In a world where businesses must balance growth with environmental responsibility, carbon accounting is key. This is where we track greenhouse gas emissions and take steps to reduce them. 

This guide takes you through the ins and outs of carbon accounting. We'll also introduce you to carbon accounting software to help make this task easier. It's all about charting a path to a greener future for your business.

What is carbon accounting?

Carbon accounting is a method used to measure, track, and report the greenhouse gas (GHG) emissions that an organization, product, event, or person is responsible for. Here's a simple breakdown:

Measurement

Carbon accounting involves quantifying the amount of carbon dioxide equivalents (CO2e) that activities emit into the atmosphere. This is often measured in metric tons.

Tracking

Carbon accounting isn't just a one-time thing. It requires consistent monitoring of GHG emissions over time to understand trends, make comparisons, and identify opportunities for reduction.

Reporting

Transparently communicating a company's emissions data is a key part of carbon accounting. This helps stakeholders understand the environmental impact of the company's activities.

Reduction

By identifying where most emissions come from, companies can strategically implement reduction initiatives.

Scope

Carbon accounting takes into account emissions from direct operations (scope 1), indirect emissions from purchased electricity (scope 2), and other indirect emissions from activities like transportation, waste disposal, or raw material extraction (scope 3).

What are scope 1, scope 2 and scope 3 emissions?

The GHG Protocol, a globally accepted standard, categorizes emissions into the three 'scopes'. This makes comparing and benchmarking performance much more feasible and reliable, while ensuring that a comprehensive view of a company's greenhouse gas footprint is accurately captured.

Scope 1

These are direct emissions from owned or controlled sources. For a business, this might include fuels burnt on-site (like gas boilers or manufacturing processes) or emissions from company vehicles.

Scope 2

These are indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company. For instance, if a company buys electricity to power its offices, the emissions produced at the power plant are counted under Scope 2.

Scope 3

These are all other indirect emissions that occur in a company's value chain. This could include emissions from business travel, waste disposal, or the extraction and production of purchased materials. These emissions are often the most challenging to measure because they involve activities not directly controlled by the company.

The three main carbon accounting methods

Navigating the world of carbon accounting, one would encounter three main methodologies – spend-based, activity-based, and hybrid. Understanding each of these approaches can guide businesses in selecting the most suitable strategy for their specific needs.

Spend-based methodology

As the name suggests, the Spend-Based Methodology ties carbon emissions directly to a company's financial expenditures. By using economic data and expenditure figures, it estimates carbon emissions based on the cost of various activities.

Despite its simplicity, it can provide a reliable starting point for understanding your carbon footprint.

Activity-based methodology

This methodology is more detailed and requires robust data on a company's activities that lead to emissions. Activity-Based carbon accounting covers direct operations like energy use, transport, and manufacturing processes. 

This approach can provide more precise results, but it also requires a larger data collection effort, which may be more suitable for larger companies or those with more complex operations.

Hybrid methodology

The Hybrid Methodology takes elements from both the Spend-Based and Activity-Based methods. It provides a more balanced approach, using financial data to estimate emissions where activity data isn't available or is too complex to gather. 

This approach can be tailored to fit a variety of business types and sizes, offering a comprehensive overview of a company's carbon footprint.

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The GHG Protocol: A global standard

The Greenhouse Gas (GHG) Protocol is a fundamental tool in the world of carbon accounting. But what exactly is it?

In simple terms, the GHG Protocol is a global standard used by businesses, governments, and non-governmental organizations to understand, quantify, and manage greenhouse gas emissions. 

Developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), it offers a comprehensive, standardized approach to emission management.

The GHG Protocol is like a recipe for managing your company's carbon footprint. It lays out the essential ingredients (or types of greenhouse gasses to consider), provides a method (guidelines on how to measure these emissions), and guides on how to present the dish (through clear and standardized reporting).

Most notably, the GHG Protocol categorizes emissions into three 'scopes':

• Scope 1: All direct emissions from company-owned or controlled sources.
• Scope 2: Indirect emissions from the generation of purchased energy.
• Scope 3: All other indirect emissions that occur throughout a company's value chain.

