As sustainability is claiming its space on corporate agendas, companies start embracing carbon accounting as the backbone of their corporate sustainability journey. Yet, what exactly is carbon accounting, why should you care, and how do you start? Here’s everything you need to know.
What is Carbon Accounting?
Just like financial accounting helps businesses keep track of financial transactions, carbon accounting provides insight into their carbon footprint. It’s a systematic approach to measure, reduce, and report the greenhouse gas (GHG) emissions of a business, throughout the entire value chain – from supply chain operations (upstream activities) to the disposal of produced goods or any facet related to provided services (downstream activities).
Greenhouse gas emissions: 3 scopes
- Scope 1: direct emissions from an organization's owned operations, including company-owned vehicles and buildings.
- Scope 2: indirect emissions from purchased electricity, steam, heating, and cooling.
- Scope 3: all other indirect emissions generated throughout an organization’s value chain.
Carbon accounting will become an indispensable tool as your organisation prepares to comply with regulations and frameworks, such as the Corporate Sustainability Reporting Directive (CSRD) and EU taxonomy. More than that, it underpins your sustainability and responsible environmental stewardship.
Why you should start with carbon accounting today
1. Unveil new business opportunities
By proactively starting with carbon accounting you are sure to leapfrog many of your competitors. It signifies a steadfast commitment to sustainability, appealing to eco-conscious consumers and investors while uncovering new business opportunities.
2. Improve your brand image
Customers, employees, investors, and all other stakeholders expect businesses to be transparent about their carbon emissions. By supplying accurate environmental impact data through carbon accounting, you’ll meet their expectations. More than that, you’ll improve your brand image so you’re bound to win new fans.
3. Reduce costs
Additionally, you’ll save cost over time, as you’ll spot ways to cut energy consumption, minimize waste, enhance operational efficiency, and conserve natural resources.
4. Anticipate on risks
Organizations not engaging in carbon accounting expose themselves to diverse risks, including financial vulnerabilities and reputational harm. Identifying emission hotspots and implementing effective reduction strategies will help you reinforce your company's long-term resilience.
CSRD and EU Taxonomy
While we rather stress the opportunities of carbon accounting than zooming in on the obligations, the EU Taxonomy Regulation and the Corporate Sustainability Reporting Directive (CSRD) are speeding up the need for businesses to engage in carbon accounting. Check out our dedicated CSRD blog and whitepaper to learn more about the CSRD.
How to get started, in 7 steps
Not sure how to embark on your carbon accounting journey? Careful planning and a step-by-step approach will get you there. Here's a detailed guide to kickstart your journey:
1. Gather data
Data is key to identifying your sustainability opportunities, monitoring progress, and reporting. Make sure to collect as much available emission data as possible within – and even outside – your organization, spanning all scopes (scope 1, 2, and 3) and sources.
➔ TIP: Consider investing in a robust data management system to streamline the data collection process. Instead of relying on labor-intensive spreadsheets, a dedicated carbon management platform will streamline your data collection efforts and save you and your team precious time. Book a demo and discover Futureproofed.
2. Calculate your emissions
Once you’ve assembled the data, apply the relevant emission factors to determine your organization's greenhouse gas emissions. The formula for this calculation is straightforward:
Emissions (measured in tCO₂e) = Business Activity Data x Emission Factor.
➔ TIP: Here too, a dedicated carbon management platform proves invaluable at this stage, as it offers connected, verified emission factor databases that save substantial time. Interested? Book a demo of our platform.
3. Assess risks and opportunities
Identify emission hotspots within your organization and explore opportunities for emission reduction or elimination. This initial assessment will serve as the foundation for your carbon reduction strategy.
4. Set clear, quantifiable goals
Determine emissions targets: clear, quantifiable carbon reduction goals that will provide direction throughout your journey and help you benchmark your progress. Make sure your objectives are aligned with the Science Based Targets initiative and the Paris Agreement so you don't have meaningless goals or face accusations of greenwashing.
5. Launch reduction strategies
Develop and execute action plans to mitigate emissions. Strategies may encompass initiatives such as energy efficiency upgrades, the transition to renewable energy sources, or supply chain optimization.
6. Engage stakeholders
Effective communication is paramount. Actively engage with key stakeholders, including employees, customers, investors, and suppliers to foster trust and garner support. Be transparent about successes as well as failures!
7. Keep monitoring and reporting
Regularly monitor emissions and track your progress toward your carbon reduction goals. Report consistently to underscore your commitment to transparency and accountability.
The time is now
Carbon accounting is not a trend or a hype. It’s an indispensable practice for forward-looking businesses that want to thrive and remain relevant in the future. Kickstart your carbon accounting journey today and take proactive steps to gradually reduce greenhouse gas emissions. You are sure to grasp a plethora of new business opportunities!
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