduce their carbon footprint and work towards net-zero carbon emissions, carbon accounting helps to serve as a quantifiable measure that a company or individual can be held accountable for – such as their direct emissions, scope 3 emissions, and other greenhouse gases emitted.
Carbon accounting solely refers to the process of measuring the amount of greenhouse gas emissions a company is responsible for producing, whereas carbon assessment is more complex.
💡 Greenly can offer a carbon assessment to our clients to help support them in the transition to be more Eco-friendly.
Basically, carbon accounting is nothing more than a number. Carbon accounting is like getting a test score back. Some people will get a bad grade on their last exam, and have newfound motivation to want to do better. For others, the poor mark is nothing more than that – and it won’t provoke any action or concern for potential improvement.
👉 Carbon accounting doesn’t require someone to reduce their carbon emissions, whereas a carbon assessment insinuates that one would like to alleviate their carbon footprint – as it is the process of using the data revealed through carbon accounting as an effort to implement new, better environmental habits.
Another way to think of the difference between carbon accounting and carbon assessment is like budgeting your money for the month.
Carbon accounting is like the fixed-amount of money you receive for the month. That guaranteed income is nothing more than a number, and can’t persuade you to adjust your spending habits – but it gives you the information necessary to create a feasible, monthly expenditure plan.
Carbon assessment is like the process of making a budget chart, making it very similar to financial accounting – but you can only proceed with the carbon accounting process if you have the data for quantifying emissions. For carbon accounting, this necessary information is understanding greenhouse gas inventories, emissions factors, and your company's emissions – which is similar to needing to understand your monthly salary to create a fiscal budget in under a financial scenario.
There are two main methods used in carbon accounting.
The first approach to carbon accounting is the spend based method.
The spend based method works by multiplying the economic value of a product or service purchased by the relevant carbon emissions in order to calculate the amount of greenhouse gas emissions produced. The spend based method of carbon accounting utilises environmentally extended input and output models, otherwise known as EEIO models, and is often less mathematically complex or time consuming to calculate.
While using the spend based method for carbon accounting is simpler, it isn’t always reliable given the economy and the tendency for prices to constantly fluctuate. Also, the inconsistency of exchange rates between foreign currencies makes it difficult to rely on the spend based method.
💡 Is the spend-based method of carbon accounting worth using?
The spend based method of carbon accounting is the best approach if the carbon calculations need to be done quickly. However, if the average data of the carbon contributor is prone to marginal errors due to uncontrollable circumstances like inflation and foreign currency exchange rates – it may not be the most precise way to use carbon accounting.
The second primary approach to carbon accounting is the activity based method.
The activity based method of carbon accounting is more specific than the spend-based method, as it uses data to determine how many units of a certain material or textile component that a company has purchased – otherwise known as "real flows" of physical data across the company's value chain.
For instance, when using the spend-based method, only the price of a chair purchased would be used to determine the amount of carbon emissions produced, whereas the activity based method uses the various amounts of the materials used for the product or service, like wood or fabric – to calculate the carbon footprint.
The activity based approach to carbon accounting is more accurate than the data provided by the spend-based method, therefore – it is widely encouraged that companies strive to use a hybrid model methodology in carbon accounting. This means that companies should use a dual, more practical approach in carbon accounting and use both the spend-based method and the activity based method simultaneously.
This hybrid approach to carbon accounting will allow companies to accurately measure their carbon footprint with the activity based method, while still having the ability to quickly calculate their carbon emissions with the readily available spend-based method.
Here is a table depicting the differences between the spend-based and activity-based methods:
| Aspect | Spend-Based Method | Activity-Based Method |
|---|---|---|
| Description | Calculates emissions by multiplying the economic value of purchased products or services by relevant carbon emissions factors. | Calculates emissions based on the quantity of materials or components used, considering the actual data of physical flows. |
| Complexity | Less complex, quicker to calculate using EEIO models. | More specific and detailed, potentially more time-consuming. |
| Accuracy | Less reliable due to price fluctuations and exchange rate inconsistencies. | More accurate and precise, as it uses real data of material usage. |
| Best Use Case | Useful for quick calculations, especially when time is a constraint. | Preferred for detailed and accurate carbon accounting. |
| Hybrid Approach | Can be used in conjunction with the activity-based method for a more practical approach. | Encouraged to be used alongside the spend-based method for comprehensive accounting. |
| Example | Calculates the carbon footprint based on the price of a chair purchased. | Calculates the carbon footprint based on the quantity of materials like wood and fabric used for the chair. |
Carbon Footprint Report of BCB GROUP by Greenly
The estimated carbon emissions calculated from carbon accounting are often divided into three different categories, often referred to as, “scopes” – these scopes in carbon accounting seek to organise and simplify the process.
