Carbon accounting measures a company’s greenhouse gas (GHG) emissions—those produced directly from its operations and indirectly through its value chain. This includes direct emissions from activities like burning fossil fuels (e.g., fuel for company vehicles) and indirect emissions from electricity use, transporting goods, and purchasing products or services from suppliers.
If you’re measuring emissions for the first time, you’ll start with a baseline emissions assessment to establish where your company currently stands.
Are There Standards for Carbon Accounting?
Yes! The GHG Protocol provides the most widely used carbon accounting standards. Nearly every other framework is based on the GHG Protocol, setting out what to include and offering methods to follow (even if your data isn’t perfect—because nobody’s is!). See our blog on the GHG Protocol for more.
The Basics of Greenhouse Gases (GHGs)
You don’t need a science degree to understand GHGs. The main greenhouse gases contributing to climate change include water vapor (H₂O), carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), and ozone (O₃). By tracking GHG emissions, companies can measure their contribution to global warming and take action to reduce it.
In carbon accounting, you’re measuring the quantity of GHGs emitted from business activities, expressed in kg of CO₂-e (carbon dioxide equivalent). This metric consolidates emissions from different gases into a single, comparable unit—much like converting multiple currencies into one for streamlined reporting across a global company.
How to Know What to Account For
The GHG Protocol divides emissions into three ‘scopes’ to differentiate between direct and indirect emissions:
- Scope 1 Emissions: Direct GHG emissions from sources owned or controlled by the company, like fuel combustion from company vehicles, gas stoves, or boilers.
- Scope 2 Emissions: Indirect emissions from purchased electricity or other utilities like steam, heat, or cooling. These emissions, from electricity generation or heating, account for a significant portion of global GHG emissions, driving efforts to shift toward renewable energy.
- Scope 3 Emissions: Indirect emissions from sources not owned or controlled by the company but resulting from its activities, such as emissions from suppliers in the value chain. Scope 3 emissions are typically the largest, accounting for around 80-90% of a company’s emissions, making them crucial to measure for effective emissions reduction.
Understanding these scopes helps you see the full picture of their emissions and identify where action can make the most impact.
This handy diagram from the GHG Protocol outlines the three scopes and the categories of activities
Scope 1, 2 & 3 sub-categories
The three Scopes have sub-categories that further help determine the emission source and calculation of the emissions under the GHG Protocol.
Scope 1 sub-categories:
- Mobile Combustion - fuels burnt for transportation in vehicles or machinery owned or controlled by the business, such as cars, trucks, trains, and ships. Essentially, if it moves because it’s burning fuel, it counts as mobile combustion.
- Stationary Combustion - fuels burnt for stationary equipment or processes, releasing emissions like carbon dioxide, methane, and nitrous oxide. Unlike mobile combustion, stationary combustion involves equipment that doesn’t move, such as boilers or generators in a fixed location.
- Fugitive Emissions - unintended release of gases, such as refrigerants in air conditioning units or leaks in industrial equipment. These emissions can be a surprising source of greenhouse gases, as equipment like fridges and A/C units often release small amounts of gases over time.
- Process or Chemical Emissions - emissions from raw materials undergo chemical transformations, such as during cement or aluminium production. These emissions are typically associated with specific industries like oil and gas, metals, and cement manufacturing.
See our blog on Understanding Scope 1 Emissions here for more.
Scope 2 sub-categories:
- Purchased electricity: This is the most common form of energy used by companies, powering machinery, lighting, electric vehicle charging, and certain types of heating and cooling systems.
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Purchased steam, heating and cooling (non-electricity):
- Steam is often used as a medium for industrial processes, mechanical work, or heating.
- Heat is typically required by commercial and industrial buildings for climate control and water heating, while some industrial equipment also relies on heat. This heat may be generated by the company itself or purchased from external sources, such as a thermal power plant.
- Cooling is similar to heat, cooling may be purchased as a service for building climate control or industrial applications. This energy may be generated on-site or procured from an external cooling provider.
See our blog on Understanding Scope 2 Emissions here for more.
Scope 3 sub-categories:
See a breakdown of data inputs for Scope 3 categories here. Below is a list of the 15 categories, both upstream and downstream in a businesses value chain.
- 'Upstream' value chain sub-categories
- Purchased Goods and Services
- Capital Goods
- Fuel and Energy-Related Activities
- Upstream Transportation and Distribution
- Waste Generated in Operations
- Business Travel
- Employee Commuting
- Upstream Leased Assets
- 'Downstream' value chain sub-categories
- Downstream Transportation and Distribution
- Processing of Sold Products
- Use of Sold Products
- End-of-Life Treatment of Sold Products
- Downstream Leased Assets
- Franchises
- Investments
See our blog on Understanding Scope 3 Emissions here for more.