Nations, states or corporations aim to tackle climate change with effective carbon management.

According to Science Direct, carbon accounting methodologies and frameworks are crucial for actual Greenhouse Gas (GHG) savings. Carbon accounting tools can help combat climate change by steering companies toward effective mitigation decisions.

As the Sixth Assessment Report by the Intergovernmental Panel on Climate Change (IPCC) report stated, we are running out of time. Unless we make drastic GHG emissions reductions within the next two decades, temperatures may rise by more than 1.5˚C above pre-industrial levels. To prevent such a disaster, carbon accounting, management and reduction need to be on the agenda. Investors, regulators, and consumers will expect businesses to act responsibly and make a real impact on the climate change situation.

What is Carbon Accounting, and Why Should Companies Care About It?

Carbon accounting or greenhouse gas (GHG) accounting covers a wide range of practices to calculate how much carbon dioxide and other greenhouse gases a company or country emits. It is typically divided into two categories-physical and financial carbon accounting.

Physical carbon accounting measures direct and indirect GHG emissions (Scopes 1, 2, and 3), taking into account all industrial activities, also referred to as a greenhouse gas (GHG) inventory, that affects the Earth’s atmosphere. Once a company establishes how much greenhouse gases it emits and impacts the climate, it can set GHG or carbon reduction targets to limit emissions. With the help of carbon accounting software and reliable industry-based emissions data, they can create a blueprint for taking steps towards a cleaner world.

Financial carbon accounting aims to give the carbon dioxide and other greenhouse gases produced and absorbed a financial market value. As corporations strive to achieve net-zero emissions targets, the need for accurate reporting of a company’s carbon footprint has become imperative. Carbon accounting and the use of carbon accounting tools will help them quantify their current emissions baseline and help track their efforts in reaching GHG reduction targets.

Carbon Accounting Is Becoming an Industry Requirement

As the climate crisis looms, the IPCC report states a stark truth – climate change will lead to extreme weather conditions occurring more frequently, leading to widespread devastation. Scientists believe that the rising levels of GHG emissions lead to rising sea levels and rising temperatures, heavy rain, flooding, erosion and reduced agricultural yields. Companies have a big role in reducing these emissions and meeting the carbon budget set by regulators. They need carbon accounting to reach net-zero goals, be climate-smart and prevent a catastrophic climate breakdown.

So, carbon accounting is no longer just a ‘nice-to-have.’ It is an increasing industry-standard requirement for many businesses. There are many drivers for initiating comprehensive carbon accounting like stakeholder and shareholder communication, mandatory GHG reporting, tender requirements for government and business contracts investment and financing due diligence, staff engagement, and green messaging.

The first step towards cutting down on emissions is to quantify the corporate carbon footprint. A carbon management software provides the tools to understand these and the precise business units responsible for these emissions. It also helps to gauge which policies appear ‘green’ but are not so in reality. Carbon management methods that do not cover system-wide consequences could increase emissions instead of the intended goal to reduce. Questions that a robust carbon accounting software will answer:

  • How to quantify and measure GHG emissions?
  • How much greenhouse gases are being emitted?
  • Who is responsible for these emissions?
  • Are there policies, material or technologies that appear green but increase emissions?
  • Which measures allow for the biggest emissions reductions?
  • Where do the most vital GHG reduction possibilities exist within the various business units and value chains?

With the results from carbon accounting, organizations can take responsibility for their impact and make informed decisions about mitigation strategies. For the residual emissions that cannot be avoided or reduced, it will help them ensure that proper carbon offsetting occurs, which means an equivalent amount of carbon dioxide is either absorbed or prevented from ever being emitted elsewhere.

Three Significant Benefits of Carbon Accounting Are:

  1. Environmental: Help reduce carbon dioxide concentration in the atmosphere.
  2. Economic: Help enterprises reduce the amount of energy and resource usage, translating to lower costs.
  3. Social and brand impact: Businesses that incorporate carbon accounting are more likely to enjoy positive brand experience and impact than those that don’t, developing deeper customer trust and loyalty.

Tools That Make Carbon Accounting Easier

Quantifying GHG emissions is complex, hence the rising need for robust carbon accounting software to improve accounting methods. Adopting cutting-edge tools and technology makes it easier for businesses to calculate, monitor, and track their carbon emissions and CO2 reduction efforts accurately across business units.

Interestingly, many companies don’t have a clear idea of the impact of the emissions from their activities. It is important to understand that different forms and methods of carbon accounting are appropriate for different purposes.

With the help of emerging software, businesses can automate many of their carbon accounting exercises, including tracking the advancement of their net-zero strategy, set in line with a GHG Protocol standard and science-based targets.

Comprehensive carbon accounting helps companies go beyond emissions inventories and reporting. Dynamic scenario assessment tools provide data and insight to measure and track GHG emissions, showing where exactly they are being produced and absorbed. It helps build an active collaboration within teams to achieve deep decarbonization, measure financed GHG emissions, develop carbon pricing modules. It also helps create portfolio carbon analysis and Carbon Disclosure Project (CDP) reporting, marginal abatement cost curves and align the carbon strategy with the overall business model.

Intelligent data integration with scenario analysis makes it easy to compare and contrast abatement costs of mitigation possibilities across multiple areas of a company. Contact us today to learn more about how carbon accounting software can lead to better carbon accounting, environmental and emissions reporting.

Further Resources on ESG Reporting

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