What is Carbon Accounting or GHG Accounting?
A high level overview to set the scene
What does it all mean?
Carbon accounting is the measurement of a company’s Greenhouse Gas (GHG) emissions - that is, the greenhouse gases that are emitted by the company from its activities and operations. This includes direct emissions from activities like burning fossil fuels (like driving a car), as well as indirect emissions associated with the consumption of electricity, freight of materials, or from the purchase of goods and services you buy (from suppliers within your value chain).
For organisations quantifying their emissions for the first time, you’ll be performing a ‘baseline emissions assessment’ to work out where your company stands.
Are there standards for this type of accounting?
There is! The GHG Protocol supplies the world’s most widely used Greenhouse Gas accounting standards. Nearly every other framework (think of the endless acronyms you’ve heard) is underpinned by the GHG Protocol for the carbon accounting part. These standards set out the things you need to include and the methods you can follow (and yes, they cover methods where you don’t have perfect data because nobody does).
You don’t have to be a scientist - but here’s the quick low down
The standards really are accounting standards more than environmental science. But let’s take a minute to go a little deeper for context. What are greenhouse gases or GHGs? They are gases present in our atmosphere that absorb and emit energy within the thermal infrared wavelength of light (IPCC, 2018) (wavelengths slightly longer than the visible spectrum we see in). Stay with us!
These gases essentially trap some of the incoming solar radiation, warming our planet. Basically, greenhouse gases are responsible for the rising temperatures that are leading to climate change and its catastrophic consequences. The primary greenhouse gases that drive the greenhouse effect are water vapour (H2O) (in the form of clouds etc.), carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and ozone (O3).
Applying This to Carbon Accounting
So when it comes to carbon accounting, you’re calculating the quantity of those gases generated from the businesses activities, and the output is usually expressed as kg of CO2-e. This refers to the impact of each GHG expressed in terms of an equivalent carbon dioxide amount. It simplifies calculations and provides a common unit.
How do you know what to account for?
Under the GHG Protocol, emissions are split up into ‘scopes’ (categories of emissions essentially). There are three scopes used in GHG accounting, which differentiate between direct and indirect emissions:
- Scope 1 Emissions: Direct GHG emissions from sources that are owned or controlled by the company, such as burning fuels from cars, trucks, gas stoves, boilers, and bbqs.
- Scope 2 Emissions: Electricity, indirect GHG emissions from purchased electricity consumed by the company (like what’s on your power bill). Scope 2 emissions are generally straightforward, it’s the emissions associated with the electricity, steam, heat or cooling a business buys from a utility or retailer. Scope 2 represents one of the largest sources of GHG emissions globally, with generation of electricity and heat now accounting for at least a third of global GHG emissions (hence the push towards renewable energy). These emissions are categorised as indirect, as they are technically emitted from sources owned by other entities i.e. the electricity provider, rather than a business generating the electricity themselves.
- Scope 3 Emissions: Other indirect emissions which are a consequence of the activities of the company but occur from sources not owned or controlled by the company (like all the suppliers the business buys goods and services from). This is the hardest one to grasp but Scope 3 emissions are essentially every other emission in the value chain other than Scope 1 and 2, meaning most of a company's emissions are related to Scope 3 sources. In fact, it’s often around 80-90%! So it’s absolutely critical to account for Scope 3 emissions.
This handy diagram from the GHG Protocol outlines the three scopes and the categories of activities
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