Adopting the GHG Protocol ensures your emissions data is consistent, transparent, and comparable, making it easier to identify areas for improvement and measure progress over time. Whether you're a small start-up or a multinational corporation, understanding and using the GHG Protocol is a crucial step in your sustainability journey.

The difference between GHG accounting and carbon accounting

While both Greenhouse Gas (GHG) accounting and carbon accounting play pivotal roles in understanding and managing a company's environmental impact, there are distinct differences between the two. However, when speaking about carbon accounting, companies often use the terms interchangeably. The highest quality carbon management software, such as Coolset, accounts for both carbon and other greenhouse gases.

Which skills are needed for proper carbon accounting?

Proficiency in carbon accounting requires a diverse blend of skills, encompassing not only technical knowledge but also critical thinking, communication, and a keen understanding of sustainability. Here are some of the key skills needed for effective carbon accounting:

• Technical knowledge
• Data analysis
• Legal and regulatory awareness
• Sustainability understanding
• Communication skills
• Project management
• Problem solving

Let's take a quick look at these individual skills in a little more detail.

Technical knowledge

Proficiency in both accounting principles and environmental science, particularly the mechanics of greenhouse gas emissions and standards like the Greenhouse Gas Protocol, is fundamental.

Data analysis

Strong skills in data collection, analysis, interpretation, and the use of statistical techniques and specific carbon accounting software are essential.

Legal and regulatory awareness

Familiarity with the evolving local and international regulations governing carbon accounting is crucial for compliance and strategic planning.

Sustainability understanding

Staying abreast of current research, trends, and innovations in the sustainability field allows for a more contextualized approach to carbon accounting.

Communication skills

The ability to effectively communicate complex information to diverse stakeholders, from executives to employees, is key.

Project management

Competency in planning, coordinating, tracking, and ensuring timely and budget-compliant completion of carbon accounting projects is a must.

Problem solving

As a new and rapidly evolving field, carbon accounting requires innovative and critical thinking to tackle unique challenges.

Master these key skills and your carbon accounting will become way more relevant.

Examples of carbon accounting for measuring and managing corporate carbon footprints

In the pursuit of a more sustainable future, businesses across various sectors utilize carbon accounting to quantify and manage their environmental impact. Here are a few hypothetical scenarios demonstrating how different types of companies might apply carbon accounting in their operations:

Energy efficiency initiatives

An office building owner might use carbon accounting to measure emissions reduction after considering a switch to LED lighting or installing solar panels.

Supply chain management

A clothing retailer might apply carbon accounting to evaluate the carbon footprint of their supply chain and consider advocating for more sustainable farming practices.

Product lifecycle analysis

An automobile manufacturer could use carbon accounting to estimate emissions during a car's lifecycle, which might inform a strategic shift towards manufacturing electric vehicles.

Corporate sustainability reporting

A tech company might leverage carbon accounting to better understand and report emissions from its operations, demonstrating their commitment to sustainability.

The EU is currently introducing legislation that will require companies to report on their non-financial sustainability information. This legislation is called the Corporate Sustainability Reporting Directive (CSRD). 

Carbon offset projects

An airline might use carbon accounting to calculate its carbon emissions, which can guide their investment into offset projects like reforestation.

Compliance and market opportunities

A manufacturing company could employ carbon accounting to maintain regulatory compliance while identifying potential opportunities in carbon credit trading and green financing.

Best in case example: Helloprint

We asked Coolset founder, Konstantinos Kouzelis, about his favourite example of good carbon accounting practices. Here’s what he had to say:

“Bringing in someone with the right skills to focus on sustainability can have a significant impact, and Helloprint is one of my favorite examples of this.

‍Helloprint hired Isabelle de Wolf as VP of Sustainability after participating in the Impact Nation sustainability accelerator program.

Although introducing a sustainability manager is already an achievement, HelloPrint ensured Isabelle didn't need to work bottoms up. Instead, the management team invited Isabelle to the board and allowed her to drive decisions.

