Why is carbon accounting important for businesses?
By adopting comprehensive accounting practices, businesses will ensure compliance with these regulations, making them better equipped for external auditing and compliance.Maria SerranoConsultant
Carbon accounting, also known as greenhouse gas (GHG) accounting, is the calculation of a business’s total direct and indirect greenhouse gas emissions. It converts the emissions of different gases into their carbon dioxide equivalent, as carbon dioxide is the biggest contributor to overall emissions.
This process is crucial for aligning with global climate goals like the Paris Agreement’s target to limit global warming to 1.5°C above pre-industrial levels by 2050. Remarkably, since 1988, just 100 companies have been responsible for 71% of these emissions.¹
Carbon accounting provides a baseline for environmental impact, essential for setting effective emissions reduction and net-zero targets. This practice supports compliance with increasing regulatory requirements for sustainability reporting, such as the UK’s Streamlined Energy and Carbon Reporting (SECR) and the EU’s Corporate Sustainability Reporting Directive (CSRD).
Effective carbon accounting builds a robust carbon footprint and offers numerous benefits to a business across various aspects:
Ensuring audit readiness and compliance.
Regulatory requirements are placing an increasing emphasis on sustainability and emissions reporting. By adopting comprehensive accounting practices, businesses will ensure compliance with these regulations, making them better equipped for external auditing and compliance.
Understanding carbon hotspots and key areas of action.
Carbon accounting helps businesses identify carbon hotspots, which are the most significant sources of emissions across their operations and value chain. his can include activities such as energy consumption in manufacturing processes, logistics, and goods purchased from suppliers. By pinpointing these critical areas, businesses can implement targeted strategies to drive the most impactful reductions in emissions.
Enhancing brand reputation.
In today’s environmentally conscious market, stakeholders—including consumers, investors, and business partners—expect companies to adopt environmentally responsible practices and demonstrate genuine commitment to sustainability.² A business’ ability to account for, manage and reduce its carbon emissions plays a critical role in shaping public perception, trust and reinforcement of its brand reputation.
Driving supplier engagement.
Comprehensive carbon accounting and emission reductions require businesses to expand their focus beyond their own operations to include supply chain emissions, which often represent the largest share of a company’s carbon footprint.
This requires close collaboration with suppliers to enhance transparency and alignment with sustainability goals. Setting clear standards, such as responsible sourcing and supplier energy reduction targets, helps drive improvements across the supply chain.
Informing strategic approaches to net-zero.
By providing a quantitative basis, carbon accounting supports the development of an actionable net-zero strategy. This offers a clear reference point to track progress and tailor emissions reduction initiatives.
Impact on employee recruitment and retention.
A strong commitment to sustainability can enhance a company’s appeal to both current and potential employees, with the trend being more pronounced among younger generations. A study reveals that 86% of young professionals would stay with a company longer if it demonstrates strong sustainability credentials.³ This highlights a valuable opportunity for companies to engage employees in their sustainability journey and empower them to contribute to the company’s sustainability goals.
Carbon accounting plays a valuable role in helping businesses align with global climate goals, meet regulatory requirements, and build resilience in an increasingly sustainability-focused market. Beyond compliance, it drives operational improvements, strengthens brand reputation, and fosters deeper engagement with stakeholders, including employees and suppliers. By accurately measuring and addressing their carbon emissions, businesses can lead in environmental responsibility, and position themselves for long-term success in a low-carbon economy.
Maria is a performance driven and passionate Climate and Carbon Consultant who has developed her skills and expertise in-house and in consultancy. She has experience working across multiple sectors like financial services, real estate, food and retail. Maria specialises in carbon accounting, setting science-based targets, third-party verification and climate-related disclosures such as CDP, having enabled multiple clients to increase their scores year on year.
Maria’s university background in Environmental Science was the driving force for her wanting to work in sustainability.
