Carbon Footprint Guide

Carbon dioxide (CO2) is a colourless gas. It is the most common greenhouse gas (GHG) emitted by human activities, in terms of the quantity released and the total impact on global warming.

Greenhouse gases (‘GHGs’) are gases that trap heat in the atmosphere and cause the Earth’s atmosphere to warm up. Examples of greenhouse gases include carbon dioxide (CO2) and methane (CH4). The emission of these gases cause and accelerate the ‘greenhouse effect’, i.e., the warming up of the Earth’s atmosphere.

IFAC has published a useful explainer of the foundational concepts designed to equip accountants with the technical guidance necessary to collect and enhance the quality of data related to all scopes of GHG emissions at individual entity and group levels: GHG Reporting Building Blocks for Accountants

There are several gases with the potential to cause global warming. These include carbon dioxide (‘CO2’), methane (‘CH4’), nitrous oxide (N2O) and others. Collectively these are known as ‘greenhouse gases’. To be able to compare them, we use the metric ‘carbon dioxide equivalents’ (‘CO2e’). The ‘e’ standards for ‘equivalents’. We assess the strength of these gases, also known as the global warming potential (GWP), relative to carbon dioxide. You can view the full list of greenhouse gases and their GWP values here.

Even though some greenhouse gases are more powerful than carbon dioxide at trapping heat, expressing them in terms of CO2 makes it easier to understand and compare the impacts of different gases on our climate.

Most organisations use energy to power activities. In many cases, fossil fuels are burned to create this energy. Fossil fuels are coal, oil and gas. When these fuels are burned, they release greenhouse gases into the atmosphere. So, when staff take a flight, drive a car, or turn on an office air-conditioning system, they are likely to be generating greenhouse gas emissions.

The emission factor is typically expressed in terms of kilograms of carbon dioxide equivalent (kgCO2e) per unit of activity or expenditure. This unit allows for the quantification of greenhouse gas emissions associated with a specific activity or expenditure.

Emission factors are derived from scientific research and data. They are often provided by authoritative sources such as the Intergovernmental Panel on Climate Change (IPCC) through their Emission Factor Database (EFDB).  Other sources include government agencies, environmental organisations, and research institutions. These factors are based on average emissions from various activities or processes and are regularly updated to reflect the most current data.

Your organisation’s carbon footprint will also enable you to understand your full impact across all scopes of your organisation, which will be vital for your sustainability reporting and essential to achieving net zero.

There are three scopes of emissions that a company creates:

Scope 1 emissions directly occurring from sources that are controlled or owned by an organisation. For example, heating fuels, transport fuels and fugitive emissions from manufacturing processes.

Scope 2 emissions arising indirectly when the business consumes purchased electricity.

Scope 3 emissions linked to the organisation’s operations from assets that they do not own or control. They cover emissions associated with buying goods and services, staff commuting, business travel, waste management, and procurement. Scope 3 emissions usually form the biggest part of an organisation’s carbon footprint.

A carbon footprint is a calculation of the total greenhouse gas (GHG) emissions that are emitted directly or indirectly by an organisation. It is usually measured in tons of CO2 equivalent per year (tCO2e/yr.) A carbon footprint should be compliant with an internationally recognised standard for GHG calculation such as the Greenhouse Gas Protocol or ISO 14064.

This ensures we are all reporting in a standardised manner and that your carbon footprint calculation meets internationally agreed requirements. This is where a carbon accounting software provider can help.

Carbon accounting means calculating an organisation’s greenhouse gas emissions.

Warnings from the Intergovernmental Panel on Climate Change are clear:   climate change will lead to extreme weather conditions occurring more frequently, leading to widespread devastation. Companies have a major role in reducing GHG emissions to avoid the worst effects of climate change. They also have a role in helping countries meet the carbon budget targets set by national governments. To do this, they must account for their carbon emissions.

There are many other drivers for initiating comprehensive carbon accounting, including stakeholder and shareholder communication, mandatory GHG reporting required by supply chain partners. , tendering requirements for government and business contracts, investment and financing due diligence, and employee engagement.

So, carbon accounting is no longer just a ‘nice-to-have.’ It is increasingly becoming a standard requirement for many businesses.

1. Environmental: Help reduce the concentration of GHGs in the atmosphere.
2. Business Strategy – Economic, Social and Brand impact: Help enterprises reduce the amount of energy and resource they use, translating to lower costs. Businesses that measure and manage their carbon emissions are more likely to enjoy positive brand experience and impact than those that do not, developing deeper customer trust and loyalty.
3. Risk and opportunities: carbon accounting elucidates risks and opportunities which should be addressed in risk registers and ultimately commercial strategies i.e., carbon accounting serves the development of more robust and relevant strategies.

A carbon accounting software provider is a company or organisation that offers software solutions designed to help businesses and individuals measure, report, and manage their carbon footprint and overall environmental impact. These solutions can help you in getting your carbon footprint calculation compliant with internationally recognised standards.

These software tools are important in carbon accounting, which involves tracking and analysing greenhouse gas emissions resulting from various activities and operations.

Providers use two primary methodologies to calculate an organisation’s carbon footprint: the spend-based method and the activity–based method.

Some providers may use a combination of both methods to provide a more accurate and comprehensive calculation of an organisation’s carbon footprint.

* It’s important to note that these are simplified formulas. The actual calculation can be more complex and may require additional factors or adjustments depending on the specific context.

The activity-based method is often preferred over the spend-based method for calculating a company’s carbon footprint due to its greater accuracy and specificity. It considers specific activities like fuel use and electricity consumption. The spend-based method, based on expenditure data, might miss some emissions. For example, a T-shirt manufacturer using the spend-based method would likely multiply the monetary value of T-shirts produced by a relative carbon emission factor. This approach might not account for all emissions from cotton cultivation to manufacturing. In contrast, the activity-based method would consider these, giving a more accurate footprint. So, while the spend-based method gives a rough estimate, the activity-based method is preferred for a more detailed and accurate assessment.

Continuous Improvement: Achieving net zero is not a one-time event, but a continuous process of measuring, reducing, and off-setting emissions. Regularly reviewing and updating the data input into the software will help ensure the most accurate and up-to-date results.

Accounting Platform Integration: Some providers offer integration with accounting platforms like Xero. These are online tools that simply the accounting process, making it easier for businesses to manage their finances. This integration allows the providers carbon software to access this financial data, which can then be used to calculate the carbon footprint for the business activities. Therefore, integrating traditional accounting platforms with carbon accounting software allows businesses to automate the process of inputting their financial data. This means they won’t have to manually enter this information into the carbon accounting software. Providers like Sage, Trace and Cogo are examples of such services that offer Xero integration. It’s important to note that the level of integration and the specific features offered can vary between different carbon software providers.

Mobile availability: When speaking with a software provider it’s always good to ask whether their software works on a mobile phone and if you can access your data and get insights at any time of the day.

Accessibility: It’s important to ask software providers whether the software can be accessed by multiple users, so book-keepers or accountants can access the accounts