Last year, the UK produced over 414 million metric tons of carbon. Believe it or not, that’s actually half as much as we produced as a nation 20 years ago, but our efforts can’t stop here.
Yet while reductions have occured, the needle hasn’t moved enough on climate change. We are currently on track to hit over 3°C in global warming by 2030, which is double the 1.5°C that the Paris Agreement has set out to achieve.
With companies worldwide tripling their commitments to net zero in 2020, and 1/3rd of the UK’s largest 100 companies setting the pledge pre-COP26 there is a mutual understanding that more drastic action needs to be taken to curb emissions.
Carbon at what cost?
Companies around the globe have awoken to the cost of carbon, both financially and in terms of potential risk exposure. Carbon footprinting, the typical approach to measuring carbon emissions across a company and their supply chain, misses something, accountability.
This is where carbon accounting comes in, just like with financial accounting, this process enables not just the measurement of emissions, but standardised reporting methodologies and climate management practices too.
The moment for basic corporate carbon baselines has passed. Businesses are increasingly facing external pressure to provide tangible carbon strategies that highlight carbon hotspots, alongside trackable plans to tackle them and transparent progress reports.
Let’s start with a definition - what is carbon accounting?
The way we describe carbon accounting is the approach of measuring, reporting and reducing carbon emissions. It's about taking accountability and climate action on your carbon footprint.
Also known as greenhouse gas accounting, carbon accounting looks at your company’s emissions data under a microscope assessing where the hotpots are, but then going those few steps further to understand how to reduce them.
A significant difference between a carbon footprint and carbon accounting is the regularity of measurement. Footprints are static snapshots in time, typically done to coincide with financial reporting seasons, yet carbon accounting relies on a continuous flow of data, which enables management and action throughout the year.
What is the driving force behind carbon accounting?
There are various factors driving the significant uptake in carbon accounting practices, let’s take a look at some of these factors in more detail.
Bigger climate targets - in December 2020, the UK Prime Minister announced a new emissions target for the country that focuses on achieving a minimum of 68% reduction in greenhouse gas emissions by 2030, compared to 1990 levels.
To achieve ambitious targets like this companies, governments, investors and consumers must work together to lower their emissions. And you can’t manage what you can’t measure, so to enact change carbon accounting must come into force.
Changing regulations - with regulations continually changing and updating across the world so are reporting methodologies and expectations.
It’s important for businesses to remain agile and report consistently. Carbon accounting platforms like ours centralise emission data updating them continuously with data flows from emission sources. This enables companies to model the data in any way necessary to keep up with regulations.
Mandatory GHG reports - accounting for carbon is fast becoming a cost of doing business in today’s world. In June 2013 mandatory carbon reporting was introduced by the UK coalition government, enforcing around 1,800 of the UK’s largest listed companies to report on their greenhouse gasses (GHG) every year since.
GHG reporting is mandatory across 40 countries in the world - this includes Australia, EU member states, North America and Japan. Follow this link to view the summary of each country.
Mandatory GHG reporting ensures that companies and facilities alike are restricted in the amount of greenhouse gas emissions they emit. By keeping within the guidelines and presenting regular GHG reports, this data can be monitored, and sources and trends can be better managed.
The Task Force on Climate-Related Financial Disclosures, also known as the TCFD, in 2017, released climate-related financial disclosure recommendations in order to support companies when providing their own GHG emissions information.
The TCFD’s disclosure recommendations target four areas: governance, strategy, risk management, and metric and targets. By focusing on these main areas, it can help facilities, organisations and companies to get the very best out of their climate-related disclosures.
Information transparency - whether we like it or not, information is everywhere, it’s at our fingertips throughout the day. This means businesses are under constant scrutiny and so are their sustainability strategies.
This means it’s important for your brand to be as forthcoming as possible demonstrating an alignment with the government, investors and the public. Carbon accounting is a public declaration of transparency.
