Climate Risk & ESG Risk

What is Carbon Accounting? All You Need to Know 

KAJAL THARWANI

8th Apr'22
What is Carbon Accounting? All You Need to Know  | OpenGrowth

Every second day we read about how carbon impacts our lives, our environment, and our ecosystem. Not only does carbon footprint harm our mother earth, but so do deforestation, greenhouse gasses, global warming, and pollution. On a positive note, we have understood the importance of nature and started reducing its impacts by adopting sustainable lifestyles. 

Different efforts can be seen by individuals, brands, and companies to fight against climate change. Carbon accounting can be seen as a major help in reducing carbon impacts. Its tools can help to take them forward and save the environment. Wait, carbon accounting? What is it? What are its benefits? What are its scopes? Too many questions. Here I am with all the answers. So, what are you waiting for? Let’s go! 

 

What is Carbon Accounting? 

Carbon accounting is also known as greenhouse gas accounting. It is the process used by organizations to measure the amounts of greenhouse gas emissions to fully understand their climate impact and set goals to reduce emissions. It is also called carbon or greenhouse inventory. 

According to Science Direct, “ Carbon accounting methodologies and frameworks are crucial for actual greenhouse gas savings. Carbon accounting tools can help combat climate change by steering companies toward effective mitigation decisions.” 

 

Carbon Accounting

 

Types of Carbon Accounting 

Carbon accounting has two categories. They are:

 

Physical Carbon Accounting 

Physical carbon accounting looks at the direct and indirect amounts of greenhouse gas emissions to the atmosphere. It is also called the greenhouse gas inventory. 

 

Financial Carbon Accounting 

Financial carbon accounting looks at giving carbon a financial market value. It helps corporations to track their efforts in achieving greenhouse gas reduction targets. 

 

Benefits of Incorporating  Carbon Accounting 

  • It helps to reduce the carbon footprint in the atmosphere. 

  • It helps to identify business activities that use a lot of energy.

  • It makes businesses transparent about their business activities and their impact on the atmosphere. 

  • It helps companies to become more environmentally conscious and take active steps to control their carbon emissions. 

  • Businesses incorporating carbon accounting are likely to get a positive brand experience. 

 

Carbon Accounting Scopes  

A company has to set goals for reducing carbon emissions within the framework of three scopes. These are: 

Scope 1 

Scope one covers emissions that result from the direct activities of companies. The activities include fuel combustion from vehicles and facilities that your company owns.

 

Scope 2 

Scope two covers emissions that result from the generation of purchased electricity consumed by your company. The purchases include electricity, cooling, and heating.

 

Scope 3 

Scope three covers the emissions from all other indirect sources in your company’s supply chain. Examples: raw goods, employee community, distribution, and transportation.

 

Carbon Accounting: Industry Requirement 

One of the IPCC ( Intergovernmental Panel on Climate Change), states, “Climate change will lead to extreme weather conditions occurring more frequently, leading to widespread devastation. Scientists believe that the rising levels of greenhouse gas emissions lead to rising sea levels and rising temperatures, heavy rain flooding, erosion, and reduced agricultural yields.” 

The report further states, “ Companies have a big role in reducing these emissions and meeting the carbon budget set by regulators. They need carbon accounting to reach net-zero-goals, be smart, and prevent catastrophic climate breakdown.” 

The report made it more clear that carbon accounting is no longer a choice, it is needed. Industries can opt for different tools and methods to check their carbon emissions. Moreover, it is important to take responsibility for their impact and take active steps to reduce it.

 

Tools Making Carbon Accounting Easier 

The GHG ( GreenHouse Gas) protocol is consistently developing tools that can be used by several industries, businesses, and organizations to reduce their carbon emissions. You can use tools as per your industry and need. A few of the tools are the  Greenhouse Gas Calculator, Direct Land Use Change Assessment, Carbon Reporting, and FarmGAS scenario tool. 

The software will help you get the answers to the following questions: 

  • How to measure greenhouse gas emissions?

  • What is the total amount of greenhouse gasses emitted?

  • Who is responsible for the emissions? 

  • Which measure will allow for the emissions reduction?

  • Where do the vital greenhouse gas reduction possibilities exist within the business units and value chains? 


With the results from the carbon accounting tools, you can choose better what is right for your organization and the environment. This will help you to make strategies and by ensuring minimum carbon emissions. 

 

Climate change

 

Conclusion 

According to the Sixth Assessment Report by IPCC, “ We are running out of time. Unless we make drastic greenhouse gas emissions reductions within the next two decades, the temperature may rise by more than 1.5 degrees Celsius above pre-industrial levels. To prevent such a disaster, carbon accounting, management, and reduction need to be on the agenda. Inventors, regulators, and consumers will expect businesses to act responsibly and make a real impact on the climate change situation.” 

Therefore, we need to understand that the main goal behind opting for carbon accounting is to reduce the impacts on the environment of businesses and industries. 


We, at OpenGrowth, are committed to keeping you updated with the best content on the latest trendy topics from any major field. Also, both your feedback and suggestions are valuable to us. So, do share them in the comment section below.

An explorer who takes risks and learns from her mistakes. An aspirational content writer, studying social work. Kajal loves trying her hands in different crafts.

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