What is the difference between carbon neutral and net zero?

Intuitively, it might seem like the terms ‘net zero’ and ‘carbon neutral’ mean the same thing. They are often (mistakenly) used interchangeably, when in reality they refer to different concepts.

Both net zero and carbon neutrality refer to a state where carbon emissions have been neutralised, and rely on the use of high-quality to varying degrees.

However, it is important to note that carbon neutrality does not put any limits on GHG emission outputs and requires a far higher capacity for offsetting, whereas net zero typically refers to more rigorous emissions reduction efforts, with the aim of achieving a future where few residual emissions exist. But, both rely on solid efforts to measure, understand, and take action on organisational GHG emissions.

What does it mean?

• Net zero: Net zero refers to reducing all GHG emissions as much as possible – up to 90% – and tackling the remaining emissions with durable carbon removal.
• Carbon neutral: Achieving carbon neutrality involves offsetting GHG emissions, focusing mainly on carbon dioxide emissions. More achievable in the short-term compared to net zero.

What kinds of emissions does it cover?

• Net zero: Involves eliminating then offsetting all GHG emissions, including Scopes 1, 2, and 3 (the entire value chain).
• Carbon neutral: Focuses on compensating for CO2 emissions through reduction or removal initiatives, typically covering Scopes 1 and 2 emissions.

How does it work?

• Net zero: Requires a fundamental reduction in emissions through changes in technology, energy efficiency, and processes across all sectors and actively removing carbon from the atmosphere using technologies such as carbon capture and storage, or enhancing natural processes like afforestation and reforestation.
• Carbon Neutral: Focuses on reducing carbon emissions and compensating for the remaining emissions through offsets.

What are the relevant standards and certifications?

• Net zero: Science Based Targets Initiative's Net Zero Standard, Oxford Offsetting Principles for Net Zero Aligned Offsetting
• Carbon neutral: PAS 2060
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Carbon neutral vs net zero – which approach is better?

Net zero and carbon neutrality both have their strengths and weaknesses, and which approach is more appropriate depends on the circumstances of the individual case.

Below, we will take a closer look at the advantages and limitations of each approach.
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Net zero: advantages and limitations

Advantages:

• Comprehensive approach: Net zero encompasses all GHG emissions – not just carbon dioxide emissions. This makes it a more holistic approach to climate change mitigation.
• Encourages innovation: Because it requires significant changes and innovations in technology, business practices, and lifestyle, net zero is a driving force for long-term sustainability. 
• Aligns with climate goals: Net zero aligns closely with global climate goals – e.g. the Paris Agreement, which aims to limit global warming to well below 2°C.

Limitations: 

• Complexity and cost: Due to the need for systemic changes and potentially new technologies, achieving net zero is more complex and potentially more expensive than achieving carbon neutrality.
• Longer time frame: Net zero often requires a longer timeline to achieve, as it involves significant reductions in emissions across all operations. 

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Carbon neutrality: advantages and limitations

Advantages:

• Feasibility: Carbon neutrality is often easier to achieve in the short term because it allows for offsetting emissions rather than requiring immediate and deep cuts in emissions.
• Flexibility: Carbon neutrality provides flexibility for organisations that are unable to make drastic changes to their processes immediately.

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Limitations:

• Lacks guidance for reductions: Carbon neutrality does not give parameters for deep emission cuts. Thus, companies may rely heavily on low-quality offsets, which can sometimes be seen as a way to ‘buy’ environmental responsibility without making significant internal changes.
• Potential for greenwashing: Due to its lack of a robust methodology, companies may be accused of greenwashing for relying on the cheapest, fastest way to neutrality without ‘doing the work.’ 

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Which approach is better?

As mentioned above, the choice between net zero and carbon neutrality depends on the specific circumstances and objectives of the entity considering them.

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Net Zero:
Net zero is the preferred long-term commitment to sustainability that aligns with global climate targets, emphasising transparency and scientifically backed methodologies. It is best suited for organisations with the resources and capability to invest in innovative technologies and processes. Achieving net zero often carries a stronger public commitment, reflecting leadership in sustainability and enhancing brand reputation.

Carbon Neutral:
Carbon neutrality is a practical starting point for organisations, offering immediate, short-term reductions and valuable experience as long as genuine efforts are made. It is particularly suited for smaller entities or those with limited resources. While carbon neutrality still demonstrates responsibility and can positively impact public perception, it is increasingly seen as a stepping stone rather than a final goal.

