December 13, 2022

What is GHG Accounting - and is it different to Carbon Accounting?

Given that the net-zero emissions movement aims to be achieved by 2050, there's been an evident rise in businesses and organisations looking for assistance when it comes to managing their carbon dioxide and greenhouse gas emissions.

Many companies lack the proper guidance on where to start reducing their own carbon footprints-resulting in these corporations often times referring third-party companies that offer said services. Here we've tried to outline more on GHG accounting, and the differences (if any) with Carbon Accounting.

What is greenhouse gas accounting?

Greenhouse gas accounting, also known as carbon accounting, is an effective way for companies to measure and manage their emissions. GHG accounting helps states, organizations, and individuals assess a company's environmental impact. It also allows companies to trade carbon credits in the marketplace and better understand their own emissions sources.

‍When we talk about accounting for greenhouse gases, we're really talking about carbon accounting - but there are some minor differences.

In short, greenhouse gas accounting is the most reliable and globally accepted method to measure a company's emissions of greenhouse gases and carbon dioxide. This way, their progress in reducing emissions can be plainly shown to others interested in the carbon market.‍

What is the main purpose of GHG accounting?

Carbon accounting's main objective is to supply a set value for greenhouse gas or carbon dioxide emissions so that they can be exchanged equitably in the carbon market.

Greenhouse gas accounting aids in supplying numeric data which a company or individual can be held accountable for with regard to their emissions.

In other words, greenhouse gas accounting is an excellent way for companies to establish greater transparency between their investors, employees and customers.

What is the difference between greenhouse gas accounting and a carbon assessment?

Greenhouse gas accounting is the process of measuring the amount of greenhouse gas emissions a company produces. Carbon assessment, on the other hand, is taking that data provided by GHG accounting and understanding if it's good or bad.

In short: Greenhouse gas accounting provides companies with numbers related to their emission rates. It would be like learning only your credit score without knowing if that number is indicative of good or bad credit.

A bad credit score will motivate some people to become more mindful of their spending Going forward, others may not be as influenced by the number that delineates their credit score.

Greenhouse gas accounting provides a company or individual with simply emission data. If the party receiving the finds importance in taking after this information, that's wonderful, but not necessary. A carbon assessment does greenhouse gas accounting one better by critically analyzing the data to help whoever emitted the gases develop new habits of reducing emissions.

How does GHG accounting work?

‍There are two ways of accounting for greenhouse gas. 

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

This method works by taking the financial value of something a company purchases, and multiplying it by the amount of carbon dioxide or greenhouse gas emissions emitted during production. This results in a quantitative representation of data.

The spend-based method of GHG accounting is quicker, as it demands less time to calculate. Nevertheless, this approach isn't the most trueicht  because prices are in a consistent state of flux, especially during episodes of inflation.

Can we trust that the spend-based method of accounting for greenhouse gas emissions is accurate?

The spend-based method of GHG accounting is the quickest way to calculate a company's carbon footprint, though it isn't the most accurate.

The second and more specific method is activity based accounting which uses data to determine how many units of specific materials have been purchased.

The spend-based method would only multiply the price of one laptop purchased by the company, whereas the activity-based method accounts for all steps involved in its creation - from sourcing materials to production and marketing tactics.‍

The spend-based and activity-based methods both use factors related to carbon emissions when assessing a company's impact on emissions as a whole.

Although the activity-based approach is more dependable than the spend-based method when it comes to carbon accounting, businesses should ideally use both approaches at once. This combination will assist companies in pinpointing their carbon footprint with greater accuracy.

How does GHG organize the categories of carbon footprint a company is responsible for?

Greenhouse gas accounting categorizes carbon emissions in order to make calculating them simpler. classified as scope 1, are caused by a company's industrialization or use of vehicles. This category would include any use of fuel or non-renewable energy.

Carbon emissions considered a part of scope 2 include any energy required to power something within the company, such as rented or leased office spaces, cars, central heating or air conditioning.

Scope 3 emissions are any other miscellaneous activities that don’t qualify for scopes one or two. Carbon emitting activities that could fall under scope three could include the use of raw materials, buying various goods or services, Commuting-related carbon footprints of employees ,or even business travel from a flight.

Scope 3 emissions are any carbon footprint inducing activity that occurs outside of the company itself, but the company is still an indirect cause of. The best example of this would be a business trip by flight. While the company cannot control how many emissions a flight produces, they're still contributing to it by sending employees on business trips. Therefore, scope 3 emissions are known to be the most difficult category in greenhouse gas accounting to measure.

Why is greenhouse gas accounting important?

Greenhouse gas accounting is a way for businesses to become more sustainable and environmentally friendly. This, in turn, attracts potential investors and customers who are interested in supporting companies that are working to mitigate climate change.

The concrete data provided by GHG accounting not only helps to establish transparency, but future allegations against greenwashing as well. This is because the statistics provided by greenhouse gas accounting serve as numerical proof that your company is making an effort to reduce emissions.

By utilizing greenhouse gas accounting, businesses can signal to investors, employees, and consumers that they are committed to sustainability, which may result in increased investment or purchases.

Ultimately, greenhouse gas accounting provides an innumerable amount of advantages that will continue to propel each sector of a business towards success. To put it simply, as long as the company is aiming to improve sustainability and reduce their emissions through GHG accounting – then more investors, customers, and employees will want to be involved in the project. This creates a domino effect for continued financial and environmental success.

Can greenhouse gas accounting help mitigate greenhouse emissions and global warming?

Greenhouse gas accounting is a guide that gives individuals and companies data about their carbon emissions. This influences them to establish new measures to reduce these emissions and hopefully make long-term changes.‍

Is your business interested in GHG Accounting?

Do you have any other questions on GHG or carbon accounting? Maybe your business is exploring the practicalities of using it. If you are looking for answers to specific questions why not leave a comment below, or reach out to us - we'd be happy to help.

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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