Key benefits of carbon accounting (Top 8)

Decarbonisation is a strategic business imperative to improve brand reputation, streamline decision-making, and drive regulatory compliance. However, to develop effective reduction strategies, companies require accurate emissions data. This can be challenging, especially for organisations with vast, global supply chains. Carbon accounting addresses these challenges by systematically measuring and managing emissions linked to a company’s operations and supply chain. 

This article outlines the benefits of carbon accounting, including improved decision-making, enhanced reputation, and compliance with regulations.

What is carbon accounting?

Also known as greenhouse gas (GHG) accounting, carbon accounting is a structured approach to quantifying greenhouse gas emissions produced directly or indirectly from an organisation’s activities. Its primary purpose is to provide a comprehensive understanding of emissions sources and to inform reduction strategies. 

As one of the most widely used standards for carbon accounting, the GHG Protocol provides organisations with a consistent and credible framework to measure, manage, and report their emissions. It includes the GHG Protocol Corporate Accounting and Reporting Standard, which outlines methodologies for quantifying and reporting emissions.

According to the protocol, an organisation’s emissions can be broken down into three scopes:

• Scope 1: These are the direct emissions produced from sources owned or controlled by a company. Emissions that occur during manufacturing processes or on-site electricity production are included in this scope.
• Scope 2: Indirect emissions linked to the generation of electricity, heating, heating, and cooling that the company purchases and uses. 
• Scope 3: These are indirect emissions produced due to a company’s activities but from sources not owned or controlled by the company. Scope 3 emissions are also the most challenging to quantify as they consider all indirect emissions occurring throughout a company’s value chain.

8 benefits of carbon accounting

Carbon accounting allows a business to understand and reduce its environmental impact, improving operational efficiency, reducing costs, and enhancing stakeholder relations. By adopting carbon accounting practices, companies demonstrate their commitment to environmental stewardship, gaining a competitive advantage in the eyes of increasingly environmentally conscious stakeholders. 

Here are the many benefits of doing carbon accounting for your organisation.

Developing effective decarbonisation strategies

Effective decarbonisation begins with understanding where emissions come from. Carbon accounting establishes a baseline year for emissions, providing the foundation for setting realistic and measurable reduction targets.

Businesses can prioritise actions that deliver the greatest impact by identifying hotspots (e.g., areas where emissions are highest). Continuous monitoring ensures strategies stay effective, adaptable to progress, and aligned with business objectives.

Key steps for establishing effective decarbonisation strategies:

• Calculate a baseline year: Establish a reference point for tracking future emissions reductions
• Set reduction targets: Define clear, measurable goals to guide decarbonisation efforts
• Identify emissions hotspots: Pinpoint areas with the highest emissions for targeted, high-impact actions
• Continuously monitor your carbon footprint: Use ongoing tracking and reporting to measure progress and refine strategies as needed

Staying compliant

The importance of robust carbon reporting is increasing as regulatory requirements tighten. Landmark ESG regulations like the EU’s Corporate Sustainability Reporting Directive (CSRD) and the US SEC’s climate disclosure rules, which implement stricter requirements for GHG emissions reporting and reductions. However, complying with these requirements can be complex for organisations without robust carbon reporting practices, as many require detailed information on Scope 3 emissions. 

By adopting carbon accounting, companies can accurately measure and disclose emissions across all scopes and showcase reduction efforts, better positioning themselves to navigate regulatory changes and avoid potential penalties associated with non-compliance. Here are some regulatory trends that are driving carbon reporting:

• Increased coverage of Scope 3 emissions: Companies must now account for indirect emissions throughout their value chain.
• Enhanced accuracy and frequency of reporting: Regulators require more precise data and more frequent emissions updates.
• Mandatory action on measured emissions: Companies are expected not only to report emissions but also to demonstrate tangible actions taken to reduce them.

Identifying cost savings opportunities

Carbon accounting identifies inefficiencies that contribute to high emissions, which often correlate with high costs. By addressing emissions hotspots, businesses can adopt energy-saving measures, optimise resource use, and minimise waste, leading to cost savings. 

