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?
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?
Carbon accounting allows a company to accurately measure the amount of carbon credits that should be purchased in order to offset their previous carbon emissions. This is done so that a company or organization can accurately decide a fair amount of carbon credits to exchange between other businesses, individuals, or third parties.
👉 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.
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.
👉 Because so many companies are trying to reduce their carbon footprint and reach net-zero carbon emissions, carbon accounting helps to serve as a quantifiable measure that a company or individual can be held accountable for.
What is the difference between carbon accounting and carbon assessment?
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.
Carbon assessment is the evaluation of numerical data of the greenhouse gas emissions provided by carbon accounting. Carbon assessment can help a company thoroughly understand their carbon emissions, and therefore help them decide which actions to take next in order to promote a more sustainable business and environment.
We at 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, and you can only do that if you have the necessary information to do so – which in this case, is carbon accounting, which is like your monthly salary in this scenario.
What are the main two methodologies used in carbon accounting?
There are two main methods used in carbon accounting.
The spend based method
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 utilses 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.
So, 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 activity based method
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.
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.
Both the spend-based method and the activity-based method make use of carbon emissions factors to calculate a company’s carbon footprint determine an activity’s emissions output.
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.
How does carbon accounting classify a company's emissions?
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 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 scope 1 when they result from industrialization habits or vehicles used in your company. For example: any fuel use, non-renewable energy sources, chemical leakage, and energy use for office spaces or various facilities would fall under scope one.
Carbon emissions that would qualify for scope 2 is energy consumed and emitted from rented or leased office spaces or vehicles, such as fuel or the electricity required to run central heating or air conditioning.
Lastly, carbon emissions that would qualify as scope 3 are any other miscellaneous emissions that don’t fall under scopes one or two. Carbon emitting activities that could fall under scope three include raw materials, purchased goods or services, transportation such as employee commuting, leased assets, franchises, investments, and even business travel.
👉 Because Scope 3 is the most general category for carbon accounting, it is often the most difficult to precisely measure.
Why should your company invest in carbon accounting?
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.
Carbon accounting can also stimulate financial growth within a company, as investors, employees, and consumers alike are more likely to contribute to the product or service if they seek sustainable practices.
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.
How can you start reducing your emissions as a company?
Carbon accounting is only one step that a company can take to reduce their output of carbon emissions. Here are 3 small steps your company can take to begin reducing their carbon footprint.
1. Turn off heating and air conditioning systems
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 so will also save your company money!
2. Offer your employees public transportation
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.
3. Stop Renting Unused Spaces
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
Carbon accounting with Greenly: Case Study on Sia Partners
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.
What About Greenly?
If reading this article about carbon accounting in 2024 has made you interested in reducing your carbon emission to further fight against climate change – Greenly can help you!
Greenly can help you make an environmental change for the better, starting with a carbon footprint assessment to know how much carbon emissions your company produces.
Click here to learn more about Greenly and how we can help you reduce your carbon footprint.
Don't wait any longer, take the first step towards reducing your carbon footprint by requesting a free and non-binding demo with one of our experts today and finding the solution that best fits your business needs.
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