March 17, 2022

Essentials

What Is Carbon Accounting?

What Is Carbon Accounting?
Contents

Carbon accounting is the process of quantifying a company's GHG emissions. By doing this, businesses can get a better understanding of their environmental impact and set goals for reducing their emissions.

This article is intended for organisations that wish to learn more about carbon accounting and what solutions are available to help reduce emissions.

We will cover what you need to know about financial carbon accounting, scopes of emissions, and a brief description of how to utilize Net0's carbon accounting platform to guide you along your net zero journey.

What are greenhouse gases?

Greenhouse gases are gases that trap heat in the atmosphere. They are produced through human activities, such as burning fossil fuels, clearing forests, and manufacturing cement. The most common GHGs are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and fluorinated gases (such as hydrofluorocarbons, or HFCs).

When it comes to global GHG emissions, there are two important factors to consider: the amount of gas emitted and the gas's climate impact. The amount of gas emitted is measured in terms of metric tons (MT). The climate impact is measured in terms of carbon dioxide equivalent (CO2e)

carbon emissions from the factory

One MT of CO2 is equivalent to 1,000 kilograms (kg) or 2,204 pounds (lbs). So, when we talk about emissions in terms of CO2e, we're talking about the amount of GHGs that is equivalent to 1,000 kg of CO2.

The most common GHGs are carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and fluorinated gases (such as hydrofluorocarbons, or HFCs). When we measure emissions in terms of CO2e, we're measuring the amount of all these gases combined.

What is the importance of carbon accounting?

Carbon accounting is essential for companies, governments, and other organisations. There are a few reasons why businesses should measure their carbon emissions.

First, by understanding how much carbon is released, businesses can develop strategies to reduce emissions or consider investing in offset projects. This can help them save money and fight against climate change.

Second, carbon accounting can also help organisations track the impact of their decisions on the environment. This information can help inform decision-making processes and allow companies to make more sustainable choices.

In addition, emissions reporting helps to create transparency and accountability around a company's carbon emissions. This is important because it helps investors and consumers make informed decisions about where to put their money.

Finally, measuring carbon footprint can also help businesses comply with government regulations.

reports

How can businesses calculate greenhouse gas emissions?

Businesses can calculate their emissions by taking into account the sources of emissions within their organisation. These sources are typically divided into three separate categories or “scopes”:

Three scopes of carbon emissions

The Scope 1, 2 and 3 system has been developed by the Greenhouse Gas Protocol. Dividing emissions into three groups is intended to help measure progress in making the huge reductions in emissions needed to meet global targets.

Scope 1 emissions

Scope 1 emissions are direct emissions from owned or controlled sources, by the reporting company, during a production process with items that they own and control. Examples of scope 1 emissions include boilers, furnaces, emissions from machinery and equipment, fuel combustion, and vehicles which use fuel. They can also come from the production of energy used by a company, like for example, the burning of coal to produce electricity.

The amount of Scope 1 GHG emissions a company produces can vary depending on how much fuel they use and what kind of fuel it is. For example, a company that uses a lot of natural gas for heating and powering its operations will have lower Scope 1 emissions than one that relies heavily on coal.

Mandatory GHG reporting requires businesses to be transparent about their Scope 1 emissions in many regions across the world.

Scope 2 emissions

Scope 2 emissions are indirect emissions from purchased sources that the reporting company has made, that come from the generation of purchased electric, heating, cooling, gas, steam, and electric vehicles. Some common examples of industries with high scope 2 emissions include aluminium production and refining, cement production, and data centres.

Mandating the reporting of scope 2 emissions is becoming more common in many countries around the world.

Scope 3 emissions

Scope 3 emissions are all other indirect emissions that occur in a company’s value chain. There are 15 categories of corporate value chain emissions that occur indirectly, (with regards to the reporting company), due to upstream and downstream activities throughout the value chain. Although these emissions occur on the outside of the reporting company's walls, they can be proactive in choosing resources, vendors, manufacturers, carriers, and distributors, and creating the life cycle of the product, to have a stronger, more sustainable value chain.

