The Ultimate Carbon Accounting Guide 2025 – A Comprehensive Primer for Businesses

Carbon accounting has taken the spotlight in recent years due to the rise of ESG regulations and the necessity for more sustainable business practices.

Carbon accounting allows you to calculate your corporate carbon footprint, understand how, where and why your company emits greenhouse gases, and subsequently report on these emissions to governments and stakeholders.

This comprehensive guide will help you understand carbon accounting, its necessity, the frameworks to use, and how software can simplify the process.

What is Carbon Accounting?

Carbon accounting, also known as greenhouse gas (GHG) accounting, is the process of measuring and tracking the carbon dioxide (CO2) and other greenhouse gas emissions produced directly or indirectly by an organization.

Analogous to financial accounting we quantify the emissions from various business activities, such as manufacturing products, transportation, and waste generation, as well as along the supply chain of an organization.

This information can then be used to create sustainability reports such as CSRD, GRI and TCFD and to start decarbonizing your business.

Key Benefits:

• Regulatory Compliance: Ensure your business meets local and international mandates such as the CSRD.
• Risk Management: Identify and mitigate climate-related risks.
• Brand Value: Position your organization as a sustainability leader.
• Financial Benefits: Reduce operational inefficiencies and save on rising energy costs.

How Carbon Accounting Works: 7-Step Guide

Carbon accounting involves a systematic approach to measure and manage emissions. It involves a number of steps, similar to financial accounting, Here’s how it works step-by-step:

Step 1: Identify Emission Sources

Map out all activities within your organization that produce greenhouse gas emissions. Determine the boundaries of your organization’s emissions to ensure you only include what is caused by you.

The GHG Protocol, the foundation of modern carbon accounting practices, provides three scopes for categorizing emissions:

Scope 1: Direct emissions from sources owned or controlled by the organization, such as combustion of fossil fuels in boilers or vehicles.

Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling.

Scope 3: Other indirect emissions from sources not owned or directly controlled by you, such as employee commuting, business travel, and supply chain emissions.

Step 2: Collect Data

Gather the necessary data to calculate emissions. The two most common types of data used are:

• Spend-based: Monetary values from procurement and operations.
• Activity-based: Actual consumption and usage data.

This can include fuel consumption, electricity usage, vehicle mileage, and waste generation. You may need to collect this data from different departments, facilities, or external sources, such as utility providers. Ensure that the data collected is accurate and complete!

Step 3: Select Emission Factors

Emission factors are coefficients that convert spend and activity data (e.g., liters of fuel consumed) into GHG emissions, such as tCO2e.

These factors can be sourced from databases such as:

• The Intergovernmental Panel on Climate Change (IPCC)
• The US Environmental Protection Agency (EPA)
• National inventories
• Proprietary offerings

Choose the most relevant and up-to-date emission factors for your organization.

Step 4: Calculate Emissions

Multiply the activity data by the corresponding emission factors to determine the GHG emissions for each source. Add up the emissions from all sources to calculate the total emissions for each scope. It’s essential to use a consistent methodology and adhere to the chosen accounting framework.

Step 5: Validate and Verify

Ensure the accuracy of your data and calculations through internal checks or third-party audits. This adds credibility to your reporting and ensures the accuracy and completeness of your data.

Step 6: Report Findings

Create detailed reports that align with regulatory requirements and stakeholder expectations. Reporting frameworks like CDP or CSRD can guide this process.

Please note that every framework requires slightly different ways of reporting and you will probably have to tweak and improve your data each time to produce good results.

Step 7: Monitor and Improve

Carbon accounting is an ongoing process. Regularly update your data, refine methodologies, and implement reduction strategies based on insights gained. This should be done at least once per year or before every new reporting period deadline.

Review your carbon accounting process and performance regularly. Identify areas for improvement, update your reduction strategies, and adjust your targets as needed. Continuously refining your carbon accounting process will help your organization stay on track to achieve its sustainability goals.

Bonus steps:

Set Reduction Targets

Based on the calculated emissions, set realistic and achievable reduction targets. Consider factors such as industry benchmarks, regulatory requirements, and the organization’s growth projections.

Develop Emission Reduction Strategies

Identify and prioritize initiatives to reduce emissions, such as energy efficiency improvements, renewable energy procurement, employee engagement programs, or supply chain optimization.

Frameworks for Carbon Accounting

There are several frameworks available for carbon accounting. Some of the most widely recognized ones include:

The Greenhouse Gas Protocol (GHG Protocol)

Developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol is a widely used international standard for carbon accounting.

Website: https://ghgprotocol.org/

ISO 14064

This is a series of international standards developed by the International Organization for Standardization (ISO) to quantify, report, and verify GHG emissions and removals.

CDP (formerly Carbon Disclosure Project)

CDP is a global disclosure system that enables companies to measure and manage their environmental impacts, including GHG emissions. It provides a standardized reporting platform for carbon accounting.

Website: https://www.cdp.net/en

Comparison of Frameworks:

• GHG Protocol: Best for comprehensive reporting across all scopes.
• ISO 14064: Ideal for organizations seeking third-party verification.
• CDP: Suitable for external stakeholder reporting.

If you want to do carbon accounting to comply with regulatory obligations, there are even more sustainability frameworks to choose from!

Business Benefits of Carbon Accounting

Carbon accounting is necessary to lower a company’s greenhouse gas emissions, comply with regulatory requirements and create an effective decarbonization strategy. It also helps in increasing brand loyalty and save long-term costs.

