Just this year, the UN’s IPCC just published its first comprehensive report since the 2015 Paris Agreement, and it found that there are issues with net zero pledges being made by organizations, which are often too ambitious for businesses to realistically meet. As such, progress since the Paris Agreement has not accelerated as fast as once hoped, with the 2030 target of reducing emissions by 45% against levels in 2010 fast approaching. With this, the need for organizations to amp up their commitments to reducing their carbon emissions had intensified.
Many countries require organizations to report their Greenhouse Gas emissions and demonstrate compliance with environmental regulations. Carbon accounting ensures accurate measurement and reporting, enabling organizations to meet legal obligations and avoid penalties - which often have very high costs associated with them.
Carbon accounting provides a quantitative assessment of the carbon footprint of organizations, products, services, and events - which fundamentally helps companies to identify areas of high emissions and implement strategies to reduce them. There are further significant benefits of carbon accounting, such as:
Increasingly, businesses can’t afford to not invest in proper carbon accounting systems - for example, with an Enterprise Resource Planning (ERP) system. ERPs are designed to integrate and manage core business processes and functions within an organization, which is especially useful when it comes to tracking and measuring carbon outputs across the organization and third parties as they provide real-time visibility into inventory levels, demand, and supply chain data.
An ERP system can help with carbon accounting and cost saving in the following ways:
ERP systems with supplier management capabilities enable organizations to evaluate and collaborate with suppliers based on sustainability criteria. This allows businesses to assess supplier practices related to emissions, waste management, energy efficiency, and other environmental factors, which in turn can lead to cost savings as streamlining processes are identified.
Carbon accounting often involves reporting emissions data to regulatory bodies, stakeholders, and customers. An ERP system can generate standardized reports and provide the necessary data for carbon accounting disclosures. By complying with regulation, businesses not only futureproof themselves, but also limit the risk of hefty fines for not adhering to protocols.
ERP systems allow organizations to monitor their carbon accounting performance over time, allowing organizations to assess the effectiveness of emissions reduction strategies, and adjust their sustainability initiatives accordingly. In the long term, this can save businesses money as the strategy is adapted as the business grows.
Calculating the return on investment (ROI) of carbon accounting software is crucial for organizations seeking to assess the financial benefits of implementing such solutions. By quantifying the financial gains and efficiency improvements, organizations can make informed decisions regarding the adoption of carbon accounting software and effectively communicate the value proposition to stakeholders.
Carbon accounting software can help with intangible business costs by providing organizations with the necessary tools and data to identify, measure, and manage their environmental impact. Not all of the financial benefits will be measurable, but some of the intangible benefits of carbon accounting software include:
Failure to meet ESG and sustainability goals can result in significant costs for organizations, including reputational damage, loss of investor confidence, regulatory non-compliance penalties, and missed business opportunities.
Non-compliance with environmental regulations can result in heavy costs. By providing accurate data, tracking emissions, and facilitating regulatory reporting, carbon accounting software helps prevent fines, penalties, and legal issues while ensuring organizations stay in line with evolving environmental standards and regulations.
By demonstrating a commitment to sustainability and transparently disclosing emissions data, organizations can enhance their reputation, build trust with stakeholders, and mitigate potential reputational risks and associated costs.
Carbon accounting software can lead to tangible cost benefits by identifying areas of energy waste, optimizing resource utilization, and streamlining processes. This can lead to financial savings for organizations in the following ways:
The carbon accounting market has experienced significant growth in recent years due to various factors. Increasing global awareness of climate change and sustainability has driven organizations to prioritize carbon emissions management.
Growing regulatory frameworks and reporting requirements have also contributed to the demand for carbon accounting solutions. Additionally, investors, customers, and stakeholders are placing greater emphasis on environmental performance, leading organizations to adopt carbon accounting software to track, report, and improve their sustainability efforts.
This growing market demand has spurred the development of innovative carbon accounting solutions, leading to the expansion and evolution of the carbon accounting market.
Considering the long-term return on investment rather than focusing solely on short-term expenses is crucial when evaluating carbon accounting software. While there may be upfront costs associated with implementing and maintaining the software, the long-term benefits can far outweigh these initial expenses.
Seeing a good ROI will depend on the ability to execute any strategies or recommendations that may come from the carbon accounting software. As an example of the sort of challenges that organizations might encounter:
To address these challenges and ensure successful implementation following a carbon audit, organizations can mitigate any ramifications that could lead to a poor ROI by ensuring thorough leadership and stakeholder engagement at the beginning of implementation to ensure that the core goals are communicated across the business. Organizations should also take care to implement a robust monitoring and evaluation framework that helps organizations track progress, identify bottlenecks, and make necessary adjustments to stay on track, make data-driven decisions, and demonstrate the impact of implemented measures.
Additionally, seeking guidance from sustainability consultants or experts can provide valuable insights and best practices for successful implementation. This is where Minimum can help.
Minimum can help organizations to understand their existing carbon output, and create plans to mitigate climate related risks in the future. Our Emissions Data Platform seamlessly collects and processes emissions data from every corner of your organization and supply chain - no matter the format. Making it the ideal platform for emissions audits and all-round business intelligence.
Learn more about how Minimum's Emission Data Platform can help to power you all the way to Net Zero today.