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The Business Guide to Carbon Accounting

A guide to understanding carbon accounting, your organization’s environmental footprint, and how you can get started.
 
MAY 9, 2022. 7 MIN READ

Why should a business account for its carbon?

The need to deliver high-quality data to validate environmental claims and take action on climate has never been greater. Pressure from investors, employees, customers, and communities means that increasingly, sustainability is tied to financial, reputational, and operational risks for companies. Organizations that proactively prioritize sustainable solutions not only cultivate positive stakeholder sentiment in the short term but set themselves up for long-term success by minimizing risk, capturing new opportunities, and gaining competitive advantage.
Carbon accounting is a critical step in measuring your climate impact and addressing it. In this guide, you’ll gain a strong understanding of what carbon accounting is and how to account for carbon emissions throughout your value chain. You’ll also learn how to analyze the results and use these insights to inform your climate action priorities.
A woman in a hardhat is reading a tablet and smiling

What is carbon accounting?

Carbon accounting is the process by which organizations quantify their greenhouse gas (GHG) emissions so that they may understand their climate impact, set goals to reduce their emissions, and identify risks and opportunities for the business. In some organizations, a company’s carbon footprint is also known as a “carbon inventory” or a “greenhouse gas inventory.”

Carbon accounting is the foundation for implementing meaningful climate action in your organization. Once you take inventory of your GHG emissions, you can start to make carbon reduction plans that support your sustainability strategy.

What are greenhouse gas emissions?

The Kyoto Protocol, the international treaty committing countries to reduce GHG emissions, identifies six types of greenhouse gases, of which three are most common for companies: carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O).

Greenhouse gases trap heat, which sustains life on Earth by allowing the sun to warm the planet and prevent the warmth from escaping into space. However, an increase in GHG emissions, largely caused by human activity, is disrupting the atmospheric balance that maintains our climate, resulting in extreme global effects on ecosystems, economies, and communities. These negative impacts include extreme heat, major wildfires, mega-storms, and rapidly rising sea levels.

The world uses the common unit CO2e, or carbon dioxide equivalent, to simplify discussion around GHG emissions. The EPA defines CO2e as the number of metric tons of CO2 emissions with the same global warming potential as one metric ton of another GHG. In other words, CO2e refers to the impact from all GHGs, normalized and described in terms of CO2 impact. By referring to the impact of all GHGs in terms of CO2e, we can make direct comparisons among various GHGs.

An illustration showing the differences between Scope 1, 2, and 3 emissions

How should you categorize emissions?

Companies’ environmental footprints come from both direct emissions and indirect emissions. Direct emissions are those within the operational control of the company. Indirect emissions are those that come from a company’s value chain. Although companies don’t have complete control over their indirect emissions, both direct and indirect emissions are critical components of a company’s total GHG footprint and its accompanying climate strategy. For the purpose of carbon accounting, all emissions are separated into one of three scopes:
Scope 1: Direct emissions from activities of the company, such as fuel combustion from onsite gas-fired boilers or diesel generators, and emissions produced by company-owned vehicles.
Scope 2: Emissions from the generation of purchased or acquired electricity, steam, heat, or cooling consumed by the reporting company but generated elsewhere, such as a power plant.
Scope 3: Indirect emissions from all other sources in the company’s supply chain, including employee commuting, business travel, purchased goods and services, raw materials, and distribution.
In the rest of this guide, you’ll find a step-by-step guide that describes how to account for your organization’s GHG footprint and how to streamline the calculation process.
 
 
 
 

The Guide to Carbon Accounting

Go net zero now by learning...
  • Which departments should be involved in carbon emissions reporting
  • How to define boundaries, collect data, and turn that data into carbon emissions equivalents
  • How to streamline and automate the process with the right tools and technology
 
 

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