HelloPrint has set ambitious targets for 2025 and 2030, and we're thrilled to collaborate with them to achieve their goals in the coming years.”

Want to read more about this example? You can find the full story here. 

How do you start on your company’s decarbonization journey?

Embarking on your decarbonization journey requires thoughtful preparation. Choosing the right carbon accounting methodology is a key step. Here's a detailed guide to navigate this decision:

1. Consider your business scope

The first point to consider is the nature of your operations. A multinational corporation with a vast supply chain will require a different approach compared to a local service-oriented business.

If your company's operations span multiple sectors or geographies, a more comprehensive methodology might be necessary. If your business is smaller or more localised, a more streamlined approach might suffice.

2. Understand your emissions profile

A thorough understanding of your company's emissions profile is key. Are your emissions predominantly from manufacturing processes, energy use in buildings, employee commuting, or perhaps your supply chain?

Each source may require different strategies and, hence, different methodologies for accurate accounting.

3. Identify available resources

Carbon accounting can be resource-intensive. It requires dedicated personnel, time, and sometimes specific software or tools.

Identify what resources are available within your organization to dedicate to carbon accounting and let this inform the complexity of the methodology you adopt.

4. Set clear objectives

What do you hope to achieve with carbon accounting? Is it to meet regulatory requirements, identify areas for reduction, report to stakeholders, or work towards a specific sustainability goal?

Clear objectives can guide the choice of methodology and ensure it provides the necessary data.

5. Seek expert advice

Carbon accounting is a complex and evolving field. If you're unsure about the best approach, don't hesitate to seek advice from decarbonization platforms, such as Coolset.

They can provide expertise as well as the tools necessary to gain a complete and clear overview of your company’s scope 1, 2 and 3 emissions.

What should you look for in a carbon accounting software platform?

Choosing carbon accounting software that fits your business needs can streamline your sustainability efforts. Here are key things to look for:

1. Data integration

Your software should be able to collate a variety of data from different facets of your operations, including energy use, waste, travel, and supply chain data. The ability to draw information from these disparate sources is critical for accurate carbon accounting.

2. Customization

Given each business has unique operational structures and emission sources, your chosen software should provide ample customization options. This allows it to accurately model and represent your company's specific processes.

3. Usability

Opt for software with a user-friendly interface to make the process more manageable.Good software should simplify the complex process of carbon accounting. It should offer a user-friendly interface for easy data input, manipulation, and visualization.

4. Adherence to standards

It's crucial that your software complies with universally accepted standards such as the Greenhouse Gas Protocol. This ensures the accuracy of your carbon accounting and allows for comparability across industries and regulatory compliance.

5. Reporting capabilities

Effective carbon accounting software should do more than just compile and analyze data. It should also provide comprehensive reporting capabilities, offering clear communication of your emissions profile and progress towards your sustainability goals.

6. Scalability

Your carbon accounting needs will grow and change as your business does. Choose a software platform capable of scaling to accommodate business growth, new data sources, or more complex analyses as required.

7. Support

Carbon accounting is complex and constantly evolving, so strong customer support is invaluable. Look for a platform that provides robust support to guide you through this intricate landscape.

8. Security

Your software will be handling sensitive company data, thus robust security measures are non-negotiable. It's vital that the platform you choose can protect your information from potential breaches.

Is Coolset the decarbonization platform for you?

Coolset has, time and time again, proven to be an excellent partner in the facilitation of decarbonization journeys. We manage data from thousands of emission sources, customized to mirror your operations. 

Meanwhile, our user-friendly interface simplifies carbon accounting while adhering to industry standards like the Greenhouse Gas Protocol, ensuring accuracy alongside accessibility.

We stand out in translating raw data into actionable insights, assisting in emission reduction strategies. As your business evolves, the platform adapts, integrating new data and more complex analyses while maintaining robust data security and providing comprehensive customer support.

Want to know more about how Coolset can facilitate your journey towards a sustainable business future? Our team is on hand to provide more information, offer a demo, or simply engage in a conversation about your needs. Get in touch.