December 13, 2022

Ultimate Guide to Carbon Accounting [2023]

Looking to further your understanding of carbon accounting? You've come to the right place. We've tried our best to demystify the science behind carbon accounting, breaking it down into easy to understand language.

What is carbon accounting and why do we need it?

Financial navigation is tricky for any business owner, but did you know that carbon accounting is just as important to monitor? Carbon accounting can help your company work towards a greener future and better environmental standards – such as developing an Environmental Management System or acquiring an ISO 14001 certification.

This is a really important step to ensure businesses (which are a huge part of global CO2 emissions) work harder to monitor and then reduce their emissions.

What is carbon accounting?

Carbon accounting is the term used to describe calculation of a business's carbon dioxide emissions. By doing this, businesses can understand how many carbon credits they need to purchase, or how much they need to reduce their emissions. To make things fair, accurate measurements of offsetting must be done so that companies know how much they should exchange with other businesses or individuals.

Carbon accounting is simply another term for greenhouse gas accounting

Carbon accounting is the process where organizations determine how much carbon dioxide they emit. This data is then used to trade carbon credits between different groups in the market, or to take actions on their emissions.

What is the primary objective of carbon accounting?

The purpose of carbon accounting is to provide a cost for the emissions of greenhouse gases like carbon dioxide.

This way, progress towards reducing carbon footprints and net-zero emission goals can be tracked with numbers - something tangible that businesses find it easier to deal with.

What is the difference between carbon accounting and carbon assessment?

Assessing your business's or project's carbon footprint involves identifying, measuring and estimating all sources of greenhouse gas emissions. Carbon accounting, on the other hand, focuses on recording these emissions so that they can be managed effectively.

Carbon assessment is the evaluation of numerical data of the greenhouse gas emissions provided by carbon accounting. Carbon assessment helps a company understand their carbon emissions and decide which actions to take next in order to promote a more sustainable business and environment.

Some people will get a bad grade on their exam and become determined to do better next time. 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 just track emissions - it's designed to help businesses find ways to reduce them. This is the critical takeaway here.

Put simply, carbon accounting is like budgeting your money for the month. You have a fixed income that you cannot exceed, and this gives you the information you need to create a feasible expenditure plan.

The process of carbon assessment is similar to creating a budget. You can only do that if you have the accurate information, carbon accounting in this case, which would be like your monthly salary.

What are the main methods of carbon accounting? 

There are two main methods used in carbon accounting.

1 - The spend based method 💰

The first approach to carbon accounting is the spend-based method.

This method works by multiplying the economic value of a product or service purchased by its relevant carbon emissions, in order to calculate the amount of greenhouse gas emitted during production. The spend-based method often uses environmentally extended input and output models (EEIO), which can be less complex or time-consuming to calculate than other methods.

Although the spend-based method for carbon accounting is simpler, it can be less reliable due to external factors such as the economy and fluctuations in prices. Additionally, inconsistencies between exchange rates of foreign currencies also impact the reliability of using the spend-based method.

Is the spend-based method of carbon accounting worth using?

If you need to calculate carbon levels quickly, the spend-based method of carbon accounting is your best bet.  Although, if average data from contributors is susceptible to outside forces like inflation or currency exchange rates, this might not be the most accurate way to go about it.

2 - The activity based method

The activity based method is more precise than the spend-based approach, as it uses data to figure out how many units of a certain product or material a company has purchased.

The spend-based method would use the price of the chair to calculate emissions, while the activity based method takes into account various amounts of materials used for production - like wood or fabric.

The activity-based approach to carbon accounting is more accurate than the spend-based method, so it is widely encouraged that companies use a hybrid model combining both approaches. This way, companies can get the most accurate data possible about their emissions output.

The hybrid approach to carbon accounting gives companies the chance to measure their carbon footprint with activity-based method for accuracy, and also calculate emissions rapidly with spend-based method.

How is carbon accounting categorised? 🤔

Three categories, referred to as "scopes," simplify the process of carbon accounting by organizing estimated emissions.

The Greenhouse Gas Protocol recognizes three scopes for industrial and vehicular carbon emission sources, heating and cooling systems, as well as other miscellaneous emissions not included in the first two scopes.‍

Carbon emissions that come from your company's industrialization habits or vehicles used fall under scope one. Any fuel use, non-renewable energy sources, chemical leakage, and energy use for office spaces or various facilities would be classified as scope one carbon emissions.

Emissions that would fall under scope include energy used and emitted from places like rented office spaces or leased vehicles. This can be anything from fuel to the electricity needed to run a building's heating or air conditioning.

Finally, scope three carbon emissions are any other emissions that don't fall under the first two scopes. Scope three includes emissions from raw materials, purchased goods or services, transportation such as employee commuting, leased assets, franchises, investments and business travel.3️⃣

Out of the three scopes for carbon accounting, Scope 3 is both the most general and hardest to exactly measure.

There are many reasons why your company should invest in carbon accounting. Carbon accounting is a process of measuring, managing and reporting an organization's greenhouse gas emissions. It provides valuable insights into how to reduce these emissions and can help organizations meet their climate change goals. Additionally, carbon accounting can help businesses save money by identifying areas where they can improve their energy efficiency.

Why your company could benefit from deciding to commit to carbon accounting 💪

There are lots of reasons to consider carbon accounting for your business. For example, it's a great way to show that you're committed to being sustainable. And more and more people are looking to invest in or buy from businesses that care about the environment and social justice, not just making money.

Carbon accounting not only provides data to help increase transparency, but it also can prevent future allegations of greenwashing. The statistics provided by carbon accounting can serve as evidence that your company is striving to reduce emissions and be more environmentally conscious.

If a company wants to show that they are committed to being environmentally friendly, then carbon accounting is the way to go. This will not only make employees and consumers more likely support the product or service, but also attract investors. New laws and government requirements are always popping up, so it's important for companies to stay ahead of the game by calculating their emissions through an verified process like carbon accounting. If they can do this, third parties will have no problem investing in the company or project because they know compliance won't be an issue.

By using carbon accounting, businesses and projects can attract new investors which in turn jumpstarts the economy. With climate change on the rise, people are more inclined to invest their money into companies that care about making sustainability a priority. Therefore, by practicing carbon accounting, businesses make themselves more appealing to potential investors.

How can you start reducing your emissions as a company? 

Reducing your company's carbon footprint does not have to be an insurmountable task. Here are 3️ small steps your company can take to begin reducing their carbon emissions.

1. Turn off heating and air conditioning systems

It's a waste of both energy and money to heat or cool an uninhabited space, so before you leave for vacation or take time off, double-check that all building systems in spaces corresponding to your company are turned off.

2. Offer your employees public transportation

These days, there are plenty of ways to reduce your carbon footprint beyond taking public transportation or carpooling. Bike and scooter sharing services are a popular option that can help lower your company's scope 2 emissions. Plus, it's a great way for employees to get some exercise, save money, and overall reduce your company's carbon emissions.

3. Stop Renting Unused Spaces

If your company uses rented vehicles, co-working spaces, or unused office space and discontinues renting from them, your company can reduce its carbon footprint.

Is your business using Carbon Accounting Software?

‍Hopefully now you'll be feeling more confident about what carbon accounting is, and why it's so important. But what about you - is your business currently using carbon accounting software, or does it plan to in the near future?
Let us know if you have any questions in the comments box below 👇

Fred Stones
Passionate about sustainability and protecting our natural environment, Fred is responsible for leading's efforts to help businesses properly track and then reduce their carbon emissions.

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