What is carbon accounting?

Carbon accounting is an important subcategory of greenhouse gas (GHG) accounting. Specifically focusing on measuring and tracking carbon dioxide emissions, carbon accounting allows companies to quantify their emissions, understand their environmental impact, and set goals for reducing their carbon footprint.

The most commonly used approach to calculate carbon emissions – and all GHG emissions – is the Greenhouse Gas Protocol, which classifies emissions into three categories known as ‘Scopes’:

• Scope 1: All emissions produced as a direct result of the company’s operations.
• Scope 2: Indirect emissions resulting from the generation of electricity, heating, cool, etc. purchased and consumed by the company.
• Scope 3: Indirect emissions that occur in the company’s supply chain as a consequence of the company’s activities, but from sources that are not owned or controlled by the company.

The goal of carbon accounting is to quantify the total carbon emissions that a company is responsible for – including emissions that are not produced directly in the company’s daily operations. Accounting for Scope 3 emissions can be particularly challenging, as companies must rely on getting accurate data from their suppliers.

‍Read more: What are Scope 1, 2, and 3 emissions?

What is a carbon accountant?

A carbon accountant is a professional who specialises in measuring, tracking, and reporting a company’s carbon emissions. A carbon accountant typically has a background in environmental science, engineering, sustainability, or a related field.

In their work, carbon accountants support environmental sustainability efforts, strategic planning, and regulatory compliance. This makes them a crucial asset for companies looking to achieve net-zero emissions.

Find a carbon accounting partner here.

How does carbon accounting work?

Carbon accounting: two different approaches

Like GHG accounting, carbon accounting is done using two methods: the spend-based method and the activity-based method. As both methods have their advantages and disadvantages, the Greenhouse Protocol recommends a hybrid approach.

The spend-based method

The spend-based method uses emission factors that are expressed as emissions per unit of currency spent. The method takes the financial value of a given company purchase and multiplies it by the amount of carbon dioxide it emits. This approach is less accurate than the activity-based method, but also less time-consuming and easier to implement.

Advantages and disadvantages of this method include:

➕ Easy to implement if financial data is available

➕ Covers a wide range of activities with one set of financial data

➖ Less accurate due to the use of average emission factors rather than specific data

➖ Emission factors might not reflect the specific suppliers or products purchased by the organisation

The activity-based method

The activity-based method uses data to retrieve information on how many units of specific materials a company has purchased. The method accounts for all the steps in the process that may have created a carbon footprint, including material sourcing, production, marketing, and much more.

Advantages and disadvantages of this method include:

➕ Provides a more precise and accurate measurement of emissions for specific activities

➕ Enables companies to make targeted emission reduction strategies

➖ Requires more detailed data on activities and processes

➖ Can be complex and time consuming to implement, particularly for large companies with many different sources of emissions

Most companies follow the hybrid model, using all of the activity-based data possible and supplementing with spend-based methods to estimate the rest. This allows them to gain a more comprehensive understanding of emissions and simultaneously support more effective decision making.

Why is carbon accounting important?

By enabling companies to account for all emissions – including their indirect emissions – carbon accounting provides companies with a clearer understanding of their emission levels and a better foundation for setting realistic and achievable targets.

From carbon accounting to carbon removal

Carbon accounting is essential to the foundation of any corporate sustainability strategy. When it comes to achieving net zero, reducing your emissions is an important and necessary step in the right direction. However, there is growing consensus that reduction is no longer enough to stay within the goals set forward in the Paris Agreement. In order to stay on track for global climate targets, companies need to be neutralising their residual CO2 emissions with an equivalent amount of verified carbon removal.

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