Here are some examples of cost-saving opportunities that we’ve seen our partners adopt:

1. Reducing electricity consumption: Implement energy-efficient technologies like LED lighting or upgraded HVAC systems to lower energy use and costs
2. Improving waste management practices: Streamline waste processes to cut disposal costs and reduce emissions from waste treatment
3. Optimising cloud usage through green IT initiatives: Transition to energy-efficient cloud services to reduce operational costs and IT-related carbon emissions.

Fostering collaboration and innovation

In today’s complex global supply chains, transitioning to low-carbon operations cannot be done alone. Carbon accounting is pivotal in gathering accurate emissions data, particularly Scope 3 emissions, through close cooperation with suppliers and other stakeholders. When collected across the supply chain, emissions data can be robust in fostering transparency, pinpointing hotspots, and identifying opportunities to replace carbon-intensive raw materials and processes with low-emissions alternatives.

Collaborative initiatives can include:

• Insetting projects: Partner with suppliers to implement initiatives that directly reduce emissions within the supply chain, such as transitioning to renewable energy or adopting sustainable farming practices
• Circular economy practices: Collaborate with stakeholders to design products and processes that minimise waste, enhance resource efficiency, and extend the lifecycle of materials
• Industrial symbiosis: Collaborate with partners to connect operations, exchange resources such as energy or by-products, and collectively reduce emissions across the supply chain.

Improving reputation and stakeholder transparency

Transparent carbon accounting practices enhance a company’s credibility by providing stakeholders (e.g., customers, investors, and regulators) with precise, verifiable data on emissions and reduction efforts. Companies that openly report their progress position themselves as responsible corporate citizens, earning trust and attracting environmentally conscious audiences. Digital tools and platforms are crucial in facilitating real-time reporting and improving communication, ensuring accountability and creating stronger stakeholder relationships.

Transparent carbon accounting practices strengthen a company’s credibility by providing stakeholders (e.g., customers, investors, and regulators) with accurate, verifiable data on emissions and reduction initiatives. Companies that consistently disclose their progress demonstrate accountability and leadership in sustainability, fostering trust and appealing to stakeholders. Digital tools and platforms enable real-time reporting and enhance communication, ultimately reinforcing accountability and deepening stakeholder relationships.

Here are some ways to improve transparency:

• Publicly report emissions data: Share detailed emissions reports and sustainability progress with stakeholders to demonstrate commitment
• Engage stakeholders in sustainability initiatives: Involve employees, customers, and suppliers in carbon reduction efforts to build a sense of shared responsibility.
• Utilise digital platforms for real-time updates: Use technology to provide timely and accurate information on emissions and sustainability initiatives.

Attracting capital and building better relationships with investors

For 80% of investors, a company’s ESG performance matters as much as its equity growth story. They are increasingly drawn to businesses with robust sustainability practices, including practical carbon accounting and actionable emissions reduction plans. Transparent and verifiable carbon data builds confidence, positioning companies to attract capital, meet regulatory demands, and demonstrate leadership in managing climate risks.

Strengthening employee engagement and corporate culture

Employees overwhelmingly support climate action, with 69% expressing a desire for their companies to invest in sustainability initiatives like reducing their carbon footprint. Actively involving employees in carbon accounting and broader sustainability efforts fosters a sense of ownership and alignment with the company’s environmental goals. Providing training and raising awareness empowers teams to contribute meaningfully to emission reduction, ultimately cultivating a more motivated, engaged, and purpose-driven workforce.

Providing climate education across all stakeholders

This decade is pivotal in mitigating climate change, and stakeholder support is crucial for companies to drive decarbonisation efforts. Organisations can use carbon accounting to provide data and insights to align stakeholders with net-zero goals and cost-reduction efforts. With a more informed and engaged stakeholder base, companies can tap into the power of collective action to amplify decarbonisation efforts.

Common carbon accounting challenges

Relying on manual methods for carbon accounting, such as spreadsheets, makes an already complex process time-consuming and prone to errors. Despite this, many organisations use outdated tools to collect, calculate, and manage emissions data.

