Carbon accounting is the process of calculating the amount of greenhouse gasses (GHG) an organization produces, either directly or indirectly, from its operations.

Similar to financial accounting, which tracks a company’s monetary transactions, carbon accounting quantifies the impact of business activities on the environment. It allows organizations to estimate their carbon footprints, helping them to understand where their emissions come from and how they can implement effective strategies to reduce them.

By adopting carbon accounting, businesses does not only contribute in fighting climate change but also ensure compliance with environmental regulations, enhancing their brand image and uncovering new business opportunities.

In short, carbon accounting is a powerful tool that supports both sustainability and long-term business success.

A comprehensive carbon accounting process is essential for developing a sustainable strategy. 

After all, it’s nearly impossible to manage what you cannot measure. Carbon accounting helps businesses quantify their emissions, laying the groundwork for effective reductions. Whether it’s cutting down on operational inefficiencies or reducing emissions from the supply chain, carbon accounting allows companies to align their sustainability goals with actionable data.

Moreover, carbon accounting plays a critical role in helping organizations reach their net-zero goals, as it enables them to track and report their progress transparently. Many governments and regulatory bodies now require climate impact reporting, so preparing in advance with accurate carbon accounting data helps businesses stay compliant with evolving regulations.

By adopting carbon accounting software, businesses can automate data collection, streamline calculations, and reduce the time spent on emissions tracking—giving them more time to focus on actually reducing their carbon footprint.

With growing pressure from governments, stakeholders, and consumers, businesses are expected to take meaningful climate action. Carbon accounting provides a measurable way to assess and reduce emissions, ensuring that the company’s environmental efforts are transparent and impactful.

In today’s world, carbon accounting represents a strategic approach to understanding and reducing carbon footprints, ensuring a sustainable future for everyone. 

Companies across industries use carbon accounting to achieve net-zero emissions, which refers to balancing the amount of greenhouse gasses emitted with an equivalent amount of carbon removal or offset.

Furthermore, carbon accounting revolves around two core elements: data collection and data processing. To accurately calculate emissions, you need two types of data:

• Business data: Information about business activities, such as the amount of fuel consumed or goods purchased.
• Emissions factors: The amount of GHG emissions associated with each unit of business activity.

Once the necessary data is collected, one can estimate their carbon footprint using one of two primary methods: spend-based or activity-based.

Spend-Based Method

This approach calculates emissions by multiplying the financial value of a purchased good or service by an emissions factor. It’s a quick way to estimate carbon emissions but tends to be less precise as it relies on industry averages.

Activity-Based Method

This method, on the other hand, is more specific and accurate, using actual data on the quantity of materials, fuel, or other resources used. Emission factors from scientific studies are then applied to calculate emissions.

Hybrid Method

A combination of the two, the hybrid method is recommended by the Greenhouse Gas Protocol, the most widely used standard for carbon accounting. It allows businesses to use activity-based data where possible and supplement it with spend-based estimates where data is lacking.

The result of carbon accounting is an estimate of a business’s total carbon footprint, typically broken down into three “scopes” based on the Greenhouse Gas Protocol:

• Scope 1: Direct emissions from owned or controlled sources (e.g., company vehicles, manufacturing processes).
• Scope 2: Indirect emissions from purchased energy (e.g., electricity).
• Scope 3: All other indirect emissions, such as those generated by suppliers or the use of sold products (often referred to as value chain emissions).

Aligning with these standards ensures that your business is compliant with regulations and you can publicly share your sustainability efforts with confidence.

For an in-depth breakdown of these standards, including how to apply them to your business, explore our Guide to Carbon Accounting Standards and Global Frameworks.

Given the complexity of collecting and analyzing emissions data, many companies are turning to carbon accounting softwares to streamline the process. These kinds of softwares automate data gathering from various sources, making it easier to produce accurate carbon footprints and meet reporting requirements. 

It’s especially beneficial for businesses with extensive supply chains, where manual data collection would be time-consuming and prone to errors.

Using a carbon accounting software does not only help to save time, but it also provides more precise insights into emissions hotspots, helping companies target the most impactful areas for reduction.

For large companies, especially those with thousands of suppliers, carbon accounting is crucial for identifying emissions within the value chain. 

On average, value chain emissions (Scope 3) account for 92% of a business’s carbon footprint. Hence, these emissions don’t come directly from the company but from the smaller businesses that supply goods and services.

Enterprises can start by using a spend-based approach to estimate value chain emissions. From there, they can refine their data by gathering activity-based information from their most significant suppliers. This targeted approach ensures that carbon reduction efforts focus on the most impactful areas.

As carbon accounting becomes a core business function, professionals in sustainability, finance, and operations are increasingly seeking to enhance their expertise in the field.

Through carbon accounting courses or advisory services they are offered training on methodologies, data collection, and reporting standards, equipping individuals with the knowledge to lead their organization’s sustainability initiatives. These courses are an excellent way to stay ahead in a rapidly evolving area of business.

The GHG Protocol is the most widely used framework for measuring and managing GHG emissions globally. Established in partnership between the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol provides comprehensive guidelines on how to calculate and report emissions.

The GHG Protocol defines the three emissions scopes mentioned above and helps businesses accurately assess their carbon footprint across all operations. Adopting this framework allows companies to be transparent about their carbon impact, enabling them to meet carbon reduction goals and avoid greenwashing risks.