Please refer to our Scope 1, 2, and 3 Emissions article for a comprehensive understanding of direct and indirect emissions, upstream and downstream activities, and the 15 categories of scope 3.

As scope 3 regulations continue to evolve, the reporting requirements become more complex and new regulations encourage (and sometimes require) businesses to start measuring and reporting scope 3.

scope 123 emissions value chain emissions flow chart

10 factors to consider when choosing the right carbon accounting software for your business:

1) Ease of integration: How easily can the carbon accounting software be integrated into your existing systems?

2) Data sources: What sources of data can the software access and use?

3) Reports: What type of reports does it generate?

4) Automation: How much automation is available?

5) Cost: What are the costs associated with using the software?

6) Customisation: How can the software be customised to meet specific needs?

7) Security: What kind of security measures are in place to protect data?

8) Support: What kind of customer support is available?

9) Scalability: How easily can the software scale to meet increased needs?

10) Compliance: Does the software comply with local, state and federal regulations regarding carbon emissions reporting?

What are some challenges with greenhouse gas accounting?

Data accuracy

One challenge with carbon accounting is that it requires accurate data on a company's carbon emissions.

This data can be difficult to come by, as it requires monitoring of all activities that result in emissions (such as fuel consumption, electricity use, waste disposal, etc.). When it comes to collecting scope 3 emissions, companies require to collaborate with their suppliers across the supply chain to have an accurate understanding of the emissions. That can be a challenge on its own as it requires cooperation from multiple entities.

Net0’s platform solves this challenge with its integrated data collection and analysis capabilities. Net0 provides a carbon accounting platform for collecting data from all sources and performing detailed analysis to create an accurate picture of the company’s emissions across scope 1, 2 and 3. To collect accurate data for Scope 3 emissions specifically, Net0 offers a vendor outreach programme that allows businesses to effectively communicate with vendors, add them directly to the platform and automate data capture from them.

Ineffective data collection

Many businesses find data collection expensive and time-consuming. In reality, many businesses spend too many resources on trying to manually record the data and have no time to focus on what matters the most: achieving carbon reduction targets by reducing emissions for good.

This is why Net0 believes that putting carbon accounting on autopilot is essential for modern businesses. By using powerful AI-driven tools, Net0 automates data capture, ensures data quality, connects ERP, CRM and other systems with organisations' out-of-the-box integrations and offers API access to developers. Net0 convert business data to CO2e metrics automatically, with minimal effort from the team.

many printed out reports

Complex process

Calculating carbon footprint can be complex, as there are different methodologies for doing so. It can be difficult to understand the different methodologies, choose the right one for your business and effectively implement them.

Net0’s platform helps businesses simplify the process by offering all three methodologies and finding the right one to use depending on each case. Whether your business chooses the activity-based approach, the spent-based methodology or the hybrid one, Net0 will support you throughout the process, helping you to accurately calculate emissions and achieve your net zero emissions targets.

Other challenges

Once businesses are done with the first step of measuring carbon footprint, organisations might face more challenges with carbon management on the way to carbon neutrality and then net zero. Some of them might include challenges with reducing corporate carbon footprint, reporting carbon emissions in real-time and sharing the journey transparently with other stakeholders in the ecosystem. Net0 also helps to tackle these challenges by offering a range of solutions that make carbon management easy and transparent.

The current state of carbon accounting in corporations

In general, carbon accounting is still in its early stages, and businesses are just starting to come to grips with the requirements of reporting Scope 3 emissions.  With rising expectations from consumers, governments and investors, companies are increasingly taking active steps to reduce emissions. Some businesses are also considering purchasing carbon offsets with carbon credits for unavoidable emissions in the short term. Although purchasing carbon credits is not a long-term solution, it is nevertheless a step towards companies’ climate goals.

The earlier your business starts carbon accounting, the more competitive you will be in today's market. Net0 can help you get ahead of the curve when it comes to carbon accounting, by providing an integrated platform to collect, manage and report your emissions data. Carbon credits to purchase carbon offsets from reliable trusted and certified projects are also available directly on the platform. In addition, businesses get a certificate for each of the offsets. With Net0, businesses can get started quickly and efficiently, and drive their transition to carbon neutrality.

