What is carbon accounting? It is the measurement and process of recording greenhouse gas (GHG) emissions to quantify and understand their correlating impact to the climate.
Centred on the quantifying the environmental hazards that could result from excessive carbon emissions, it is a vital measure to direct businesses to more accountable means of achieving sustainability in their processes.
Why is carbon accounting important
The purpose of carbon accounting is to establish emission reduction targets for companies to calculate the impact of their existence on the planet.
In the era of accountability culture, it enables companies to make better-informed decisions in their operation and business models to reduce the amount of carbon emitted.
How is carbon emissions calculated
There are 3 scopes of carbon emissions
1) Emissions from direct activities of your company
These are GHG produced from company operations such as vehicles owned or controlled by the business if they are not electrically powered
2) Emissions from the generation of your company’s purchased and consumed electricity
Scope 2 emissions physically occurs at the facility where they are generated but are accounted for in an organisation’s GHG inventory because they are a result of the company’s energy use
3) Emissions from all other indirect sources in your company’s supply chain
These are emissions that are not the result of activities from assets owned or controlled by the company but are indirectly responsible for through the purchase, use and disposal of products
More visibility and incentives to accurately measure GHG emissions and its impact is required for an effective method of accounting so that each company may subsequently quantify their upstream and downstream emissions.
The limits to carbon accounting
The protocol expects companies to gather emissions data from all their multi-tier customers and suppliers, a fiendishly complex task, and thus scope 3 has allowed companies to conduct some amount of guess work of upstream and downstream emissions.
This means unlike financial reporting, there is no effective system to punish companies if they get their emissions reporting wrong, making rigorous carbon accounting more of a concept than a standard.
Because it is an expensive process that is uneconomical at any scale, incentivising companies to be transparent about their carbon accounting requires a global market-driven aggressive decarbonisation stimulant to make sure decarbonisation by businesses can be a source of competitive advantage.