Carbon emissions are a hidden expense of the food we consume, the clothing we wear, and the technology we use. These emissions, mostly naked to the human eye, contribute to extreme weather, glacier melting, and climate change. According to studies, supply chains are responsible for more than 70% of carbon emissions worldwide, hence industries and businesses bear a great deal of responsibility towards reducing these emissions. Business Carbon Accounting is a method for companies to measure and control emissions at every stage of production of their goods and services. It is a way to quantify the amount of pollution that industries create in the form of greenhouse gases (GHG).
For companies, there are have several advantages to undertaking Business Carbon Accounting such as reducing costs, meeting industry standards, and aligning with climate regulations. However, without a strategic plan, carbon accounting can be a failed exercise. Hence, a clear strategy and following the right steps ensures that the procedure aligns with organisation’s goals, secures stakeholder buy-in, and avoids pitfalls.
For example, Microsoft’s early focus on Scope 3 granularity guided its software choice to track 30,000+ suppliers.
Here’s a look at a few essential tips for business carbon accounting.
- Set the Boundaries and Scope of Carbon Accounting:
The first step to business carbon accounting is having clarity about what emission tracking standard the company will follow. There are various global standards and protocols for tracking industry emissions. One of the most widely used and accepted standards is the GHG Protocol.
The protocol includes Scope 1, 2 and 3 emissions that categorizes emissions as per the following:
- Scope 1: Direct emissions from owned sources such as company vehicles and manufacturing processes.
- Scope 2: Indirect emissions from purchased electricity, heat, or steam.
- Scope 3: Indirect emissions from the value chain, including suppliers, transportation, and product lifecycle impacts.
For most companies, Scope 3 emissions make up 80–95% of their total footprint.
Suggested Tip💡: Establish a strong framework for business carbon accounting, which guarantees reliability and uniformity in emissions reporting. To satisfy investors and regulatory requirements, businesses should match their processes with globally accepted standards.
2. Collaborate for Accurate Business Carbon Accounting
Business Carbon Accounting calls for specific knowledge, companies must decide whether to hire outside experts or create an internal sustainability team. Most suppliers, especially small businesses, lack the resources to measure emissions. Hence, an organisation has to make a call to whether to outsource the entire sustainability and ESG department or build internal capabilities of employees by bringing on board a sustainability partner in the form oconsultants or service.
Suggested Tip💡: Start with 2–3 suppliers to test the approaches of the consulting agencies. Another method would be to, offer training or Host workshops on carbon accounting basics for the employees to upskill them.
Unilever launched its Climate Partnership Program, training 300+ suppliers to measure emissions. They provided free access to carbon calculators and funded renewable energy projects. Result? Suppliers cut 1.4 million tonnes of CO2 in three years.
3. Securing reliable Data Sources of Business Carbon Accounting
According to a report published by PCAF (Partership for Carbon Accounting Financials), one of the greatest challenges when it comes to measuring emissions is the s carcity of high-quality data.
The process of business Carbon Accounting is largely dependent upon the data from reliable sources. To calculate the accurate amounts of emissions, the carbon accounting tool or software needs to be updated with the correct data collection sources. Analyzing this data can also be used to make coherent, comprehensive and connected business and sustainability decisions. Additionally, during the decarbonization process, the data collected initially serves as the base values for carbon accounting companies to fix emission reduction targets.
Suggested Tip💡: Automating data collection through IoT sensors, AI-driven tools, and blockchain technology can significantly enhance accuracy while reducing human errors. This can be achieved easily with a carbon accounting tool as they are designed to collect data from suppliers easily and accurately.
Walmart utilizes AI-driven tools to monitor emissions across its vast supply chain. The company partners with CDP (formerly Carbon Disclosure Project) to track Scope 3 emissions from suppliers.
4. Integration of ESG and Financial Decision Making
Business Carbon accounting must be incorporated into a company’s financial and strategic decision-making process; it shouldn’t be a stand-alone sustainability initiative. Businesses can make data-driven decisions that support profitability and environmental responsibility by integrating carbon footprint with financial reporting and investment decisions. Stakeholders, investors, and regulators are also calling for more openness regarding climate-related risks. To show the full cost of their environmental impact, businesses should include statistics on carbon emissions in their financial reports.
Suggested Tip💡: Setting a price for carbon emissions is one of the best methods to incorporate carbon accounting into financial decision-making. This implies that there is a monetary cost associated with each ton of CO₂ released, which affects operational and business strategy choices.
Since 2012, Microsoft has charged its business units for their emissions and reinvested the proceeds back into sustainability projects through an internal carbon fee.
5. Use Software for Business Carbon Accounting
Technology is essential for automating data collection, lowering errors, and ensuring adherence to international reporting standards as businesses work to achieve more transparent and effective carbon accounting. Tracking emissions annually using spreadsheets or even handwritten logbooks, is prone to huge mistakes and is also time consuming. Traditional method may seem viable and cost-friendly in short run, but can lead to mistakes, inaccurate reporting and even severe losses for the businesses.
Hence, investing in a software or carbon accounting tool to track and measure emissions, is important to businesses leading to accurate tracking, timely updates and even profits.
Suggested Tip💡: Choose a software which uses advanced technology with features like automated reminders, continuous monitoring, and enhanced transparency, and provides a robust solution for tracking and auditing Scope 1, 2, and 3 emissions in alignment with GHG Protocol and PACT standards.
Adopting a successful carbon accounting strategy is essential for companies. It meets stakeholder expectations, guarantees regulatory compliance, and finds ways to increase efficiency and save money while mapping carbon footprint. Prior to choosing a carbon accounting solution, a well-thought-out plan guarantees consistency with corporate objectives and makes integration into current procedures easy.
How can businesses use TSC’s NetZero for carbon accounting?
Maintaining an accurate, compliant, and successful carbon management system requires avoiding frequent errors. Purchasing the appropriate business carbon accounting software guarantees accuracy, compliance, and a competitive advantage as emission restrictions get stricter. In accordance with PACT and GHG Protocol guidelines, TSC NetZero offers a reliable way to monitor and audit Scope 1, 2, and 3 emissions.
The program simplifies carbon reporting and keeps companies ahead of regulatory changes with its automated reminders, ongoing monitoring, and improved transparency. Businesses can easily fulfill compliance standards and fulfill their sustainability pledges with TSC, opening the doors to long-term success and growth.
