Carbon accounting, also known as greenhouse gas accounting, refers to the process of measuring the amount of carbon dioxide equivalents (CO2e) emitted directly and indirectly by an entity. 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. Carbon accounting a necessary component to mitigate climate change by quantifying emissions and implementing reduction strategies. This process encompasses various methodologies for calculating and reporting emissions, aimed at individuals, corporations, and governments.
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.
Sustainability and environmental impact assessment: Beyond compliance and trading, carbon accounting helps organizations assess their broader environmental impact and sustainability performance.
Benchmarking and goal setting: By quantifying emissions, organizations can set precise, measurable goals for reducing their carbon footprint. This can be part of broader environmental objectives, such as achieving carbon neutrality or net zero emissions, where an organization balances out its unavoidable emissions with carbon savings or offsets.
Innovation and market differentiation: Companies use carbon accounting to identify opportunities for innovation in products, services, and processes that reduce emissions. This can also serve as a market differentiator, appealing to environmentally conscious consumers and partners.
Identifying and quantifying sources of greenhouse gas emissions: This involves cataloging all emission sources within an organization or system, ranging from direct emissions from owned or controlled sources to indirect emissions associated with the supply chain, product use, and disposal.
Implementing reduction strategies: By understanding where emissions are highest, entities can target interventions more effectively, whether through operational changes, energy efficiency improvements, or shifts to lower-carbon energy sources.
Reporting and compliance: Many jurisdictions and regulatory frameworks require entities to report their greenhouse gas emissions. Carbon accounting provides the data necessary for compliance with these regulations, as well as for voluntary reporting initiatives aimed at transparency and accountability.
Businesses can calculate their emissions by taking into account the sources of emissions within their organisation. These sources are divided into three scopes. 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 - 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.
Scope 2 emissions - 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 aluminum production and refining, cement production, and data centres.
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 supply 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.
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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?
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.
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.
Calculating your carbon footprint can be complex, as there are different carbon accounting 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 carbon accounting methods and finding the right one to use depending on each case. Whether your business chooses the activity-based approach, the spend-based method or the hybrid one, Net0 will support you throughout the process, helping you to accurately calculate emissions and achieve your net zero emissions targets.
Once businesses are done with the first step of measuring their 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.
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. With Net0, businesses can get started quickly and efficiently, and drive their transition to carbon neutrality.
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 and is now becoming a requirement amongst bigger firms and investments.
Recommended reading:
For further information and a deeper understanding of carbon accounting, we highly recommend reading our comprehensive blog and downloadable resources on the subject.
• Article: How Are Carbon Emissions Measured?
• Article: Carbon Emissions and Mitigation Strategies
• Article: Scope 4 Avoided Emissions: Everything You Need to Know
We have a resource section in our blog that is dedicated to various mandatory government regulations depending on your region and company size. They can also be reported with voluntarily. Net0 complies with all government standards. Here are some other resources below:
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.
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 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.
They offer 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. They have 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 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.
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
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) Book a call 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.
In summary, carbon accounting is a method of measuring an organisation's corporate emissions, which provides valuable insights into its environmental footprint. The practice of accurate carbon accounting is becoming mandatory for large businesses, public companies, and government entities. Carbon accounting enables these organisations to establish and work towards targets for reducing their carbon emissions, ultimately contributing to the global effort to combat climate change.
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.
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