Carbon accounting—measuring and reporting greenhouse gas emissions—has moved from voluntary corporate responsibility to regulatory requirement and investor expectation. Organizations need rigorous, defensible approaches to emissions measurement.
This guide provides a framework for building organizational carbon accounting capabilities.
Understanding Carbon Accounting
Why Carbon Accounting Matters
Regulatory compliance: Mandatory reporting requirements expanding.
Investor requirements: ESG investors demand emissions data.
Customer expectations: B2B customers require supply chain emissions.
Risk management: Understanding exposure to carbon costs.
Reduction foundation: You cannot manage what you don't measure.
Carbon Accounting Basics
Core concepts:
Carbon dioxide equivalents (CO2e): Standard unit converting all GHGs.
Global Warming Potential (GWP): Relative warming impact of different gases.
Emissions factors: Conversion factors from activity to emissions.
Organizational boundary: Which entities are included.
Operational boundary: Which emission sources are included.
Emissions Categorization
Scope Framework
The GHG Protocol defines three scopes:
Scope 1 - Direct emissions:
- Owned or controlled sources
- Fuel combustion in facilities
- Company vehicles
- Process emissions
- Fugitive emissions
Scope 2 - Indirect energy:
- Purchased electricity
- Purchased heat or steam
- Purchased cooling
Scope 3 - Value chain:
- Upstream: Purchased goods, transportation, business travel
- Downstream: Product use, end-of-life, investments
- Typically 70-90% of total footprint
Scope 3 Complexity
The hardest category:
Categories: 15 defined categories in GHG Protocol.
Data challenges: Depends on third-party information.
Estimation: Often requires modeling and assumptions.
Materiality: Focus on significant categories.
Measurement Approaches
Data Collection
Getting the numbers:
Activity data: Quantities of activities (kWh, liters, km).
Emissions factors: Published or calculated conversion factors.
Calculation methods: Activity × Factor = Emissions.
Data sources: Utility bills, fuel purchases, travel records.
Accuracy Considerations
Hierarchy: Measured > Calculated > Estimated.
Completeness: Cover all material sources.
Consistency: Same methods over time enable comparison.
Transparency: Document methods and assumptions.
Technology Solutions
Carbon accounting software:
Data collection: Integrations with operational systems.
Calculation engines: Automated factor application.
Reporting: Standard report generation.
Audit support: Documentation and trail.
Reporting Standards
Key Frameworks
GHG Protocol: Foundational methodology standard.
CDP: Disclosure platform used by many stakeholders.
TCFD: Climate risk disclosure framework.
SEC Climate Rule: Emerging US regulatory requirements.
CSRD: EU corporate sustainability reporting.
Assurance and Verification
Building credibility:
Limited assurance: Basic verification of processes.
Reasonable assurance: Higher confidence, more testing.
Third-party verification: External credibility.
Internal controls: Systems ensuring accuracy.
Implementation Approach
Getting Started
Building the program:
Define boundaries: What's in scope?
Inventory emissions sources: Comprehensive listing.
Establish data processes: How data will be collected.
Select methodology: Standards to follow.
Calculate baseline: Initial emissions inventory.
Building Capabilities
Maturing over time:
Integrate with operations: Embed in business processes.
Automate collection: Reduce manual effort.
Improve accuracy: Move up the data quality hierarchy.
Expand scope: Add Scope 3 categories progressively.
Key Takeaways
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Start with Scope 1 and 2: Establish foundation before tackling Scope 3.
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Use established standards: GHG Protocol provides credible methodology.
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Focus on materiality: Prioritize significant emission sources.
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Plan for verification: Build audit-ready documentation.
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Prepare for regulation: Requirements are expanding rapidly.
Frequently Asked Questions
Where should we start? Scope 1 and 2 first—direct and electricity emissions. Most data is accessible; methodology is straightforward.
How accurate does our inventory need to be? Directionally accurate with improving precision over time. Rough estimates beat no data.
What software should we use? Depends on size and complexity. Spreadsheets for simple cases; specialized software for larger organizations.
How do we handle Scope 3 data gaps? Industry averages, supplier estimates, spend-based calculations. Document methodology.
Should we get third-party verification? Increasingly expected by investors and regulators. Start with limited assurance.
How do carbon accounting and reduction planning connect? Accounting identifies hotspots for reduction efforts. Ongoing measurement tracks progress.