Let’s look at a few benefits of carbon accounting in more detail:

Reduce your carbon footprint

You cannot manage what you can’t measure and you cannot reduce what you don’t know. Carbon accounting is the first step to lowering your carbon footprint. It helps you detect which operations are big emitters along your value chain and evaluate potential reduction potential.

Unfortunately, calculating carbon emissions is no easy task and requires a lot of data from various sources and providers. Among them are your facilities, vehicle fleet, procurement, logistics, and employees.

Using dedicated software for carbon accounting can automate this process and save you time and resources!

Of course, this doesn’t just apply to your own organization, however. We now know that most emissions are found along the value chain as indirect scope 3 emissions. If you truly want to take your carbon accounting seriously, you need to consider all of these sources.

Again, our Reegy platform can help you achieve just that!

Regulatory Compliance

Many countries have implemented carbon reduction targets and require organizations to report their GHG emissions. This also comes with stricter regulations, such as the European Union’s Corporate Sustainability Reporting Directive (CSRD). Carbon accounting ensures your business stays compliant.

Financial Benefits

Carbon accounting can reveal inefficiencies in your operations and help save energy and resources. This can lead to enormous cost savings, especially in the face of rising prices for gas and electricity.

Brand Value

Consumers and clients increasingly favor companies with strong sustainability credentials. Carbon accounting helps position your brand as a leader in this space. Oh, and customers love environmentally safe products!

Risk Management

Understanding your company’s carbon footprint helps identify potential risks associated with climate change, such as regulatory penalties, reputational damage, or operational disruptions.

How to Get Started with Carbon Accounting

Getting started with carbon accounting may seem daunting but it doesn’t have to be! That’s why the first thing to do before tracking your emissions is to:

Define Your Goals

What do you want to achieve? Regulatory compliance, cost reduction, or sustainability leadership? Set clear goals from the start!

Make sustainability a priority

Sustainability, ESG, and CSR aren’t just buzzwords on your annual reports. They should mean something to you and your organization and be a top priority! Sustainability also isn’t just tied to mere “environmental protection” but sustainable business practices that reduce risks to your organization.

Use Carbon Accounting Software

Please do not use spreadsheets, emails, and Word to do your carbon accounting and reporting. Modern software solutions streamline data collection, calculation, and reporting. Look for tools that offer:

• Integration with existing systems
• Automated calculations
• Customizable reporting
• Additional Sustainability Features

Implement Reduction Strategies

While carbon accounting is a regulatory and accounting task, you should not stop there!

Based on your findings, implement actionable steps such as switching to renewable energy, optimizing logistics, or improving operational efficiency.

How software can simplify your carbon accounting needs

We’ve already mentioned that software can make carbon accounting easier, faster, and more accurate. Here are some more benefits of using dedicated carbon accounting software:

Accuracy

Automated tools reduce errors in data collection and calculation. Carbon accounting software can automate data collection and management, reducing the risk of manual errors and saving time.

Efficiency

Save time with streamlined workflows and integration capabilities. Carbon accounting software can integrate with existing systems, such as Enterprise Resource Planning (ERP) and energy management systems, to streamline data collection and reporting.

Reporting

Easily create detailed reports that align with regulations like the CSRD or GRI (Global Reporting Initiative). Carbon accounting software can generate customized reports for different stakeholders, ensuring compliance with various regulatory requirements and standards.

Real-Time Monitoring

Track progress towards emissions reduction targets in real time. Software solutions can track emissions in real-time, enabling companies to make informed decisions and adjustments to their strategies.

Analysis and Forecasting

Software can analyze data trends, identify patterns, and forecast future emissions, helping organizations set realistic reduction targets and develop effective strategies.

Take Action!

Carbon accounting is no longer optional—it’s a critical component of your company’s sustainability strategy. By adopting robust carbon accounting practices and leveraging the right tools, your organization can not only comply with regulations but also unlock financial and reputational benefits.

Ready to take your carbon accounting to the next level? Explore our software solutions and consulting services to start your journey toward a greener tomorrow. Let’s talk!

FAQ

What is the purpose of carbon accounting?

Carbon accounting helps organizations measure, manage, and reduce their greenhouse gas emissions. It is essential for regulatory compliance, risk management, and sustainability reporting.

What are the methods of carbon accounting?

The primary methods are:

• Spend-based: Using monetary values from procurement to estimate emissions.
• Activity-based: Measuring actual consumption and usage data for accurate results.

Is carbon accounting difficult?

While carbon accounting can be complex due to the need for accurate data from multiple sources, using dedicated software simplifies the process significantly.

Is carbon accounting expensive?

The cost varies depending on the size of the organization and the tools used. While initial investments may be required, long-term benefits like cost savings and risk mitigation often outweigh these expenses.

How long does carbon accounting take?

The time required depends on the scope and complexity of the organization. Initial setups may take weeks, but ongoing monitoring and reporting can be streamlined with software, reducing the effort significantly.

What are the three scopes of carbon emissions?

The three scopes of carbon emissions are:

• Scope 1: Direct emissions from owned or controlled sources.
• Scope 2: Indirect emissions from purchased energy.
• Scope 3: Indirect emissions from the value chain, such as supplier activities and business travel.

Why is carbon accounting important for businesses?

Carbon accounting is important because it ensures regulatory compliance, identifies cost-saving opportunities, mitigates climate risks, and enhances brand value by demonstrating a commitment to sustainability.

How can software help with carbon accounting?

Software can streamline data collection, automate calculations, ensure reporting compliance, and provide real-time insights to help organizations effectively manage their carbon footprint.

What frameworks are used for carbon accounting?

Common frameworks include the Greenhouse Gas Protocol (GHG Protocol), ISO 14064, and CDP, which guide organizations in measuring and reporting their emissions.