The Basics

The Carbon Accounting Process

If your organization is considering carbon accounting for the first time, navigating the complexities around regulations and understanding the end to end process can be quite confusing. Our Emissions Data Platform exists precisely to help organizations start their journey towards lowering their carbon output. But first, let’s take a look at what the typical process might look like for you. 

Steps in carbon accounting

The roadmap for carbon accounting will have small nuances depending on the entity looking to report on their emissions.  This is because different organizations will have to follow different rules and adhere to different regulations - plus, the carbon report will need to account for how the reporting entity works with suppliers, engages with customers etc. Generally, the following steps are likely to be a feature in the carbon accounting process for organizations big and small: 

  • Gathering of data to be analysed
  • Calculating emissions uncovered in the data collection phase
  • Creation of the carbon report
  • Verification via a third-party expert that is impartial
  • Communicating report and targets set following the audit

Data collection

First and foremost, any robust carbon accounting process begins with rigorous data collection. Within this, an organization should consider all 3 scopes under the Greenhouse Gas (GHG) Protocol - which we’ll get onto shortly. 

Alongside this, it’s crucial to assess the broader supply chain and operational aspects for Scope 3 emissions. Utilizing primary sources like on-site monitoring, utility bills, and collaboration with suppliers, organizations compile accurate data. This foundational step is essential for calculating emissions and forms the basis for transparent reporting and subsequent sustainability strategies.

Scope 1, 2, and 3 emissions

Calculating Scope 1, 2, and 3 emissions involves a comprehensive examination of an organization's operational footprint, extending from direct emissions to those embedded within its supply chain. Broadly, the scopes are:

Scope 1 emissions

Scope 1 emissions encompass direct greenhouse gas emissions that arise from sources under an organization's control, such as on-site combustion of fossil fuels or emissions from owned vehicles. Calculating these emissions involves quantifying fuel consumption, energy usage, and production processes.

Scope 2 emissions

Scope 2 emissions are indirect emissions generated from purchased electricity, heating, and cooling. These emissions are calculated by assessing the energy consumption associated with purchased utilities and applying relevant emission factors. 

Scope 3 emissions

Scope 3 emissions extending into the supply chain, business travel, and even product lifecycle - as such, these are also indirect. Calculating Scope 3 emissions necessitates collaboration with suppliers, an intricate analysis of transportation networks, and a consideration of product end-of-life emissions. 

The challenge lies not only in the complexity of the calculations but also in securing accurate data from third-party entities and partners. Overall, the calculation of these different scopes requires a meticulous and multifaceted approach, combining data from diverse sources to provide a comprehensive overview of an organization's environmental impact.

Primary data sources

Primary data sources in carbon accounting are essential for obtaining accurate and reliable information on greenhouse gas (GHG) emissions. These sources include direct measurements, such as on-site monitoring of fuel consumption, energy use, and production processes. Organizations often deploy sensors, meters, and monitoring devices to gather real-time data on emissions generated from Scope 1 sources.

Additionally, utility bills and records provide crucial information for calculating Scope 2 emissions, representing indirect emissions from purchased electricity, heating, and cooling. Collaborating with energy providers and utilizing consumption data allows organizations to determine the environmental impact associated with their energy consumption.

Scope 3 emissions, covering a wider range of activities in the supply chain, business travel, and product life cycle, rely on:

  • Data from suppliers
  • Transportation records
  • Product life cycle assessments

Gathering primary data from these diverse sources ensures a comprehensive understanding of an organization's overall carbon footprint, enabling effective carbon accounting and informed decision-making towards sustainability goals.

Calculating emissions

From the direct emissions stemming from internal operations to the nuanced assessment of supply chains and product life cycles, the journey of calculating emissions is a multifaceted expedition. Broadly, the key areas that any organization should consider are emission and conversion factors - let’s explore each. 

Emission Factors

Emission factors encapsulate the carbon intensity of various processes, providing a standardized measure for estimating emissions associated with diverse activities, such as:

  • Energy consumption
  • Industrial processes
  • Transportation

Emission factors offer a quantifiable link between measurable parameters, and the environmental impact of those parameters. Their application allows organizations to assess and monitor their carbon footprint accurately. 

As industry practices and technology evolve, so do emission factors, necessitating regular updates to ensure the fidelity of emission calculations. Therefore, a nuanced understanding and careful selection of emission factors are imperative for organizations committed to comprehensive carbon accounting and the formulation of effective emission reduction strategies.