Data collection often proves difficult, mainly when gathering consistent and reliable information from multiple sources and stakeholders. Measuring Scope 3 emissions is incredibly challenging, as these indirect emissions span the entire value chain and are often difficult to trace. Ensuring accuracy and consistency in reporting is critical, as discrepancies undermine the credibility of a company’s sustainability claims and can result in regulatory penalties.

Some of the common challenges that companies face include:

• Data collection: Gathering reliable and comprehensive data from various sources, such as suppliers and operational units, is often complex. To solve this, consider investing in carbon accounting software for ESG reporting. This software simplifies the data collection and reporting, improving accuracy and efficiency.
• Measuring Scope 3 emissions: Tracking indirect emissions across the value chain poses significant challenges, often resulting in incomplete or inconsistent reporting. Be sure to engage key stakeholders, such as suppliers and employees, to enhance the quality of the data by ensuring a broader and more reliable scope.
• Maintaining accuracy and consistency in reporting: Variations in data quality and methodologies can lead to discrepancies, making it challenging to compare performance over time or against industry benchmarks. By adopting industry standards like the GHG Protocol, you can further strengthen the credibility of your emissions reporting and build trust with stakeholders.

How carbon accounting software helps companies overcome challenges and unlock benefits

Building sophisticated data capabilities is crucial for unlocking the benefits of carbon accounting. Here’s how dedicated carbon accounting software like Plan A accelerates your carbon accounting efforts.

• Streamlines data capture: Carbon accounting software captures data from diverse sources using predefined rules and unifies it into a centralised platform. Plan A structures this data according to GHG protocol and maps it to organisation structure, enabling you to track emissions with high granularity.
• Drives transparency in supply chain emissions: Companies can significantly reduce their carbon footprint by concentrating their decarbonising initiatives in their supply chain. However, Scope 3 emissions are highly challenging to track. Reliable carbon accounting software captures emissions data across the supply chain and aggregates it to help you develop comprehensive decarbonisation plans. 
• Enhances data quality: Businesses make significant errors during emissions measurements. Carbon accounting software minimises the risk of errors and improves the overall accuracy of data by eliminating the need for manual processes.
• Facilitates compliance: Reporting mandates like CSRD, ESRS, and CSDDD represent a growing regulatory focus on ESG efforts. Carbon accounting software embeds disclosure requirements, helping companies move beyond simple compliance to seizing opportunities. Specialised tools like our CSRD Manager provide step-wise guidance for companies to navigate the complexities of CSRD reporting. 
• Improves strategic outcomes: Carbon accounting software calculates corporate carbon footprint (CCF) using GHG-compliant methods. With Plan A, organisations can compare emissions across sources, identify hotspots in the supply chain, set science-based targets, and implement reduction actions in one platform. 

Case studies of successful carbon accounting implementation

Several companies have successfully leveraged carbon accounting software to enhance emissions reporting, improve transparency, and advance their sustainability objectives:

• Interface, Inc.: Developed the EcoMetrics system to integrate environmental and financial data, improving the transparency and quality of GHG emissions reporting. This integration has made emissions data more actionable and supported their sustainability goals.
• Stryber: Leveraged Plan A’s carbon accounting software to collect and analyse its emissions data across operating geographies. Plan A developed a tailored reduction plan for Stryber, focusing on Scope 3 emissions and business travel. As a result, Stryber successfully reduced its emissions and compensated those that could not be reduced otherwise.
• AMPECO: This B-corp-certified global EV charging management software company aims to become net zero by 2030. In 2022, it partnered with Plan A to gain an in-depth understanding of its carbon footprint and energy usage and identify areas for optimisation. Today, AMPECO is making rapid progress towards reducing its Scope 1 and 2 emissions by 50% by 2025 compared to 2022.

Carbon accounting offers companies clear benefits, from improving emissions tracking and supporting sustainability goals to ensuring compliance with evolving regulations. By adopting robust carbon accounting practices, businesses can gain valuable insights, enhance transparency, and build stakeholder trust. Investing in these practices drives sustainability efforts and positions companies to contribute meaningfully to a more sustainable future.