Carbon accounting explained
Carbon accounting can be a tricky area to navigate with its distinct terminology and acronyms. We’ve listed key terms and frequently asked questions to help you better understand the ins and outs of carbon accounting.
We’ve also outlined why carbon accounting is important for your business and how it can benefit your business today, and into the future.
Key Terms
Carbon accounting is the process of measuring and managing your company’s greenhouse gas (GHG) emissions. It involves tracking direct and indirect emissions to understand your business carbon footprint.
Head on over to the Carbon Accounting page to learn more or check our Carbon Accounting Beginner’s Guide for Australian SMEs.
Scope 1 emissions are greenhouse gas emissions or CO2 you release directly as part of your business operations, e.g. cars, trucks, diesel generators, etc.
Scope 2 emissions are indirect greenhouse gas emissions from the generation of purchased electricity, heating and cooling by your company.
Scope 3 emissions are your share of all of the emissions by every business in your supply chain, which are likely to be 70-80% of the emissions for any business. For many service businesses this could be 90% or higher.
Scope 3 includes emissions from suppliers, transport, business travel and waste management. These emissions are often the largest share of a company’s carbon footprint.
ESG stands for Environmental, Social, and Governance and encompasses a set of criteria used to evaluate a company’s ethical and sustainability practices. Essentially, environmental, social and governance factors are core to an organisation’s strategy and operations.
Environmental factors assess the company’s impact on the planet and includes carbon and climate change vulnerabilities, renewable energy & clean technology, and water, waste & pollution management.
Social factors examine the company’s relationship with stakeholders and the community. It means complying with employment legislation, labour standards, customer protections and oversight of your supply chain.
Governance factors evaluate a company’s management and accountability structures. Effective governance ensures having internal controls and procedures in place around risk management, tax strategy, remuneration, and more.
The Greenhouse Gas (GHG) Protocol is a multi-stakeholder initiative to develop internationally accepted accounting and reporting standards for business and to promote their broad adoption. The GHG accounting standard ranks highly among GHG measurement methods globally.
The Paris Agreement is a legally binding international treaty on climate change, agreed at the UN Climate Change Conference (COP21) in Paris in 2015. It is now adopted by the European Union and 193 countries including Australia and New Zealand.
Science Based Targets defines net zero as a state of balance between emissions and removals. A business aiming for net zero means it’s trying to cut its GHG emissions across its entire value chain to as close to zero as possible.
Carbon neutral means a business is committed to bringing their carbon dioxide emissions down to zero by implementing strategies to reduce emissions and compensating for the carbon dioxide it does emit by preventing or reducing emissions elsewhere and/or by removing an equivalent amount of carbon dioxide from the atmosphere. This balancing practice is also know as carbon offsetting and can include activities such as planting trees.
Check out this blog discussing the differences between net zero and carbon neutral.
Greenwashing is the practice of misrepresenting the extent to which a product or strategy is environmentally friendly, sustainable or ethical.
Read this short blog to learn more about greenwashing.
Importance for your Business
Carbon accounting helps your business understand its carbon footprint and environmental impact, empowering you to:
- Implement emission reduction strategies
- Develop sustainable business practices
- Comply with government regulations
- Build consumer confidence
- Enhance brand reputation
- Grow stakeholder trust
- Retain large clients
Head over to Why Carbon Accounting to read more about the reasons for getting started with carbon accounting. Or check out our Carbon Accounting Beginner’s Guide for Australian SMEs.
Carbon accounting demonstrates your business’s commitment to sustainability, making it an attractive option for environmentally-conscious investors and customers seeking eco-friendly products and services.
Check out Why Carbon Accounting or read our Carbon Accounting Beginner’s Guide for Australian SMEs.
The key steps include:
- Identify emission sources
- Collect data on energy use and other relevant activities
- Calculate emissions using standardised methods
- Report and analyse the results
Head on over to Why Carbon Accounting for more detailed steps.
There are several tools and software available, such as the GHG Protocol, Carbon Trust Footprint Calculator, and specialised carbon accounting software like Trace, Sumday or NetNada, which can simplify the process.
Check out our Carbon Accounting Software page to read about the apps we work with.
Carbon accounting can lead to cost savings by identifying areas for energy efficiency and waste reduction. Moreover, demonstrating a commitment to sustainability can attract eco-conscious customers and investors.
Check out our Carbon Accounting Beginner’s Guide for Australian SMEs to learn more.
