What Is Carbon Accounting And Why Is It Important To Your Business

May 24, 2021


Businesses leading the way in combating the adverse effects of climate change have a few things in common. One fundamental commonality is their use of carbon accounting tools to make better decisions concerning their carbon strategy, while steering them away from choices that have a lesser potential impact on achieving their carbon reduction goals.

Corporations are increasingly turning to carbon accounting and internal carbon pricing, with new research from the CDP revealing nearly half the world's largest companies have internal carbon fees.

As corporations strive to become carbon neutral while accurately reporting on their carbon reduction efforts, what exactly is carbon accounting, and why should your business care about it?

In this article, the greenhouse gas emissions management specialists at SINAI define carbon accounting and why it’s important to your business. We also share tools that can help you with your carbon accounting and tracking your efforts in reaching your carbon reduction targets with ease.

What is carbon accounting?

Carbon accounting covers a range of practices aimed at calculating how much carbon a company or country emits.

Carbon accounting is generally divided into two categories:

  • Physical carbon accounting
  • Financial carbon accounting

Physical carbon accounting is the method of measuring both the direct and indirect carbon emissions of a company’s or country’s industrial activities into the Earth’s atmosphere, also referred to as a greenhouse gas (GHG) inventory.

On the other hand, financial carbon accounting aims to give the carbon produced and absorbed a financial market value.

Why carbon accounting matters to your business

Carbon accounting is important to your business for a number of reasons. No longer just a ‘nice-to-have,’ accounting for greenhouse gas emissions is an increasing industry-standard requirement for many businesses.

Firstly, you need to know precisely how much carbon your company is emitting so that reduction targets can be set.

Secondly, carbon accounting is vital in helping you assign responsibility to different areas of your company and value chain for the part they play in contributing to the business’s carbon emissions.

Carbon accounting not only provides the insight needed to quantify and measure your company’s carbon emissions but it also assists you in making informed decisions when it comes to your carbon and mitigation strategies.

  • What is the total amount of carbon being emitted?
  • What part of the business or value chain is responsible for these emissions?
  • Where do the most significant carbon reduction opportunities exist within your various business units and value chain?

Robust carbon accounting helps you answer these questions.

Many drivers exist for undertaking comprehensive carbon accounting, including:

  • mandatory GHG reporting in directors reports,
  • investment and financing due diligence,
  • stakeholder and shareholder communication,
  • staff engagement,
  • green messaging,
  • and tender requirements for government and business contracts.

With the rise of necessary carbon accounting, cutting-edge tools and technology have come to the market to make it easier for businesses to accurately calculate, monitor, and track their carbon emissions and CO2 reduction efforts across various areas of their business.

Tools that make carbon accounting easier

The GHG Protocol is constantly developing and promoting tools that can be utilized by several industries, businesses, and organizations. These range from the Corporate Greenhouse Gas Calculator, Direct Land Use Change Assessment Tool, and Carbon Reporting Tool for SME Companies. In addition to the calculation tools and guidance documents, you can utilize the ‘Built on GHG Protocol’ service, that will identify whether  your organizations accounting inventory has been built in line with a GHG Protocol standard.

Emerging software has also revolutionized the carbon accounting world. Using AI and machine learning technology, businesses can automate many of their carbon accounting activities, including tracking progress towards achieving their carbon reduction targets.

Your company can go beyond emissions inventories and reporting, taking advantage of dynamic scenario assessment tools some software solutions provide. To stand out as a leader in our industry when it comes to deep decarbonization, source a software solution that offers your business the ability to develop marginal abatement cost curves and carbon pricing modules.

Tracking your GHG emissions with ease

Comprehensive carbon accounting is essential for businesses as they seek to tackle the impacts of climate change, providing data and insight into where exactly emissions are being produced and where they are absorbed.

SINAI can help your company zero in on dynamic collaboration not only within your sustainability team but your finance team and many other business units to bring your carbon strategy directly into your business model. Intelligent data integration makes it simple and straightforward to measure and track your greenhouse gas emissions.

See for yourself how our scenario and mitigation modeling can assist your business in comparing and contrasting marginal abatement costs of mitigation possibilities across multiple areas of your company.

If your business is interested in learning about the opportunities of going beyond carbon inventories, contact us today for a demo of our software and see how SINAI’s GHG emissions management solution can lead to better carbon accounting, environmental and emissions reporting.

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