What is Carbon Accounting?
Summary
Carbon Accounting is total sum of all the greenhouse gas (GHG) emissions generated by the direct and indirect activities of an organisation or company.
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Everything you need to know about carbon accounting
It involves calculating the greenhouse gas (GHG) emissions generated by the direct and indirect activities of an organisation or company.
This assessment takes into account all the emissions generated, in particular during the production of goods or services, including emissions :
Upstream and downstream of production;
When the product is used and at the end of its life;
Employee travel;
Offices occupied;
The number of computer servers;
Expenditure on various services (marketing, legal, communications).
The European CSRD directive will come into force in 2024 and will eventually require all companies in Europe to produce their carbon footprint and communicate their action plan to reduce their carbon footprint.
A growing number of companies are therefore carrying out carbon assessments, either to meet regulatory obligations or because they want to take the lead and integrate them into their CSR strategy.
However, carrying out a carbon footprint is not an end in itself: while the result is the measurement of the carbon footprint, the ultimate objective is to put in place measures to reduce an organisation’s GHG emissions.
What is the purpose of a carbon accounting?
The aim and challenges of a carbon footprint
The carbon footprint aims to get each organisation to contribute to the common effort to achieve climate targets by identifying areas where the carbon footprint can be minimised.
Once the carbon footprint has been established, the company must implement an action plan comprising corrective and proactive measures to reduce and offset its emissions (for example, identifying opportunities for eco-design of a product, or financing CO² sequestration projects).
Keeping this in mind, the carbon emissions inventory serves the purpose of pinpointing emission sources and potential reduction opportunities. Subsequently, the company selects specific emission areas to focus on for improvement and devises strategies to attain these enhancements. These strategies are then formalised in the action plan, which should:
set out the company’s objectives in terms of reducing emissions;
detail the means and measures envisaged by the company to reduce its impact on the climate;
where appropriate, set out the actions already undertaken and their results;
specify the expected reductions, as well as the associated deadlines.
etc.
To carry out this strategy effectively, the carbon footprint must integrate sustainable development into CSR by raising awareness and providing training for all those involved within the company. If you wish to know more about the objectives and challenges of carbon accounting, feel free to read our article.
Carbon footprint action plan
EU member states will be subject to the European CSRD directive, which will come into force in 2024 and will eventually require all European companies to produce their carbon footprint and implement an action plan.
Through this new law, Europe is increasing its emissions reduction target for 2030, to achieve carbon neutrality by 2050.
In some specific countries, such as France, laws already exist to encourage companies to reduce their emissions. It is therefore important to analyse the legislation in force in the country to determine a company’s environmental obligations.
Origin and methods of the carbon footprint
The GHG Protocol
The GHG Protocol was created in 1998 to standardise carbon accounting. As the first organisation to define the methodology for carrying out a reliable carbon footprint, this standard is now the most widely used in the world, especially in English-speaking countries.
ADEME’s Bilan Carbone® method
This carbon inventory method was developed in France by ADEME under the expertise of Jean-Marc Jancovici in 2000. This method, which is similar to the GHG Protocol, includes an Excel spreadsheet that can be used to assess emissions, compare them from one year to the next and plan reduction actions.
The PAS method
Developed by the British Standards Institute (BSI), PAS (Publicly Available Specification) is a British standard that was introduced in October 2008 and revised in 2011. PAS 2050 also offers companies the opportunity to measure an organisation’s carbon footprint.
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Calculating the carbon footprint: duty and opportunity for a sustainable future.
Why calculate your organisation’s carbon accounting?
Regardless of regulatory requirements, companies have every interest in reducing their carbon footprint.
Improve their brand image
Consumers naturally gravitate towards more environmentally friendly products and services. According to market research, the fact that a company is carbon-responsible increases its market share.
Better terms from financial institutions
Carbon-neutral companies find it easier to obtain finance on more favourable terms than those that are not committed to the environment.
Winning contracts
In addition to the public contracts that are more easily awarded to them, responsible carbon companies sign more contracts from customers who are obliged to produce their carbon footprint.
Attracting the best people and retaining staff
Not only do carbon-neutral companies attract the best talent, but they also manage to retain their staff through their strong commitment.
How is a carbon accounting calculated?
Today, there are various approaches to assessing the CO² emissions of an area or an organisation. Whether the goal is to conduct a regulatory assessment or a comprehensive greenhouse gas evaluation, two standards stand out.