However, carbon neutrality has fallen out of use as a claim due to anti-greenwashing regulations in the Nordics and EU. These policies such as the Green Claims Directive point to the weaknesses of carbon neutrality, including having no requirement for deep emission cuts or potentially incentivising the cheapest, quickest way to neutrality. This undermines integrity in offsetting and makes it more confusing for consumers to know what is a green product. Yet, aiming for neutrality is a great way to get started, gain experience alongside genuine efforts and pushes for transparency.

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Why is reaching net zero so important?

Reaching net zero is crucial for several reasons. If global emissions continue unabated at current rates, we are set to exceed 2°C of global warming, with severe consequences for society and the environment.

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The primary goal of reaching net zero is to limit global warming to well below 2°C, with efforts to limit the increase to 1.5°C. Achieving this goal is essential to prevent the most severe impacts of climate change, such as extreme weather events, rising sea levels, and loss of biodiversity.

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Tackling this crisis requires a multi-pronged approach, beginning with emissions reductions across Scopes 1, 2, and 3 where relevant, followed by carbon removal via thoroughly vetted credits.

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Carbon removal: A vital step on the road to net zero

Carbon removal technologies play a crucial role in achieving net zero emissions by actively removing carbon dioxide from the atmosphere. From afforestation to direct air capture, these technologies offer diverse pathways to sequester carbon and offset emissions.

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Among other things, carbon removal:

• Addresses residual emissions by capturing and storing an equivalent amount of carbon dioxide from the atmosphere
• Compensates for historical emissions that have accumulated over time
• Enhances natural carbon sinks through practices like reforestation, afforestation, and improved land management
• Bridges the transition to low-carbon economies by allowing time to develop and implement more sustainable technologies and practices

And much, much more.

Net zero targets have the potential to increase global carbon removal capacity, alongside reduction efforts. Multiple frameworks and certifications exist to guide and validate companies’ net zero claims. However, it’s crucial that companies do not overlook the need for high-integrity carbon removals alongside emission reduction.

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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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What is GHG accounting?

Greenhouse gas (GHG) accounting refers to the process of measuring and monitoring the GHG emissions associated with a company or organisation. Using standardised measuring and reporting per agreed-upon protocols, companies are able to measure the quantity of GHG emissions resulting from their:

• Direct emissions: Emissions produced by the company, such as emissions from on-site combustion or production processes.
• Indirect emissions: Emissions resulting from the energy the company uses, the company’s supply chain, and the end-of-life stages of its products.

Greenhouse gas accounting helps to provide numerical data on greenhouse gas emissions. It provides companies with information which enables them to be held accountable for their emissions, making it possible for companies to take action when it comes to reducing their emissions.

What is the difference between GHG accounting and carbon accounting?

The term GHG accounting is often used interchangeably with carbon accounting, but the two are not completely synonymous.

GHG accounting encompasses all greenhouse gasses, including carbon dioxide. Carbon accounting is a subset of GHG accounting which specifically focuses on measuring and managing carbon dioxide emissions. This enables companies to more accurately account for all emissions within their value chain and serves as the foundation for crafting an impactful reduction and removal strategy.

Find a carbon accounting partner here.

How does GHG accounting work?

GHG accounting involves the following key steps:

1. Identification: Identifying sources of emissions within the company. Examples of these include stationary combustion, transportation, and fugitive emissions.
2. Calculation: Calculating emissions from each source using emission factors and activity data. To account for the different global warming potentials of various greenhouse gasses, emissions are typically reported in terms of carbon dioxide equivalents (CO₂e).
3. Tracking and reporting: Recording and reporting emissions in accordance with established standards and protocols – e.g. the Greenhouse Gas Protocol, ISO 14064, or national regulations. This includes accounting for Scope 1, 2, and 3 emissions.
4. Verification and validation: Ensuring the accuracy and reliability of the data and methods used for GHG accounting. This is often done through external verification or audits.

Methods of GHG accounting

GHG accounting is done using two methods: the spend-based method and the activity-based method.

