Carbon Accounting 101: A Beginner’s Guide for Australian SMEs

Demystifying Carbon Accounting for Aussie businesses

An article in The Accounting Times highlights the importance of early adoption of mandatory climate reporting for SMEs.

But for many Australian small and medium-sized businesses, carbon accounting often ends up in the too-hard basket. The reasons are understandable: limited resources, a lack of in-house expertise and the perception that carbon accounting is complex and time-consuming. Add to that the pressing demands of running a business, and it’s easy to see why sustainability initiatives take a back seat.

But what if carbon accounting was more straightforward than it seems? By breaking it down into manageable steps, SMEs can not only navigate the process with ease but also unlock significant benefits: from cost savings to strengthening your business reputation.

In this article, we’ll explore the reasons for putting carbon accounting on the back burner, explain the basics of carbon accounting and highlight why starting NOW can set your business on a path to sustainability and success.

Barriers to Carbon Accounting

For most Australian small and medium-sized businesses, carbon accounting is a new kid on the block with no immediate benefits to place it high on the priority list.

Here are five key factors why SMEs have sidelined carbon accounting:

1. Limited Resources
   ‘We can’t afford to spend money on carbon accounting’
   SMEs typically operate with tighter budgets and smaller teams, making it challenging to allocate the time, money and personnel needed for carbon accounting.
   
   
2. Complexity Perception
   ‘It’s all too hard’
   Many SMEs perceive carbon accounting as a highly technical and complex process, involving intricate calculations and unfamiliar terminology, which can be intimidating without specialised knowledge.
   
   
3. Lack of Expertise
   ‘We don’t know where to start’
   SMEs often lack in-house expertise in sustainability and environmental management, making it difficult to know where to start or how to effectively track and manage emissions.
   
   
4. Competing Priorities
   ‘We’re too busy running the business’
   Running a small business involves juggling multiple responsibilities, and immediate operational needs often take precedence over long-term sustainability efforts, pushing carbon accounting down the priority list.
   
   
5. Uncertain ROI
   ‘There’s no obvious ROI’
   There’s a common concern that the costs associated with carbon accounting may not yield immediate or clear financial returns, leading SMEs to question its value and delay its adoption.
   
   

The Basics of Carbon Accounting

So, what is carbon accounting?

In simple terms, carbon accounting helps companies calculate their carbon footprint and their environmental impact.

Carbon accounting is the process of measuring and tracking the amount of carbon dioxide (CO2) and other greenhouse gases a company emits. Also known as greenhouse gas accounting or climate reporting, carbon accounting involves detailed tracking of emissions from various sources, including energy use, transportation and waste production.

Check out our Carbon Accounting FAQs and Carbon Accounting Glossary to better understand the terminology and read answers to common questions.

Importance of Carbon Accounting

In Europe, there are increasing examples of businesses requiring suppliers to have a detailed and documented sustainability plan before entering into formal contracts. Ensuring alignment with sustainable business practices is integral to growing solid relationships. Corporate Australia is beginning to follow suit as parent companies mandate these requirements in their policies.

In fact, government-mandated carbon reporting for big businesses will impact SMEs because 85% or more of these brands’ emissions come from their supply chain. Even though SMEs are not yet required to report their Scope 1 and 2 emissions, larger companies such as Woolworths, Qantas and BHP Group will expect their suppliers to calculate their carbon footprint as part of Scope 3 emissions reporting.

As a result, a willingness to provide carbon accounting could mean the difference between retaining or losing large clients.

Why your SME needs Carbon Accounting NOW

The urgency for Australian SMEs to adopt carbon accounting practices cannot be overstated.

Here’s why:

1. Regulatory Compliance
   Australia is increasingly moving towards stricter environmental regulations. While large corporations are currently the main targets, SMEs are likely to face similar requirements in the near future. Proactively adopting carbon accounting can ensure your business stays ahead of potential mandates.
   
   
2. Financial Savings
   Carbon accounting isn’t just about compliance—it’s also about efficiency. By identifying energy inefficiencies and waste, your SME can reduce operational costs. This could mean lower electricity bills, reduced waste disposal fees, or more efficient supply chain management.
   
   
3. Business Reputation
   Consumers and investors are increasingly favouring businesses that demonstrate a commitment to sustainability. Implementing carbon accounting shows that your SME is serious about reducing its environmental impact, which can attract new customers and investment opportunities.
   
   
4. Risk Management
   As climate change impacts become more severe, businesses face increased risks from supply chain disruptions, resource shortages and regulatory changes. Carbon accounting helps your SME identify and mitigate these risks by providing insights into your environmental impact and areas for improvement.
   

Check out our page on Why Carbon Accounting to explore the reasons for adopting carbon reporting.

The Future of Carbon Accounting in Australia

As the world moves towards a low-carbon future, carbon accounting will become increasingly important for businesses of all sizes. For Australian SMEs, the shift towards sustainability is both a challenge and an opportunity. By adopting carbon accounting now, your business can gain a competitive edge, reduce costs and contribute to a more sustainable future.

Don’t wait for regulations to force your hand — start your carbon accounting journey today. The sooner you begin, the more time you’ll have to reap the benefits and position your SME as a leader in sustainability.

Conclusion

Carbon accounting may seem daunting at first, but if you’re an Australian SME, it’s an essential
step towards sustainability and long-term success. By understanding and managing your carbon footprint, you can reduce costs, comply with future regulations and position your business as a leader in the growing green economy.

Want to know more?

We’re more than happy to have a chat about your business and what’s involved with getting started with carbon accounting. Give us a ring on (02) 8188 9019 or complete our enquiry form.

Check out our Carbon Accounting FAQs, our Carbon Accounting Glossary or head over to our Carbon Accounting Software page to get an idea of the reporting apps we work with.

We’re on the forefront of carbon accounting, helping clients find the right carbon reporting solution to stay ahead of the pack.