Carbon Accounting- Why is Important?

Carbon Accounting- Why is Important

Carbon Accounting- Why is Important?

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Over the past few years as awareness of issues concerning environmental sustainability has started to grow, individuals and organizations have created sustainability initiatives to help support the cause, and carbon accounting is one of them.

In this article today, we will be focusing on carbon accounting and discussing what it is and why it is so important today.

Let’s get started.

What is carbon accounting?

Carbon accounting is a broad term used to describe a wide range of practices that help companies effectively calculate the amount of carbon their company emits. This data is quite useful because using this information businesses can work on reducing their carbon emissions and assemble an offsetting plan.

Carbon accounting can be divided into two categories:

Physical carbon accounting

This is an accounting method that measures both the direct and indirect emissions that a company releases or a country and its industrial activities release into the atmosphere. This is also referred to as greenhouse gas inventory.

Financial carbon accounting

This is an accounting method that focuses on giving the carbon produced as well as absorbed a financial market value. 

Why is carbon accounting getting so important for businesses now?

Businesses and companies, especially those who operate on a large scale usually leave a huge carbon footprint because of their production activities which in turn results in adverse environmental effects. However, now that the corporate sector is much more informed about the impact of their activities they are getting more and more involved in reducing the negative effect their practices are leaving on the environment. At the same time, consumers have started becoming more eco-conscious too, and are demanding businesses to do better in terms of sustainability. These two factors go to explain why so many businesses have added carbon accounting tools, an incredibly beneficial way of practicing eco-consciousness, in their business model.

Apart from this, carbon accounting can prove to be beneficial for businesses for other reasons as well.

Some of these are summarized as follows:

Why carbon accounting matters to businesses

  • Allows businesses to set carbon-reducing targets effectively and in ways that can be quantified, thereby helping managers keep a record of all activities
  • Allows businesses to assign responsibility to the different sectors of the company to help each sector play a part in contributing to the businesses sustainability initiative
  • Help businesses fulfill CSR in a better way, allowing for effective consumer-seller relationships based on trust and transparency
  • Helping recognize which part of the business or value chain contributes most to the emissions
  • Identifies the sector of business where most reduction opportunities exist
  • Assists in the preparation of mandatory GHG reporting present in directors’ reports
  • Improves stakeholder and shareholder communication as well as staff engagement

Carbon Accounting and emerging technologies

The carbon accounting world has been revolutionized immensely by new technology software as well as AI. Using AI and machine learning tools businesses are now capable of switching their carbon accounting systems to automated versions so that all activities such as progress tracking, record keeping, etc can be completely computerized and automated.

Experts predict that in the future as sustainability will become a mandatory element in the business world, even greater technological advancements will be made so that carbon accounting can be made even simpler to use by all businesses regardless of their scale of production. The entire system would be digitally controlled so the costs incurred would be less as well.

We hope that this article has proven to be a resourceful guide in helping you understand what carbon accounting is all about.

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