The spend-based method

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

Advantages and disadvantages of the spend-based method include:

• Easy to implement if financial data is available
• Covers a wide range of activities with one set of financial data
• Less accurate, as this method uses 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 have been purchased. The method accounts for all the steps in the process that may have created a carbon footprint. This includes material sourcing, production, marketing, and much more.

Advantages and disadvantages of the activity-based method include:

• Provides a more precise and accurate measurement of emissions for specific activities
• Allows for targeted emission reduction strategies
• Requires more detailed data on activities and processes
• Can be time consuming and complex to implement, especially for large companies with many different sources of emissions

As both methods have their advantages and disadvantages, many companies choose to use a hybrid approach, combining both methods to gain a more comprehensive understanding of emissions and support more effective decision making.

Why is GHG accounting important?

For companies striving to reach net-zero emissions, GHG accounting is important for numerous reasons. GHG accounting functions as a baseline measurement that provides companies with a clearer understanding of their emission levels – an essential factor for companies looking to set realistic and achievable net-zero targets.

Other reasons GHG accounting is an important element on the journey towards net zero include:

• Monitoring progress: GHG accounting enables companies to monitor their progress on the road towards net zero. By tracking emissions, companies can assess the effectiveness of their strategies and make adjustments as needed.
• Identifying reduction opportunities: By providing detailed information about emission sources, GHG accounting helps companies identify areas for improvement and opportunities for emission reduction – e.g. switching to renewable energy sources or improving energy efficiency.
• Transparency and reporting: Accurate GHG accounting enables companies to transparently report their emissions and progress towards net zero to investors, customers, and other stakeholders, helping to build credibility and trust.
• Compliance with regulations: GHG accounting helps companies comply with relevant regulations and reporting requirements surrounding greenhouse gas emissions.
• Risk management: Understanding emissions and their potential impact helps companies manage climate-related risks. This can include adjusting business strategies and investments to account for customer preferences or future climate policies.
• Access to sustainable financing: Accurate GHG accounting can help companies demonstrate their commitment to sustainability. This can help attract investors and financial institutions that favour companies with strong environmental performance.

The process of GHG accounting can also help drive companies to invest more in innovation within areas such as energy usage, supply chain management, and product design, moving towards a more sustainable future for companies across the globe.

Next steps

GHG accounting provides companies with a clearer understanding of their emission levels, allowing them to better focus their efforts towards the greatest reduction opportunities. 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 longer enough to stay within the goals set forward in The Paris Agreement. For a company to reach net zero, residual GHG emissions must be neutralised with an equivalent amount of carbon removal.

At Klimate.co, we provide access to high-quality, innovative, and verifiable carbon removal solutions. We strategically finance projects based on environmental responsibility as well as social and economic development – and we only work with companies that are already taking action to reduce their emissions.

Scope 1, 2, and 3 emissions: What are they, and what is their purpose?

The Greenhouse Gas Protocol – the world’s most widely used greenhouse gas accounting standard – categorises GHG emissions into three Scopes: 1, 2, and 3.

These three categories are used to classify greenhouse gas (GHG) emissions associated with a company’s activities, within both its own operations and its wider value chain.

By incorporating Scope 1, 2, and 3 emissions in their full emissions inventory, companies are able to achieve a more comprehensive understanding of their full value chain emissions. This enables them to better focus their efforts towards the greatest reduction opportunities.

Definitions of Scope 1, 2, and 3 emissions

In essence, Scope 1 emissions are direct emissions owned and controlled by the company, whereas Scopes 2 and 3 are indirect emissions from sources that are not owned or controlled by the company. Whilst the company does not own or control the sources of Scope 2 and 3 emissions, these emissions still occur as a result of the company’s activities.

Scope 1, 2, and 3 emissions are categorised as follows:

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Scope 1 emissions

Scope 1 emissions are direct greenhouse gas emissions which occur from sources that are directly owned or controlled by the company. These include emissions from sources such as fuel combustion, company vehicles, and fugitive emissions.

Example: Scope 1 emissions occur from burning fuel in the company’s fleet of vehicles (provided these vehicles are not electrically powered).

Scope 2 emissions

Scope 2 emissions are indirect emissions which occur as a result of the generation of electricity, heat, or steam that a company purchases or consumes. Scope 2 emissions occur at the facility where the energy is generated, but are still associated with the company’s activities.

Example: Scope 2 emissions are caused by the generation of the electricity used in the company’s buildings.

