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Carbon accounting explained

Carbon accounting is the process of quantifying and tracking the amount of carbon dioxide (CO2) emissions produced or absorbed by an entity, such as a company, organisation, or country, over a specific period.

What is carbon accounting?

As scientific evidence of human-induced climate change continues to mount, there’s a growing recognition of the role greenhouse gas emissions, particularly carbon dioxide (CO2), plays in driving global warming. 

Carbon accounting has emerged as a key tool in the worldwide effort to mitigate climate change. It provides a systematic approach to measuring, tracking, and reporting emissions from sources like energy consumption, industrial processes, agriculture, and land use changes.

What are the benefits of carbon accounting?

Just as monetary transactions are measured and recorded to produce financial statements that reflect an organisation’s financial health and performance, carbon accounting measures and records greenhouse gas emissions to reflect an organisation’s environmental impact. By doing this, organisations can understand their environmental impact, identify areas for improvement, and develop strategies to mitigate climate change. 

Carbon accounting has become important for three main reasons: 

  1. Climate change mitigation: Carbon accounting enables organisations to track and reduce their greenhouse gas emissions, directly contributing to global efforts to combat climate change. By understanding their carbon footprint, businesses can implement targeted strategies to decrease emissions and promote sustainability. For example, projects like ocean carbon dioxide removal aim to remove harmful CO2 from the ocean using innovative methods to support healthy oceans and therefore mitigate climate change.
  2. Support for business reporting requirements: Carbon accounting ensures compliance with environmental regulations, helping businesses report their carbon emissions and meet legal and regulatory standards. This transparency builds trust with stakeholders and can prevent legal penalties associated with non-compliance.
  3. Business competitive advantage: Adopting carbon accounting practices can enhance a company's sustainability credentials, attract eco-conscious consumers and investors, reduce costs through energy efficiency and create opportunities in markets that prioritise environmental responsibility. Projects like the Carbon Accounting Tools - choosing a clear pathway to creating a carbon baseline project  aim to encourage the adoption of carbon accounting practices by supporting producers with one-on-one learning. 

Carbon accounting involves three main steps: measuring emissions, recording data, and reporting results. 

1. Measuring

The process of measuring emissions in carbon accounting involves quantifying greenhouse gas emissions from various sources within an organisation. 

  • Scope 1 emissions are direct emissions from owned or controlled sources, such as company vehicles and on-site fuel combustion. 
  • Scope 2 emissions are indirect emissions from the consumption of purchased electricity, steam, heating, and cooling. 
  • Scope 3 emissions encompass all other indirect emissions in a company's value chain, including those from purchased goods and services, transportation, waste disposal, and employee travel. 

Companies like Carbon Capture Shield, Agrimix and Loam Bio have developed innovative tools to help organisations quantify their carbon emissions, which is important for effective climate action planning.

2. Recording data

Once an organisation identifies their emission sources across Scope 1, 2, and 3, the data is converted into CO2 equivalents using standardised emission factors, as outlined by carbon accounting standards. This information is recorded in carbon accounting software or spreadsheets for accuracy and consistency. Carbon Scribe is an example of an organisation specialising in recording emissions data that is currently working on a new technology to simplify the recording process. 

3. Reporting 

The final step in carbon accounting is reporting results. This involves compiling and presenting emissions data to stakeholders, regulatory bodies, and the public. Effective reporting includes detailed disclosures in sustainability and annual reports, showcasing the organisation’s commitment to environmental responsibility and building trust. Accurate and transparent reporting, supported by companies like AgriProve, which assist businesses through the entire carbon project process, also promotes broader climate action.

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