Conversion Factors

Once data points around emissions have been calculated, there may be a need to convert some of the factors across different sources to get one view of the reporting entity’s overarching carbon output. Conversion factors play a pivotal role in the precision and accuracy of carbon accounting, serving as the bridge between raw data and meaningful greenhouse gas (GHG) emissions calculations. 

These factors allow the transformation of raw activity data - such as energy consumption or fuel usage - into equivalent emissions. By converting diverse units of measurement into a standardized metric, organizations can compare and aggregate data across different sources. These factors vary based on the type of emission source, energy type, or specific industry, reflecting the varying carbon intensity of different activities. 

Reporting and verification

Once emissions are calculated, the next crucial step is to transparently communicate these findings through comprehensive reports. Reporting provides a structured narrative of an organization's environmental impact, fostering accountability and facilitating informed decision-making.  

The rules and regulations around carbon reporting will vary depending on the primary location of the reporting entity. Some of these will be mandatory, but others advisory. To give an example of the regulations that may impact your organization: 

Streamlined Energy and Carbon Reporting (SECR)

Aims to simplify reporting requirements by consolidating existing reporting obligations, including the mandatory reporting of greenhouse gasses, for companies falling within the scope such as quoted and unquoted companies, LLPs and public sector organizations.

EU Emissions Trading System (EU ETS)

Under the EU ETS, a cap, or limit, is set on the total amount of greenhouse gas emissions that covered entities can emit. Companies must monitor, report, and verify their emissions annually and surrender allowances equal to their emissions.

Mandatory Greenhouse Gas Reporting (GHGRP)

A necessity in both the US and the UK, companies that meet certain criteria are obligated to include information about their GHG emissions in their annual directors' report.

Corporate Sustainability Reporting Directive (CSRD)

Intended to ensure that sustainability reporting becomes an integral part of companies' mainstream reporting, providing stakeholders with a clearer understanding of companies' environmental, social, and governance (ESG) performance and impacts.

However, to bolster the credibility of these reports, external verification by independent entities becomes imperative. Verification ensures that the disclosed data aligns with established standards, offering stakeholders, including investors and the public, the confidence that the reported information is accurate and reliable.

Find out more about regulations for carbon reporting

Third-party verification

It’s one thing to have pulled together a carbon report, but another to have it verified by a third party. Byt doing this, your organisation isn’t merely marking its own homework - you’re ensuring that experts who do not have stakes in your organization agree with the outcome of your report. 

Once you’re comfortable that the carbon report with you or an expert working on your behalf is as accurate as possible, you may consider an external, independent assessment to validate the accuracy and reliability of an organization's reported greenhouse gas (GHG) emissions data. 

This verification process typically involves engaging a certified external entity, often an accredited third-party verifier or auditor, to review the organization's methodologies, data collection processes, and emission calculations against established standards and protocols. The third-party verification process usually unfolds in several key steps:

  1. Engagement - The organization seeking verification engages with an independent third-party verifier. This entity should be recognized and accredited to ensure credibility.
  2. Data review - The verifier thoroughly examines the organization's data collection methods, emission calculations, and any relevant documentation to ensure compliance with industry standards and reporting protocols.
  3. On-site inspections - Depending on the complexity of the emissions profile, on-site visits may be conducted to verify the accuracy of reported data and assess the effectiveness of data collection processes.
  4. Verification statement -  Following a comprehensive review, the third-party verifier provides a verification statement, confirming that the organization's reported emissions align with established standards. If discrepancies are found, recommendations for improvement may be offered.
  5. Public Disclosure -  In many cases, the verified emissions data, along with the third-party verification statement, is made publicly available, contributing to increased transparency and bolstering stakeholder confidence.

Transparency and Accountability

Transparency allows consumers, investors, and the wider public to make informed choices, supporting businesses aligned with their values. By openly disclosing emissions data and sustainability practices, organizations cultivate a culture of trust and credibility among stakeholders. This is why it’s crucial for organizations to communicate their emissions targets and results very clearly - and accurately. 

Additionally, it fosters a sense of accountability too, and compels organizations to uphold their commitments to environmental sustainability. It’s not enough for organizations to make claims that they’re aiming to lower their emissions output,  they must be able to demonstrate this commitment too. 

Through transparent reporting, companies not only showcase their dedication to mitigating climate change but also invite scrutiny, encouraging continuous improvement and innovation. 

Learn more about enabling transparency with carbon accounting software

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.