Scope 3 emissions

Scope 3 emissions are indirect emissions which occur as a result of the company’s activities, but from sources that are not owned or controlled by the company. These include investments, purchased goods and services, business travel, employee commuting, waste disposal.

Scope 3 emissions include all emissions not covered in Scope 1 or 2, and which are created by the company’s value chain.

Example: Scope 3 emissions occur when the company buys, uses, and disposes of products from suppliers.

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The role of Scope 1, 2, and 3 emissions in corporate sustainability

Understanding Scope 1, 2, and 3 is crucial for companies aiming to reduce their environmental impact and comply with global sustainability standards.

By understanding emissions across all Scopes, companies are able to comprehensively assess their environmental impact. This knowledge enables them to identify the most significant sources of emissions and develop targeted reduction strategies tailored to their specific operations and value chains. 

This is particularly important for companies aiming to achieve net-zero emissions. There are several reasons for this, which go beyond simply aligning with broader global sustainability goals.

These include:

• Accounting for all emissions: Net zero means balancing the amount of GHG emissions released into the atmosphere with an equivalent amount of emissions removed or offset. To achieve this, companies must account for all emissions within their value chain. This can be achieved through carbon accounting, which is used to accurately estimate all three scopes and serves as the foundation for crafting an impactful reduction and removal strategy. Find a carbon accounting partner here.
• Developing comprehensive reduction strategies: Reduction is essential on the road to net zero. Understanding emissions helps companies develop comprehensive reduction strategies that address both direct (Scope 1) and indirect (Scope 2 and 3) emissions.
• Minimising residual emissions: Understanding Scope 1, 2, and 3 emissions helps companies identify residual emissions that are challenging to eliminate entirely, but may be minimised through the right reduction and offsetting measures.
• Enhancing transparency and credibility: Transparent reporting of emissions data demonstrates the company’s willingness to be accountable for all emissions associated with its operations and activities. This enhances the credibility of the company’s net-zero commitment, helping to build trust with stakeholders and investors.

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You might also be interested in: What is GHG accounting, and how does it work?

Scope 3 emissions: How companies can make an impact

For many companies, Scope 3 emissions account for more than 70% of their carbon footprint. For example, the extraction and processing of raw materials often cause significant Scope 3 emissions for manufacturing companies.

Scope 3 emissions are typically more challenging to control, as many suppliers have considerable influence on how emissions are reduced through their own purchasing decisions. However, committing to tackling Scope 3 emissions is crucial for companies looking to achieve net zero emissions.

Addressing Scope 3 emissions can make a significant difference in advancing a company’s journey towards decarbonisation and corporate sustainability.

Getting started with carbon removal

Understanding emissions across all Scopes enables companies to comprehensively assess their environmental impact, identify the most significant sources of emissions, and develop targeted reduction strategies tailored to their specific operations and value chains.

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 longer enough to stay within the goals set forward in The Paris Agreement. For your company to reach net zero, you must neutralise your residual GHG emissions with an equivalent amount of carbon removal.

At Klimate.co, we provide access to high-quality, innovative, and verifiable carbon removal solutions. We strategically finance projects based on environmental responsibility as well as social and economic development – and we only work with companies that are taking action to reduce their emissions.

Your Net Zero commitment, guaranteed

A Carbon Purchase Agreement (CPA) is a contract entered between a carbon removal supplier or broker (in this case Klimate) and a client, that guarantees future access to Carbon Dioxide Removal (CDR) credits.

The purpose is to guarantee that the Purchaser has access to carbon removal in the future - at a given price, volume and type - while ensuring the quality, credibility and additionality of the CDR credits.

How a Carbon Purchase Agreement works

Planning

Ambitious companies with Net Zero commitments sign on to CPAs to aggregate demand. By signing CPAs, companies secure their access to high-quality CDR projects that will not be available in the future. By grouping together projects, companies can create sufficient demand to ensure development at a cost-efficient scale and guarantee additionality.

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Execution

Project suppliers use the CPA to build new CDR facilities. With demand secured, Klimate collaborates with suppliers to secure working capital and deploy CDR facilities. We use our robust and proprietary analytical framework to ensure that only the highest quality projects are supported.

Delivery

CDR credits with true additionality. As the CDR projects begin delivery, purchasers pay for credits, registered on the public records of Klimate. The cost is fixed, as opposed to the market price, expected to increase significantly in the coming years due to supply shortages.