A woman working on the computer in the office

The future of carbon accounting

In the coming years, carbon accounting and emission reduction initiatives are expected to become the industry standard. As businesses continue to strive for net zero targets, the demand for effective carbon accounting and reporting solutions will only continue to grow. Net0 is at the forefront of this trend and will be a key partner in helping businesses to achieve their goals, by simplifying their carbon accounting.

How do I start with carbon accounting?

If you're looking to get started with carbon accounting, Net0 is the perfect solution. With our powerful platform, businesses can quickly and easily measure their carbon footprint and take steps towards reducing greenhouse gas emissions. Here's how to get started:

1) Request a demo and sign up for Net0.

2) Connect your business systems to our platform, including ERP, CRM and other systems.

3) Collect your emissions data automatically, with minimal effort from your team.

4) Use our intuitive platform to manage your carbon footprint data and track your progress towards net zero.

With Net0, getting started with carbon accounting is easy and efficient. We provide all the tools you need to get started quickly and achieve your net-zero targets. Contact us today to learn more!

Carbon accounting in corporations

To comply with laws and regulations it is becoming the norm globally to report scope 1 and 2 emissions at the very least. Scope 3 value chain emissions are being reported now amongst value chains that want to decrease their negative environmental impacts and stay competitive where consumers are turning to greener brands. Another motivation is that investors have been shifting their resources only to sustainable brands. In fact, the demand for ESG investment options has been escalating for years according to a study by the Harvard Business Review. 

emissions management software


Recommended reading:

• Article:
10 Reasons Net0 Is the Best Carbon Accounting Platform
• Article:
Carbon Credits: Everything You Need to Know
• Article: How Are Carbon Emissions Measured?
• Article: 
How to Measure Your Business' Carbon Footprint
• Article: 
Carbon Accounting Methodologies for Measuring Emissions

What are the GHG emissions accounting standards?

It is important for businesses to be aware of the most common reporting standards.

The GHG Protocol

The Greenhouse Gas Protocol is a set of guidelines for calculating a carbon footprint. It was developed by the World Resources Institute and the World Business Council for Sustainable Development. The GHG Protocol helps companies and governments to track emissions and make informed decisions about reducing them.

The GHG Protocol has two tracks: the corporate track and the national inventory track. The corporate track is for companies that want to measure and manage their carbon footprint. The national inventory track is for governments that want to compile national greenhouse gas inventories.

The Greenhouse Gas Protocol is the most widely used climate accounting standard in the world. More than 1,500 companies and government agencies use it to measure and manage their carbon footprint. The GHGP is the perfect guide to understanding how to manage your GHG emissions.

Net0 complies with all GHGP standards since it is the most commonly used method.

A blue folder with protocols

ISO 14064 Standard

ISO 14064 is a standard that sets out best practices for carbon accounting and reporting. It was developed by the International Organisation for Standardisation (ISO).

ISO 14064 helps companies to measure and report their carbon footprint consistently and accurately. It helps to ensure that data is reliable and comparable.

ISO 14064 has three parts:

Part 1: GHG accounting and reporting principles

Part 2: GHG accounting and reporting for organisations

Part 3: GHG accounting and reporting for inventories

The ISO 14064 standard is the most widely used GHG accounting standard in the world. More than 1,500 companies use it to measure and report their carbon emissions.

Net0 conforms to all of the ISO 14064 standards.

The CDP

The CDP is an international non-profit organisation that helps companies and governments to accurately measure, manage and reduce their GHG emissions. It was founded in 2000.

The CDP has two programmes: the climate disclosure programme and the supply chain programme.

The climate disclosure programme helps companies to disclose their carbon footprint to investors, customers and other stakeholders. The supply chain programme helps companies to measure and manage the carbon dioxide emissions in their supply chains.

The CDP has a global network of experts who help companies to measure and report their emissions accurately and reliably. It also has a database of more than 8,000 companies and government agencies from 180 countries.

The CDP is the perfect organisation for helping companies to measure and report their carbon footprint.

Net0 conforms to all of the CDP's standards for carbon measurement.