The different methods
The GHG Protocol
The Greenhouse Gas Protocol (GHG) method is presently the most internationally adopted standard.
The study’s scope is defined by the company under consideration, the activities taken into account (scopes 1, 2, and 3), the greenhouse gases included in the calculation, and the reference year. Emissions are calculated following IPCC guidelines.
Global Warming Potential (GWP) factors are used to translate emissions into CO² equivalent. The GWP enables the impact of gas on the climate to be compared with the impact of CO² so that the results can be expressed in a common unit (CO²e).
The quality and reliability of the results are then verified, including the calculation of uncertainties. Verification by a third party may be considered.
Finally, the results are interpreted and a reduction target is set. An action plan can then be drawn up.
The Bilan Carbone ® method
Launched in France by ADEME in 2004 and taken over by the Association Transition Bas Carbone (ABC) in 2011, the Bilan Carbone® method assesses greenhouse gas emissions in scopes 1, 2 and 3, i.e. both direct and indirect emissions.
To quantify these different greenhouse gas emissions, ADEME uses a calculation formula based on physical or monetary emissions factors. It takes into account all the greenhouse gases identified by the IPCC.
The PAS method
The British standard PAS 2060 defines measurement and reduction targets for each company. Thanks to its documentation, it can also be used to verify your carbon neutrality declaration.
The standard comprises 4 key stages: measuring the carbon footprint, reducing/offsetting, documenting and validating.
The carbon footprint calculation must include 100% of Scope 1 and 2 emissions plus Scope 3 emissions.
If you wish to know more about how to compute your company's carbon accounting, feel free to read our article.
What should be taken into accounting in a carbon footprint?
In the carbon footprint approach, each company must define the internal and external scope to cover Scopes 1, 2 and 3.
Scope 1 covers all the direct greenhouse gas emissions produced by the company, such as the heating of premises or emissions from company-owned vehicles.
Scope 2 covers indirect emissions associated with energy, such as emissions generated during the production process of a product or service.
Scope 3 includes all the company’s indirect emissions. As a general rule, it is in this category that we find the majority of emissions generated by the company, such as those resulting from the purchase of raw materials or services.
The carbon footprint approach covers a wide range of greenhouse gas emissions. However, the principle of the carbon footprint only covers greenhouse gas emissions and does not include other environmental impacts (deforestation, water pollution, etc.).
The difference between an energy audit and a carbon accounting
While an energy audit aims to assess a company’s energy performance, a carbon footprint quantifies all the company’s GHG emissions. The difference between energy audit and carbon accoutning lies in the scope of the analysis: the energy audit only takes into account the use of electricity or fuels, whereas the carbon footprint goes further and includes the environmental impact of offices, marketing expenditure, the computers owned by the company, etc.
If you want to know your company’s carbon footprint, you need to carry out a carbon footprint assessment, as this is the only way to provide a complete analysis of all the activities that emit greenhouse gases.
Stages of a carbon footprint assessment
There are 5 main stages in drawing up a carbon footprint:
1. Defining the company’s geographical and operational scope
This involves determining to which facilities, equipment and activities the calculation of the company’s carbon footprint applies. This stage also involves defining what determines whether or not a company owns certain activities, i.e. according to financial or operational control, or according to shares of capital.
2. Gathering information
The carbon consultant or the professional in charge of carrying out the carbon assessment gathers data on all the CO² emission items from accounting documents and staff surveys. Those company's data may be either monetary or physical data.
3. Conversion of activity into tonnes of CO² equivalent
The data collected is presented in different units (tonnes, kilometres, litres, etc.). The carbon expert must therefore convert this information into tonnes of CO² equivalent using emission factors published by organizations such as ADEME, to obtain consistent data that can be aggregated. Depending on the organization and the geographical location of a company's business market, emission factors may take purchasing power parity into account. This step determines the company’s total carbon footprint in CO² equivalent for the year in question.
4. Determining the action plan
The company draws up a carbon footprint action plan as part of its CSR approach, in other words, the measures it will put in place to reduce its GHG emissions. An action plan includes actions to reduce CO² emissions as well as actions to offset them, such as financing projects that naturally capture CO². It should be noted that reduced and sequestered emissions must be presented and calculated separately.
5. Communicating its carbon plan
The organisation shares the actions it has taken to protect the climate with its internal and external partners. This step also enables staff, suppliers and customers to participate in this responsible approach. It is important to be transparent at this stage and to communicate and interpret correclty all the assumptions made in arriving at the final result, particularly in the case of missing or incomplete activity data.