Why CPAs are critical to delivering Net Zero commitments

The science is clear—all viable climate models show that carbon removal will be necessary to achieve the targets set by the Paris Agreement and reach global Net Zero by 2050. Companies need to reduce their emissions as much as possible, but unavoidable emissions must still be addressed through CDR. A Carbon Purchase Agreement can help your business meet future decarbonisation targets

Securing access, affordability and additionality through CPAs

• There is already a significant shortage of supply for high-quality carbon removal. The cost of CDR is also expected to accelerate as demand rapidly outpaces supply. By committing early, you fix the future cost, while paying the full amount only at the successful delivery of the CDR credits.
• Additionality is the holy grail of offsetting emissions. By co-initiating new carbon removal projects, CPAs become unquestionably additional.
• CPAs also help accelerate the overall development of the carbon removal market, by sending a market signal that prompts other companies to invest as well. In the long run
• Leading companies like Meta, Google, Stripe and McKinsey are already pre-committing to purchase CDR towards 2030.

Key terms

1. Method - There are many ways to remove CO₂, each CPA specifies which method will be used.
2. Volume CO₂ / Year - Each CPA holds a certain amount of CO₂ that can be produced per year.
3. Cost / Ton - The cost for each CDR credit, typically 1 ton CO₂.
4. Delivery schedule - The time period and volumes in which the CDR credits will be delivered. For example 2025 to 2030.
5. Pre-commitment - The share of the total amount which needs to be committed at the start of the contract.

A Carbon Purchase Agreement for your company

Curious about how a Carbon Purchase Agreement might fit into your overall sustainability strategy? Speak to a carbon removal strategist to learn more about how you can achieve climate impact while making sound business decisions.

How to calculate company emissions

When aiming to calculate your emissions, the first step is deciding whether you want to do the work in-house, or rely on an external partner.

Using existing frameworks in-house

Calculating emissions requires a lot of time, work and specialist knowledge, but it is possible to carry out in-house. If your company or organisation has someone with the expertise needed, there are tools available to support you in calculating your emissions.

For instance, the GHG Protocol offers a free cross-sector Excel-based calculation tool with detailed instructions for use. There are numerous other tools available—we’ve put together a selection here.

Climate consultants

As almost all companies will need to report on carbon emissions sooner or later, there are a growing number of consultants specialised in doing so, whether you need a carbon footprint analysis or LCA.

Climate consultants tend to prefer an activity-based approach, which you can learn more about below, as this leads to more accurate calculation. Most consultants also offer strategic consulting on ways to reduce your emissions. This comes at a cost, but if you need high fidelity, it might be worth it.

Carbon accounting platforms

In recent years, there has been a flurry of activity in the carbon accounting space, and startups creating software solutions have sprung up around the world.

These platforms offer an impressive amount of automation, allowing them to calculate emissions faster and at lower cost. Many can also integrate directly into services your company uses, like your electricity meter, heating system, flight booking system, etc.

However, these platforms generally use a spend-based approach, which can lack accuracy.

What is the cost of calculating company emissions?

Now that we have a basic understanding of calculating emissions, you might anticipate the answer: It depends. In our experience, costs can range from €1,000 to more than €60,000. Below are some of the key factors that influence the cost of accounting:

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Having these numbers handy before seeking help with calculating your emissions will help you get comparable quotes.

In general, you get what you pay for. The more expensive the solution you opt for, the higher the accuracy will be, and the better the calculations will stand up to scrutiny. It is very important to consider what you will use the calculations for, and where you are in your sustainability journey.

If you are a small company looking to get a basic understanding of your emissions and how to start reducing them, it makes sense to go with a cheaper, faster solution and get started. If you are a large company, intending to reach carbon neutrality, you need to have very thorough calculations from a reputable source.

What type of calculation do you need?

In these times of regulatory uncertainty, it makes good business sense for your company to keep updated with the latest developments. Here we outline two of the main approaches for calculating your climate impact: carbon footprint analysis and life cycle assessment (LCA).

Carbon Footprint Analysis: Emissions of your entire company

Nothing in life is free, and similarly, everything has a carbon footprint. A carbon footprint analysis evaluates the greenhouse gas (GHG) emissions caused by a product, a manufacturing plant or an entire company. A range of GHG emissions are assessed and then converted into carbon dioxide equivalents (CO₂e) to allow for comparisons.

