What is Carbon Accounting and Why is it Important?

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Global surface temperatures have warmed 1.1°C since pre-industrial times, mainly due to greenhouse gas (GHG) emissions. Scientists suggest that this global warming exacerbates several issues such as water scarcity, food shortages, extreme weather events, biodiversity loss, and so much more. The only way to limit global warming and its impacts is by managing and abating human-induced carbon emissions. But how can we manage something we do not measure? This is where carbon accounting comes in. 

What is Carbon Accounting?

You may be unfamiliar with the term ‘carbon accounting’, but it has been around for over 20 years. It was established in 1997 under the Kyoto Protocol. The Kyoto Protocol is a treaty that was written up and agreed upon between parties in an effort to reduce emissions that can alter the climate. 

Carbon accounting is the process of performing an inventory of all the greenhouse gasses (GHGs) emitted from a process, a product or a service and transforming it into carbon equivalents.Common practice in carbon accounting is to establish a baseline year, then set one or more targets to reduce emissions compared to the baseline. For example, let’s say your company generated 1,000 tons of CO2e in 2022, and you have accounted for all those emissions. You set a goal to reduce your carbon footprint by 50% by 2025, using 2022 as the baseline year. Since you know your carbon inventory in 2022, you now need to reduce your emissions and decarbonize to 500 tons of CO2e in your goal year (50% times our 1,000 ton baseline).

Once a company sets one or more carbon accounting targets, you will  need to carry out projects, initiatives, and investments to reduce our operating carbon footprint. You can transition from fossil fuel vehicles to electric vehicles, install solar panels, and make our offices and facilities more energy efficient which are all actions that reduce Scope 1 and Scope 2 emissions. You can also work to improve our supply chain sustainability, and adopt practices like recycling, upcycling, and product re-use to decrease Scope 3 emissions. From a carbon accounting perspective, we need to track all that activity and calculate its impact.When a company can’t do enough directly to reduce its carbon footprint, many choose to purchase high-quality carbon offsets  credits from verified projects like carbon capture or tree planting that are proven to sequester carbon elsewhere.For example,  by emitting one ton of CO2 and then purchasing carbon credits equal to the same amount of carbon, you have achieved “”net-zero” emissions. You have still generated pollution, but you have balanced the scales between the amount of greenhouse gas we produced and the amount we removed from the atmosphere.

Companies can use carbon accounting to understand how their activities contribute to climate change and set goals to limit their emissions. Carbon accounting deals with collecting and categorizing the right data and providing relevant insights on where companies stand and where improvements can be made. A data-driven approach is essential to empower decision-makers to accelerate sustainability transformation efforts. Carbon accounting can also serve as the foundation for climate change pledges like carbon neutrality and net-zero.

Other terms for carbon accounting include emissions accounting, greenhouse gas accounting, greenhouse gas inventory, carbon footprint, carbon or GHG inventory , emissions inventory or carbon management.

Accounting for Carbon through GHG Protocol

The GreenHouse Gas Protocol (GHG Protocol) is an international standard for corporate accounting and reporting emissions, categorizing greenhouse gasses into Scope 1, 2 and 3 based on the source. Greenhouse Gas Protocol provides accounting and reporting standards, sector guidance, calculation tools and training for businesses and local and national governments. It has created a comprehensive, global, standardized framework for measuring and managing emissions from private and public sector operations, value chains, products, cities and policies to enable greenhouse gas reductions across the board.

In order to understand a businesses environmental impact and minimize their carbon footprint, organizations need to measure their Scope 1, 2, and 3 emissions. According to the GHG protocol standard, scope 1 and 2 emissions are mandatory to report while scope 3 emissions are reported on a voluntary basis.

Scope 1 emissions include direct emissions from the organization. eg. production of GHG during manufacturing processes

Scope 2 are indirect emissions from the generation of purchased energy. E.g. purchased electricity

Scope 3 are all indirect emissions that occur in the across the value chain of the organization. E.g emissions from goods and services purchased by the company

“Source: WRI/WBCSD

However, scope 3 emissions are difficult to calculate and mitigate, but are the most significant. They are the  emissions that occur outside the organization that cannot be directly measured such as emissions from suppliers and customers. For example, a Rocky Mountain Institute report found that the average company’s supply-chain greenhouse gas (GHG) emissions are 5.5 times higher than the direct emissions from its own operations and assets. 

Why is Carbon Accounting Important? 

Greenhouse gas emissions from human activities are an undeniable source of climate change, as stated in the 2021 IPCC report. To ensure the resilience and stability of earth’s systems, we need to operate within our planetary boundaries if we want to avoid irreversible damage. The next few years are critical, with the need to reduce carbon emissions by 45-50% by 2030, and achieve net zero by 2050. The first step towards achieving this goal is carbon accounting, in order to determine where we stand and establish a strategy to achieve our net-zero goal. Achieving net zero would help stabilize global temperatures and prevent irreversible damage.

While businesses may leave a greater carbon footprint than a household, individuals can begin carbon accounting as well. By tracking how much electricity you use, how often you drive your car, and for how long, how much you recycle, where you shop, and what you eat can determine how much of an impact you are having on the earth’s climate. In fact, the United Nations offers a carbon footprint calculator that can help you to determine where you need to cut back. It also offers suggestions on how to offset your carbon footprint.

EnvironFocus Can Help!

EnvironFocus offers sustainability consulting and reporting services using globally recognized standards and practices. Our team of experts would be delighted to assist your organization (irrespective of your size) with performing your carbon inventory. Do not hesitate to reach out to us for more information at programs@environfocus.com

About Post Author

Elena Edo

Elena Edo holds a masters in sustainable development practice with a specialization in climate change from the University of waterloo. Her research interests include climate change adaptation and vulnerability assessments, disaster risk management, nature-based solutions, urban sustainability, energy poverty, and clean growth. She is an advocate of BIPOC, low-income, and disability communities and is committed to promoting just and equitable climate policy through inclusive decision-making processes.
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