How long does it take to assess a carbon footprint?
The time taken to produce a carbon footprint varies according to several factors, including the size of the company and the quality of the data on GHG-emitting activities. Generally speaking, it will take between 5 man-days for a SME and 60 man-days for a large company.
The time required to carry out a carbon footprint can be reduced by:
Facilitating and rationalising data collection, the most time-consuming phase;
Calling in an experienced specialist;
Training someone in-house to carry out carbon footprints in future years.
This involves determining to which facilities, equipment and activities the calculation of the company’s carbon footprint applies. This stage also involves defining what determines whether or not a company owns certain activities, i.e. according to financial or operational control, or according to shares of capital.
Finally, based on monetary emission factors, it is possible to use the company’s balance sheet, such as the detailed income statement, as a starting point. This approach speeds up the calculation of the carbon footprint, given the systematic and standardised nature of accounting documents. However, it has significant limitations due to the high level of uncertainty surrounding monetary emission factors. In addition, it does not allow emissions linked to services or products sold to be accounted for.
How much does a carbon footprint cost?
The average cost of a carbon footprint is generally between €2,000 and €20,000. Several factors influence the cost of a carbon footprint, such as:
The size of the organisation;
The complexity of the field of activity;
The number of employees;
The degree of accuracy of the carbon footprint;
The service provider selected to carry it out.
The cost of a carbon assessment carried out by an external consultancy firm can vary from a few thousand to several tens of thousands of euros:
€5,000 for a carbon assessment for an SME covering scopes 1 and 2;
€10,000 for a carbon assessment for an SME covering scopes 1, 2 and 3;
€20,000 or more for large organisations.
Financial assistance available for carrying out a carbon footprint
Some government bodies offer grants and subsidies to support and encourage companies to carry out their first carbon footprint, covering up to 50% or even 75% of the cost of a carbon footprint. The subsidies and criteria for benefiting from them vary from country to country.
Which organisations are legally required to disclose their carbon footprint?
In France, under the provisions of the Grenelle II law (article 75), companies with more than 500 employees in mainland France and more than 250 employees in overseas regions are required to carry out a carbon footprint.
At the European level, from 2024, the CSRD directive will require certain companies to calculate and publicly communicate their carbon footprint and their action plan to reduce it. Eventually, this will apply to all companies operating in Europe.
This is all the more reason for companies to anticipate new regulatory obligations, to start drawing up a carbon footprint and to integrate it into a sustainable approach as of now.
The players in the sector
Who can perform a carbon footprint?
There are several solutions available to companies for drawing up their carbon plan:
Train an in-house expert with a carbon footprint calculator;
Use an independent carbon consultant;
Use a CSR consultancy firm.
Although the first solution requires an investment in time, it is cost-effective and allows the company to carry out its action plan independently. Note that, to be even more cost-effective, companies can choose from a variety of free calculators to assess their carbon footprint. The other two options are more costly but can meet an immediate need.
Carbon footprint consultants: experts in the sector
Carbon footprint consultants are specialists who guide and advise companies in carrying out their carbon footprint, from data collection to the development of the carbon reduction strategy.
They work with the other teams and train them in raising staff awareness, gathering information and using the carbon footprint calculators.
CSR consulting firms
Many sustainable development and CSR consulting firms offer tailor-made carbon assessments. Some of them use sophisticated carbon footprint solutions. Unlike carbon footprint consultants, these firms also cover other aspects of CSR, such as social impact and best practices in corporate governance.
They work with the other teams and train them in raising staff awareness, gathering information and using the carbon footprint calculators.
How can I find a service provider to carry out a carbon assessment?
Not all companies have the same carbon footprint needs. Some want to calculate a carbon footprint for a particular year, while others want to implement a comprehensive CSR strategy. It is important to be aware of your needs and to request several quotes from different service providers.
Particular attention should be paid to the service provider’s ability to showcase similar projects. The certifications and experience of the consultants provided should also be taken into account.
Finally, the total cost of the project, i.e. the services provided by the consultants and the calculator used, should be compared with the cost of doing the project in-house. The service provider should allow a member of staff to upgrade their skills so that the skills involved in calculating the carbon footprint can be brought in-house.
Reduce your company’s carbon footprint by booking a demo with our experts at D-Carbonize.