The Science Based Targets Initiative (SBTi)

The Science Based Targets Initiative (SBTi) is a partnership between the World Resources Institute (WRI), the World Business Council for Sustainable Development (WBCSD), the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat, and several other organisations. It was launched in 2015. The SBTi helps companies to set emissions reduction targets that are consistent with the latest climate science. It provides companies with guidance and support to measure and reduce their greenhouse gas emissions.

The SBTi has three goals:

1. To help companies to measure and reduce their greenhouse gas emissions.

2. To provide guidance on how to set carbon emissions reduction targets that are consistent with the latest climate science.

3. To build a global network of experts who can help companies to measure and reduce their greenhouse gas emissions.

The SBTi is the perfect organisation for helping companies to measure and reduce their carbon emissions.

Net0 conforms to all of the SBTI's standards for carbon measurement and helps businesses to set science-based targets.

The Corporate Accounting and Reporting Standard

The Corporate Accounting and Reporting Standard (CAR) is an international accounting standard that helps companies to account for their greenhouse gas emissions. It was developed by the International Accounting Standards Board (IASB).

The CAR helps companies to measure and report their greenhouse gas emissions in a consistent and accurate way. It helps to ensure that data is reliable and comparable.

The CAR has two parts:

Part 1: Greenhouse gas accounting and reporting principles

Part 2: Greenhouse gas accounting and reporting for organisations

The CAR is the perfect guide to understanding how to manage your GHG emissions.

Net0 conforms to all of the CAR's standards.

happy coworkers

To conclude

In conclusion, carbon accounting is the process of quantifying a company's greenhouse gas emissions in order to better understand its environmental impact. Carbon accounting is now becoming a requirement and it is important for businesses because it helps them to set goals for reducing their carbon emissions and preventing climate change.

Net0 is the only emissions management platform you will need for your carbon accounting solution. The platform calculates all corporate CO2 tonnage for you and categorises it into the 3 scopes for you. Net0 not only simplifies carbon accounting, but it also frees up time and resources for your sustainability team so they can focus on more important things such as creating strategies to reduce carbon emissions.

Schedule a demo today to experience the platform for yourself and learn how it can make carbon accounting more efficient in your organisation.

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This article has been brought to you by Sofia Fominova, a co-founder of Net0. For daily updates, news and industry insights, please follow Net0's business page on LinkedIn.

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FAQ

What’s the difference between gross zero and net zero?

Again, net zero is coming to a balance between emissions and those which have been removed from the atmosphere. Gross zero means stopping all emissions, period.

Again, net zero is coming to a balance between emissions and those which have been removed from the atmosphere. Gross zero means stopping all emissions, period.
How soon can we start?

You can usually start using the system within a week of contract signature. Book a call with us to start.

You can usually start using the system within a week of contract signature. Book a call with us to start.
Do you help with setting up the processes?

Yes, our team will help you set up the platform and provide you with guidance on how to use it.

Yes, our team will help you set up the platform and provide you with guidance on how to use it.
What type of clients have you successfully helped?

We work with companies from different industries, from professional services and tech businesses to construction companies and manufacturing sites.

We work with companies from different industries, from professional services and tech businesses to construction companies and manufacturing sites.
What sets Net0 apart from others on the market?

Net0 offers simplicity, automation, no-code integrations, and provides an activity-based approach meaning the calculations are done by co2e tonnage and not by how much money was spent on the activity that led to emissions.

Net0 offers simplicity, automation, no-code integrations, and provides an activity-based approach meaning the calculations are done by co2e tonnage and not by how much money was spent on the activity that led to emissions.
Why do companies choose to work with Net0?

Net0 is the most comprehensive solution to recording, measuring, tracking, offsetting, and certifying emissions all in one place and in minutes. Net0 also enables organizations to invite anyone they want to contribute to the dashboard, being all-inclusive and simple to use.

Net0 is the most comprehensive solution to recording, measuring, tracking, offsetting, and certifying emissions all in one place and in minutes. Net0 also enables organizations to invite anyone they want to contribute to the dashboard, being all-inclusive and simple to use.

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