Accounting involves measuring and reporting an organization’s greenhouse gas emissions using established standards and protocols.
Greenhouse Gas (GHG) accounting involves measuring and reporting an organization’s greenhouse gas emissions using established standards and protocols. Many companies are adopting GHG accounting due to its numerous benefits, such as building stakeholder trust, identifying emission hotspots, and reducing environmental impact. Furthermore, GHG accounting offers a competitive edge by attracting consumers who prefer sustainable products and services.
Greenhouse Gas (GHG) accounting involves measuring and reporting an organization’s greenhouse gas emissions using established standards and protocols. Many companies are adopting GHG accounting due to its numerous benefits, such as building stakeholder trust, identifying emission hotspots, and reducing environmental impact. Furthermore, GHG accounting offers a competitive edge by attracting consumers who prefer sustainable products and services.
These regulations require disclosure of greenhouse gas emissions, including scopes 1, 2, and 3. While GHG accounting may not yet be mandatory for everyone, taking the first step now is a prudent move.
Embarking on a GHG accounting journey involves several critical steps:
Setting organizational & operational boundaries
Selecting a GHG Emission Calculation Approach
Collecting Data and Using Calculation Tools
Setting a Reduction Target and Tracking Progress
Assurance and Verification for Carbon Emissions
Reporting GHG Emissions
Direct emissions owned or controlled by the reporting organization, such as on-site activities emitting directly into the atmosphere. This includes stationary combustion, mobile combustion, fugitive emissions, and process emissions.
Indirect emissions from purchasing electricity, steam, and heating/cooling. These can be disclosed using location-based or market-based methods.
Indirect emissions from the company’s value chain, both upstream and downstream. These are the most challenging to calculate due to the complexity of gathering supply chain data. Companies new to GHG accounting should initially focus on scopes 1 and 2, moving to scope 3 as they gain experience.
Choosing the appropriate approach for setting organizational boundaries can be challenging. A company should select an approach that maximizes scope coverage. For instance, a company with significant investment holdings might choose the equity share approach, while one with practical control over its assets might opt for the control approach.
After defining the boundaries, the next step is to collect relevant data. This can include utility bills, fuel consumption records, and other operational data. Using specialized GHG accounting tools can streamline this process. Software solutions like Sustainext.ai can automate data compilation, ensuring accuracy and saving time.
Once the data is collected and emissions are calculated, companies should set reduction targets. These targets should be SMART (Specific, Measurable, Achievable, Relevant, Time-bound). For instance, a company might aim to reduce scope 1 and 2 emissions by 20% over the next five years.
Regular monitoring and reporting are essential to track progress against the reduction targets. Companies should establish a system for periodic reviews and updates to ensure continuous improvement.
Assurance and verification are critical for ensuring the credibility of GHG reports. External audits by third-party organizations can provide verification, enhancing the reliability of the reported data and boosting stakeholder confidence.
Finally, companies need to report their GHG emissions. This can be done through sustainability reports, CDP disclosures, or other reporting frameworks. Transparent reporting demonstrates a commitment to sustainability and can enhance a company’s reputation.
Once companies have understood the GHG Accounting process, they need to decide whether they carry out the exercise internally, use external consultants or carbon accounting platforms to digitize the entire process.
To maintain good GHG accounting standards, companies need to:
Each organization will have to take a slightly different approach to their GHG Accounting process as data management varies across companies and there is no defined set of procedures to follow.
The best practice to implement with GHG Accounting and Reporting is to Start Small and Scale Rapidly. Most organizations can track and obtain data for Scope 1 and 2 as that is Emissions from their Own Operations whereas tackling Scope 3 Data is a challenge as that needs to be obtained from an organizations Supply Chain.
For a First Time Reporter, Starting with Scope 1 and 2 data would be most ideal and once they understand the accounting process, they can start with select categories in Scope 3 such as Business Travel, Employee Commute, Purchased Goods and Services, etc and keep expanding from there.
For a Seasoned Reporter, it’s more about the Accuracy and Validation of Data through Assurance as the Reports need to be published and made available on various public domains. Setting Reduction Targets and tracking progress and communicating that effectively is what the larger organizations care about.
Sustainext provides specialized support in GHG Accounting and Reporting. Our Team of professionals can support you throughout the entire process from Accounting to Compliance reporting.
As a Global Service Provider, we work with Clients from various sectors using a combination of Consulting and Technology, we can provide clients with a Managed Service that is cost effective, improves efficiencies and accuracies, and reduces turnaround times leading to greater client satisfaction.
