Corporate Responsibility

How Carbon Accounting is Driving Corporate Change

As the world works towards a global target of 1.5 degrees, the onus to take action doesn’t only rely on governments - increasingly, the responsibility to consciously make an effort to reduce carbon emissions rests with organizations. Here we explore the ways that carbon accounting is changing business operations, and the impact it is having on organizations. 

The significance of carbon accounting

Carbon accounting is a crucial process for measuring, managing, and reporting greenhouse gas (GHG) emissions, representing an essential step in addressing climate change. Over time, regulations are becoming increasingly stringent, which means that organizations are under more pressure than ever before to adopt carbon accounting practices into their day to day operations. It has become vital for developing effective strategies to:

Moreover, carbon accounting underpins the transparency and credibility of climate action, as it provides a standardized method for reporting emissions to stakeholders, investors, customers and regulatory bodies. By quantifying emissions, carbon accounting helps in setting science-based targets, tracking progress towards these goals, and making informed decisions on investing in energy efficiency, renewable energy, and other carbon reduction initiatives. 

Integration of carbon accounting into sustainability strategies

Integrating carbon accounting into sustainability strategies is fundamental for businesses aiming to navigate the transition to a low-carbon economy effectively. This integration allows companies to quantify their greenhouse gas emissions accurately, providing a clear baseline from which to develop targeted reduction initiatives. 

Target setting

Many companies are setting science-based targets to reduce their greenhouse gas emissions in line with the Paris Agreement's goal of limiting global warming. These targets often include reaching net-zero emissions by a specific year, reducing carbon intensity, and investing in renewable energy sources.

Improvements to energy efficiency

Companies are focusing on reducing energy consumption and improving efficiency across their operations, from manufacturing processes to office buildings. This includes retrofitting buildings with energy-efficient technologies, optimizing manufacturing processes, and adopting green IT practices.

Investing in renewable energy

A significant number of businesses are investing in renewable energy sources, such as solar and wind power, either by installing renewable energy systems on-site or by purchasing renewable energy certificates (RECs) and power purchase agreements (PPAs) to offset their energy use.

Supply chain decarbonization

Companies are working with suppliers to reduce their carbon footprint which can involve setting emissions reduction targets for suppliers, adopting sustainable procurement practices, and investing in supply chain innovations that reduce overall emissions.

Carbon offsetting and removal

While reducing emissions is the priority, some companies are also investing in carbon offset projects and carbon removal technologies to balance out their remaining emissions.

By embedding carbon accounting into broader sustainability efforts, organizations can prioritize actions based on their potential climate impact, aligning investment in energy efficiency, renewable energy, and sustainable supply chain practices with their carbon reduction targets.

Transparency and accountability in reporting

It’s one thing for an organization to be taking steps to reduce their carbon impact - and another to ensure that stakeholders, investors and customers are kept reliably informed of progress too. It’s absolutely critical that any climate targets are reported on truthfully - this means ensuring that any goal setting is realistic, measurable and progress against them is monitored. 

This openness allows for informed decision-making, fosters trust, and builds reputation - which can lead to more profitable businesses. It also facilitates the comparison of performance against industry benchmarks and regulatory standards, driving improvements and encouraging more sustainable practices across sectors. 

Transparent reporting holds organizations accountable for their actions, pushing them towards achieving their sustainability goals and contributing positively to global challenges such as climate change. Moreover, it enables stakeholders to hold companies responsible for their commitments, ensuring that they not only set ambitious targets but also follow through with meaningful action to achieve them.

Learn more about transparency and accountability in carbon reporting

Communication with investors

Businesses should communicate their carbon targets with investors through a clear, transparent, and strategic approach to foster trust, demonstrate commitment to sustainability, and highlight potential financial implications and opportunities. Here are key strategies for effective communication:

  • Integrated reporting - Incorporate carbon targets and sustainability initiatives into annual reports, financial statements, and sustainability reports. This integrated approach helps investors see the connection between environmental performance and financial health.
  • Use of recognized frameworks - Adopt widely recognized reporting frameworks and standards, such as the Global Reporting Initiative (GRI), Task Force on Climate-related Financial Disclosures (TCFD), and Science Based Targets initiative (SBTi), to ensure that the communication is credible, comparable, and in line with investor expectations.
  • Regular updates - Provide regular updates on progress towards carbon targets through press releases, investor briefings, and dedicated sections on the corporate website.
  • Risk management - Clearly communicate how the company is managing risks associated with climate change, including physical risks to operations and transition risks related to shifting regulatory landscapes and market dynamics.
  • Discovering opportunities - Emphasize how carbon reduction targets align with business opportunities, such as cost savings from energy efficiency, revenue from new green products, or enhanced brand reputation.

By adopting these strategies, businesses can effectively communicate their carbon targets to investors, ensuring that their sustainability efforts are recognized as integral to their overall value proposition and long-term success. However, carbon accounting doesn’t come without its challenges… 

Challenges in carbon accounting

Carbon accounting is a complex process due to its comprehensive scope and the intricate methodologies required to accurately measure greenhouse gas (GHG) emissions. This complexity arises from the need to account for various types of emissions:

  • Scope 1 - Direct emissions from owned or controlled sources
  • Scope 2 - Indirect emissions from the generation of purchased electricity, steam, heating, and cooling
  • Scope 3 - All other indirect emissions that occur in a company's value chain

Each category involves different data collection methods, emission factors, and calculation protocols, which adds to the complexity of accounting. The dynamic nature of global emission factors, evolving regulatory standards, and the challenge of tracking emissions across global supply chains add layers of complexity too, which can leave some organizations at the beginning of their carbon accounting journey unsure where to begin.

Learn more about the difference between scopes 1, 2 and 3

Companies must also navigate the integration into broader sustainability strategies and financial reporting frameworks, requiring robust systems and expertise to ensure accuracy, comparability, and transparency. This complexity underscores the importance of specialized knowledge and tools in effectively managing and reducing an organization's carbon footprint - which is where Minimum can help. 

How 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.