The Greenhouse Gas (GHG) Protocol provides the most widely used standard (called the Corporate Value Chain Standard and the Corporate Accounting and Reporting Standard) for measuring and reporting emissions. These are divided into Scope 1, 2, and 3 emissions, ensuring a true and fair representation of your company’s climate impact. The International Organization for Standardization (ISO) also offers a standard (ISO 14064) to quantify, monitor, report, and verify your direct and indirect GHG emissions.

Scope 1

Scope 1 emissions relate to emissions that come directly from your company’s owned or controlled operations, e.g., fuel consumed in company vehicles. These are the emissions you have the most control over, and can quickly target to start your journey to net zero.

Scope 2

Scope 2 emissions represent indirect emissions from sources purchased or acquired for use in your company, e.g., electricity, heating, cooling. Hotspots caused by Scope 2 emissions are most efficiently targeted by switching to renewable energy sources.

Scope 3

Scope 3 emissions are the trickiest. They are all other indirect emissions occurring in the value chain of your company, both upstream and downstream, e.g., employee commuting, waste, business travel, investments, and the list goes on! There are two main methods for calculating Scope 3 emissions: spend-based and activity-based.

Spend vs. Activity-Based Data

Spend-based data is obtained by multiplying the financial value of a purchased good or service by an emission factor. Emission factors are derived from an industry average of emissions levels, and so spend-based data only represents a rough estimate of actual emissions.

A more precise by time, labor, and cost intensive approach is to use activity-based data. This involves collecting detailed data, both internally and externally from all suppliers, and multiplying that data by activity-specific emission factors. A more granular overview of supply chain emissions is provided from this approach which allows for targeted GHG reductions.

Life Cycle Analysis: Understanding a specific product or service

Alternatively, a LCA can be carried out on a specific product, process or service within a defined set of boundaries (cradle-to-gate, cradle-to-grave). Notably, it encompasses multiple environmental and economic impacts beyond just GHG emissions, such as:

• Natural resource depletion
• Ecosystem degradation
• Human health
• Social fairness
• Pollution
• Water quality

Obtaining and processing raw materials, manufacturing, dissemination, usage, maintenance, repairs, selling/reusing, and disposal can all be contained within this as well.

Cradle-to-Gate vs. Cradle-to-Grave vs. Cradle-to-Cradle

Cradle-to-gate refers to the environmental and economic impact of a product, process, or service from the point of raw material extraction through the manufacturing process, up until the point of use. Alternatively, the impacts of the entire process (from raw material extraction to disposal) can be accounted for in an LCA. This is often referred to as cradle-to-grave.

Some companies or organisations may opt for a cradle-to-gate approach if they have designed a product or service that is easily reusable. However, a lot of products and services amass most of their carbon footprint after purchase, which is when the cradle-to-grave approach is most insightful.

Another more holistic school of thought is cradle-to-cradle. This design philosophy was inspired by nature, where the waste products of one process serve as the fuel for another process. In short, no materials are simply discarded at the end of their useful life; instead they are reused indefinitely in other products of greater or equal value.

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Why we don’t calculate emissions for you

At Klimate, we offer access to portfolios of thoroughly vetted high-quality carbon removal to help companies compensate for their unavoidable emissions.

A lot of companies out there are offering to calculate your emissions as well as help you offset them. However, we are going about this differently.

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We want to ensure trust and integrity

It seems logical to have one partner to take care of everything when it comes to going carbon neutral. However, there is a good reason why your accountant and auditor are not the same person.

Most companies that sell offsets, including ours, charge a commission for each credit. This means that the larger the emissions, the larger the commission. This creates a conflict of interest when making the calculation.

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We believe everyone should do one thing and do it well

Sourcing and analysing the best carbon removal solutions is a big undertaking, and we want to focus all our efforts on this.

At the same time, calculating emissions is equally complex, and we see a growing number of companies specialising in industry-specific calculations like real estate, food, e-commerce, and even furniture!

We are under no illusion that we can be as good as them, therefore we choose to collaborate instead.

Need support with calculating your emissions?

We have a strong network of partners specialised in different industries and types of calculations. You can go through our partner directory here