Results, not mission statements - mission statements aren’t enough. Consumers want hard facts about how your business is making efforts to reduce its carbon emissions and contributing to the bigger picture.
Stakeholders want to hear about your green initiatives so that they can purchase sustainably and invest responsibly. Greenwashing has become a significant concern for many, answering questions with data substantiates sustainability narratives.
According to statistics from a Carbon Trust survey focusing on 500 young adults: ‘57% said they would stop buying a product if its manufacturer refused to commit to measuring and reducing its carbon footprint. 55% said they would be more loyal to a brand if they could see it was taking steps to reduce its carbon footprint.’
As we develop as a society, consumers have become more discerning about their environmental impact and the choices they make when purchasing a product or turning to a service provided by a company.
In response to this, businesses have to adapt and become more transparent to meet the demands of a new generation.
What are the benefits of carbon accounting?
Carbon accounting helps us to find answers to the following questions:
- Who is responsible for the business’ carbon emissions?
In order to reduce carbon emissions, the organisation must establish the person(s) in charge of maintaining focus on the company’s direct and indirect carbon impact. Once the data flows have been set up it will be much easier to hold the right people accountable and have the necessary conversations to make real change.
- Which areas need targeting to achieve the biggest reduction in carbon?
A simple carbon footprinting calculation may tell you just how much of an impact a business is having on the environment, but it won’t tell you which departments or processes house the carbon hotspots. The continuous nature of carbon accounting on the other hand, tracks annual fluctuations and benchmarks suppliers highlighting where carbon levels are the highest.
- What methods/strategies can be implemented to help reduce your climate impact?
By understanding an organisations’ contribution to carbon emissions, it becomes much easier to start working on strategies that will help reduce it, whether it’s a complete revamp of a particular process or the introduction of new technology. Without knowing how much carbon an organisation is producing, it's hard to know where to start with this sort of innovation.
- Are there businesses that are greenwashing us?
Despite the fact that carbon reporting has been mandatory for certain businesses in the UK for several years now, this hasn’t stopped companies from being able to greenwash the public by providing misleading information coupled with unfocused reports.
What are the challenges of carbon accounting?
- Double counting - for organisations that work together, it can be complex when deciding who is accountable for what. This typically occurs where there’s a supply chain, so one activity might be accounted for by more than one party.
- Data inconsistencies - if there isn’t a uniform standard in place that’s enforced across industries, then there will be discrepancies between a complete and incomplete carbon report. This is why it’s important for governing bodies to provide guidance about what a complete carbon report looks like, and how businesses can approach the process in the right way.
Understanding your supply chain emissions
Value chains house carbon risk, from raw materials to how consumers dispose of products after use. Whether you directly control the emissions or not, you are considered to be accountable for them. After all, your supply chain can account for up to 90% of your emissions.
For companies, there’s a 3-scope framework that helps to measure and reduce emissions.
Scope 1 - direct emissions. These stem from your company's activities, including fuel combustion from business-owned or controlled facilities and vehicles.
Scope 2 - bought emissions. Such as electricity consumption that comes in the form of steam, heating and cooling.
Scope 3 - indirect emissions. These stem from raw materials, distributing, transporting, staff commuting, usage of products sold, processing and end-of-life products.
How is achieving net-zero good for business?
There are so many reasons why achieving net zero is good for the planet but good for business too, the many benefits include:
- Increase brand value
- Attract and retain talent
- Secure investments
- Cost efficiencies
- Room for innovation
- Competitive advantage
- Increase resilience
Want to prepare for a low-carbon future and reap the rewards?
At Emitwise, we understand that there are many sustainability challenges that businesses face today, so to help you on your journey to net zero - turn to our expert and innovative team and let’s make that change together.
Using Emitwise’s industry-leading software designed by carbon accounting and AI technology experts, businesses like yours can be empowered to drive emission cuts by tackling carbon-heavy parts of day-to-day operations and supply chains.