Carbon accounting is a crucial component of environmental reporting, as it involves the measurement and tracking of greenhouse gas (GHG) emissions and removals. More specifically, it’s a key part of the following considerations in any environmental report:
Carbon accounting involves quantifying the amount of greenhouse gasses emitted by an entity, such as a company or a nation. Common greenhouse gasses include carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), and fluorinated gasses. The key greenhouse gas emissions to be aware of are categorized into scopes:
Carbon accounting provides the data needed for organizations to set emission reduction targets. By understanding their carbon footprint, entities can establish realistic and measurable goals to reduce emissions over time.
When establishing an organization's carbon output, the work doesn’t stop there. It’s vital to ensure that any climate goal setting is achievable - which can be discovered during a feasibility analysis.
Once the goals have been established and implemented, it’s equally as important to ensure that there is progress against the targets. Regular carbon accounting allows organizations to track their progress toward emission reduction goals.
This information is crucial for evaluating the effectiveness of sustainability initiatives and making adjustments as needed. This is key for organizations in understanding the ROI of carbon accounting.
Many jurisdictions have carbon accounting standards and reporting requirements related to GHG emissions. Carbon accounting helps organizations comply with these regulations by providing accurate and transparent data on their environmental impact.
As a result of meeting these regulatory requirements, organizations can avoid the costly penalties that are associated with it, alongside reaping the benefits of being able to demonstrate to customers and stakeholders that you’re serious about your commitments to lower your carbon footprint.
Learn more about the benefits of carbon accounting
The reporting guidelines will vary from region to region. Some countries or jurisdictions may have more stringent requirements than others, and therefore pose a biggest risk to organizations who aren’t meeting the targets.
However, there are a few international standards that are set by the likes of the UN or the EU - and these come with heavy penalties for non-compliance. To name some of the reporting guidelines:
The GRI Standards are widely used for sustainability reporting. GRI provides guidelines for reporting on economic, environmental, and social aspects. Within the environmental dimension, organizations are encouraged to report on their greenhouse gas emissions, energy consumption, and other relevant environmental indicators.
CDP is a global disclosure system that enables companies, cities, states, and regions to measure and manage their environmental impacts. It specifically focuses on carbon emissions, water usage, and climate-related risks and opportunities.
Learn more about the Carbon Disclosure Project
Developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol provides standards and guidance for companies and governments to measure and manage their greenhouse gas emissions. It is often used in conjunction with other reporting frameworks.
Learn more about the Greenhouse Gas Protocol
TCFD provides recommendations for disclosing climate-related financial risks and opportunities in mainstream financial filings. While not a reporting framework itself, TCFD encourages organizations to disclose information related to their governance, strategy, risk management, and metrics and targets, including those related to greenhouse gas emissions.
Learn more about the Task Force on Climate-related Financial Disclosures
Many CSR reporting frameworks, such as the United Nations Global Compact (UNGC), may include guidelines for reporting on environmental performance, including carbon emissions.
When organizations adhere to these guidelines and frameworks, they are not only promoting transparency but also contributing to a global effort to address climate change by effectively managing and reducing their carbon footprints. The specific requirements may vary, but the common thread is a focus on measuring, reporting, and, in many cases, setting targets for reducing greenhouse gas emissions.
In a nutshell, no, not all environmental reporting is mandatory - but there is increasing pressure for it to become so as the global target set by the Paris Agreement looks off-track to limit global warming to 1.5°C before 2025 .
The mandatory nature of environmental reporting varies by jurisdiction and industry. In many places, there is an increasing trend towards requiring organizations to disclose their environmental performance.
The specifics depend on the country, local regulations, and the industry in which an organization operates. Here are some key points to consider:
Certain industries, especially those with significant environmental impacts, may face industry-specific reporting requirements. For example, the extractive industry or industries with high energy consumption may have additional reporting obligations.
Even in the absence of strict regulatory requirements, investors and stakeholders are increasingly interested in the environmental, social, and governance (ESG) performance of organizations. As a result, many companies voluntarily engage in environmental reporting to meet the expectations of investors, customers, and the public.
Some organizations may be required to report their environmental performance as part of contractual agreements with customers, suppliers, or other stakeholders.
Given the increasing global emphasis on sustainability and climate change mitigation, there is a growing likelihood that environmental reporting will become more standardized and, in some cases, mandatory. Organizations should stay informed about regulatory developments in their jurisdictions and industry sectors to ensure compliance with any emerging reporting requirements.
Additionally, voluntary reporting can be a strategic choice for companies looking to demonstrate their commitment to sustainability and meet the expectations of various stakeholders.
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.