💡 According to the Greenhouse Gas (GHG) Protocol, the three scopes are broken down whether the carbon emissions come from industrial or vehicle related activities, heating or electric cooling systems, or other various emissions that do not fall under scopes one and two.
Carbon emissions are classified into the following scope categories:
Remember, scope emissions are used on behalf of numerous government based and non-profit organizations to help companies break down their emissions – such as the Environmental Protection Agency and the Science Based Targets Initiative (SBTi).
👉 Because Scope 3 is the most general category for carbon accounting, it is often the most difficult to precisely measure and the most challenging to reduce emissions – making it a subject of interest in carbon reporting and for businesses working towards net zero emissions.
There are several reasons why your company could benefit from deciding to commit to carbon accounting, such as adhering to environmental legislation, boosting brand reputation, and making process towards your company's climate goals.
For example, using carbon accounting is a good first step towards developing corporate sustainability. More and more investors and customers are seeking to partner or purchase products or services from businesses that seek not only financial success, but environmental and social just as well.
Also, using carbon accounting provides concrete data that can help establish transparency and in turn, prevent any future allegations against greenwashing. The statistics provided by carbon accounting can serve as evidence that your company is indeed striving to reduce carbon emissions.
💡 Therefore, in summary – carbon accounting principles illustrate not only the value in measuring and reducing emissions, but the the overall action that can be taken to mitigate their negative impact on surrounding communities and boost their overall business value.
The same concept goes for any new laws or government requirements. If companies strive to calculate their carbon emissions through a verified process like carbon accounting, third parties will be more willing to invest into the business or project as companies will be able to demonstrate their willingness to comply with new environmental regulations.
All of the following benefits of carbon accounting ultimately attract new investors, which only continues to stimulate the economic success of the business or project.
👉 Since investors are increasingly interested in companies that are willing to adjust their business model to improve overall sustainability due to worsening climate change, companies that use carbon accounting are likely to have a greater appeal to new investors.
Sia Partners is a consulting and accounting firm with an international presence in 18 countries that was founded in 1999. Sia partners was doing its carbon management on its own but they were spending too much time exchanging information between their different offices. In 2020, they opted for the greenly emissions tracking tool for greater simplicity and efficiency.
It’s easy to accidentally leave the heat or air conditioning on in an office, car, or other rented space tied to your company when it’s unnecessary. So, before going on holiday or taking a leave of absence – check that inhabited spaces aren’t being heated or cooled when no one’s there.
Doing this will also save your company money!
Long gone are the days where taking the metro instead of driving your car to work were the only ways to cut back on carbon emissions.
Popular bike or scooter share services provide the opportunity to lower your company’s carbon accounting score in scope 2. Your employee’s will exercise more, save money, and overall reduce your company’s carbon emissions.
If your company takes a moment to evaluate which rented vehicles, co-working spaces, or companies that aren’t being used to their full capacity – your company can stop renting those spaces and therefore, reduce your company’s carbon footprint.
Overview of Greenly's interface for carbon footprint
If reading this article about carbon accounting in 2024 has made you interested in reducing your carbon emissions and get started with carbon accounting and reporting – Greenly can help you!
If reading this article about carbon accounting has inspired you to consider your company’s own carbon footprint, Greenly can help.
At Greenly we can help you to assess your company’s carbon footprint, and then give you the tools you need to cut down on emissions. We offer a free demo for you to better understand our platform and all that it has to offer – including assistance with boosting supplier engagement, personalised assistance, and new ways to involve your employees.
Learn more about Greenly’s carbon management platform here.
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