Carbon Accounting: A Guide to the Basics

As climate change continues to be a pressing global issue, businesses are increasingly under pressure to reduce their carbon emissions.

Carbon accounting is a critical tool that enables organisations to measure, monitor, and manage their greenhouse gas (GHG) emissions.

By understanding and tracking their carbon footprint, businesses can take informed decisions to reduce their environmental impact and enhance their sustainability credentials.

This overview covers the key stages of carbon accounting, from calculating emissions through to setting reduction goals, reporting and utilising carbon offsets.

Understanding the Basics of Carbon Accounting

Carbon accounting involves quantifying the greenhouse gas emissions associated with a business’s activities.

These emissions are typically categorised into three scopes:

Emissions under these scopes are typically expressed as carbon dioxide equivalence (CO2e). This represents all greenhouse gases in a measure aligned to the impact of carbon dioxide, the greenhouse considered of most concern and therefore of particular focus. 

Setting Boundaries for Carbon Accounting

To accurately measure emissions, it’s essential to define organisational and operational boundaries:

Data Collection and Analysis

Accurate data collection is the foundation of effective carbon accounting.

Key data points for business activities include:

Data can be collected through various methods, such as utility bills, fuel invoices, mileage records, and employee surveys.

Once collected, data should be analysed to identify emission hotspots and opportunities for reduction.

Calculating Carbon Emissions

To calculate emissions, businesses typically use emission factors, which are standardised values that relate a specific activity to the amount of greenhouse gas emitted. 

By multiplying the activity level by the appropriate emission factor, the total emissions can be determined.

Emissions factors are available from government sources in several countries, including in the UK (DEFRA emission factors) and US (EPA emission factors). Alternatively, you can consider using the Intergovernmental Panel on Climate Change (IPCC) database, or Climate Registry factors.

Setting Carbon Reduction Goals

Setting ambitious but achievable carbon reduction goals is crucial for driving positive change. 

Ideally, these goals should be aligned with the Science-Based Targets initiative (SBTi), the Greenhouse Gas Protocol, or other recognised reporting frameworks.

Some common strategies for reducing emissions include:

Energy Efficiency: Implementing energy-efficient technologies and practices, for example use of LED lighting and Heat Pumps.

Renewable Energy: Utilising renewable energy sources like solar, wind, or hydro power. This can be on-site or, if possible, through your energy provider.

Sustainable Transportation: Encouraging low-carbon transportation options, such as electric vehicles or public transport.

Waste Reduction and Recycling: Minimising waste generation and maximising recycling efforts.

Supply Chain Optimisation: Collaborating with suppliers to reduce emissions throughout the value chain that enables your business.

Monitoring, Reporting, and Verification

Regular monitoring and reporting are essential to track progress and ensure accountability. 

Primarily, the focus of this monitoring and reporting should be to encourage continuous improvement internally. If the business understands the progress being made and relative responsibilities, the route to achieving further progress is clearer.

Reporting to the customer base and supply chain can also be beneficial. Large businesses often use various frameworks for this, such as the Carbon Disclosure Project (CDP) or the Global Reporting Initiative (GRI).

For most SME businesses looking to publicise progress, production of a simple sustainability report is normally sufficient. 

Balancing Your Carbon Account: Offsetting

If a business is seeking to achieve a Carbon Neutral or Net Zero position, then the use of carbon offsets is a further key component of carbon accounting.

Carbon offsetting involves investing in projects that reduce or remove greenhouse gas emissions, such as reforestation or renewable energy.

Within a carbon account, the volume of offsets sources for each year should be matched to the total CO2e emissions you expect to release through business activities in that year. 

While offsetting can complement reduction efforts, it should not be used as a substitute for direct emissions reductions.

Leveraging Technology for Carbon Accounting

To further support your approach to carbon accounting, technology can be leveraged.

Carbon accounting software can help automate data collection, calculations, and reporting, potentially making the process less time consuming. 

Bear in mind however, that carbon accounting doesn’t need to be a hugely complex process. Some software is excessive for many businesses. 

Additionally, you can also make use of the abundant AI tools now available. These can potentially be used to identify trends, optimise operations, and predict future emissions. But be careful to note how up-to-date their knowledge is – trends and predictions could be out dated.

Carbon Accounting: Beneficial to Business

By effectively implementing carbon accounting, businesses can gain a deeper understanding of their environmental impact and demonstrate their commitment to sustainability.

Carbon accounting is an ongoing commitment, and as your business grows, you’ll have more opportunities to innovate, identify opportunities for improvement and further reduce your environmental footprint.

Critically for successful business practice, many of the opportunities that can be pursued are often based around greater energy efficiency. Therefore, carbon accounting not only improves business sustainability, but can also enhance financial performance.

To support you further with the implementation of carbon accounting, we recommend the following additional resources:

Net Zero Business: A Simple Guide to Getting Started

Carbon Offsetting Made Simple: An Overview

Setting Realistic Environmental Goals for a Business

Sustainability for Small Businesses: Useful Actions to Take

Lastly, if you have any comments or questions, then feel free to get in touch, either in the comments section below, through our social media channels, or at [email protected].