Quick summary: As this climate crisis worsens, companies are pressurized by investors, regulators and customers to improve their sustainability and report their GHG emissions. Businesses need the best accountability and sustainability platform to manage the carbon accounting, reduction in emissions, managing and reporting in their sustainability strategy. Look into the 8 must haves of the right Carbon Accounting software for your organization.
The world today is committed to limiting global temperature rises to above 1.5˚C pre-industrial levels to ward off the worse impacts of climate change.
We need to halve the GHG emissions by 2030 and hit the net-zero target by 2050. As this climate crisis worsens, companies are pressurized by investors, regulators and customers to improve their sustainability. It is important for every business to efficiently track, measure, reduce and report its GHG emissions.
Behind each goal and commitment, there needs to be accounting that keeps track of progress.
53% of global GDP has made an intended commitment to reaching net-zero by 2050. Companies are seeking third party assistance to manage and reduce their carbon footprint through carbon accounting software which eliminates spreadsheets and manual calculations.
Carbon accounting is an accounting method to measure, make an inventory and report the organization’s GHG emissions. This is also known as the carbon footprint of the organization. The global accounting unit for emissions is carbon dioxide (CO2) and carbon equivalents (CO2e) the sum of carbon plus other emissions like methane and nitrous oxide converted into carbon.
Similar to financial accounting, carbon accounting encompasses the organization’s emissions as its carbon inventory that can be reduced against carbon offsets. Emission “Scopes” are used by GHG Protocol, one of the gold standard frameworks for carbon accounting as well as by the Environmental protection agency (EPA). The ghg protocol helps to track and report GHG emissions.
The emissions from scope 1, scope 2 and scope 3 for an organization can be measured using emission factors and the carbon accounting tools.
An organization needs to understand where its emissions come from to lower its carbon footprint. This can vary across companies and industries.
Organizations can opt to work with sustainable solutions to reduce their emissions after determining their carbon footprint.
Businesses need an end to end sustainability platform to manage the carbon accounting, reduction in emissions, managing and reporting in their sustainability strategy. But how do we choose the best software with so many carbon accounting systems around?
Digital solutions with carbon accounting software and environment compliance tools help organizations to reduce carbon footprint, improve decision making and save costs as a part of their decarbonization strategy.
The 8 must haves for a carbon accounting software
Businesses need to calculate their greenhouse gas emissions across scopes 1,2 and 3 and convert those outputs to CO2 equivalent
Measurement of emissions and benchmarking helps businesses to chalk a plan to manage and reduce emissions. The platform should showcase the impact of emissions and help to reduce them to reach their net-zero goals.
Availability of data on a shared platform aids in audit trails and saves time. The dashboard features help in gaining insights into the emission scopes.
There is a need for an easy onboarding process without any complexities or technicalities with required training that helps collaboration. The platform should educate and engage all the stakeholders so that they can generate sustainability reports for progress.
Scope 3 emissions comprise 90% of a business’s carbon footprint, while scope 1 and 2 only tell a part of the story with many companies lacking the required resources. An all in one platform should generate accurate results by setting supplier requirements and collaborating with all stakeholders in the supply chain.
Emission reporting is being mandated by governments with public disclosures to investors. The platform should align with the GHG protocol and the necessary carbon standards.
Sustainability platforms need to engage employees at work and home to realize an effective sustainable journey. This would create a more environmental- friendly atmosphere.
SaaS platforms are scalable, easily upgraded with low costs. The cloud solution provides the processing power with a subscription model. SaaS applications can be integrated seamlessly with other platforms and systems using APIs.
Greenhouse gas accounting is no longer a ‘Nice to have” for a business. There is an increasing standard requirement for businesses to have carbon accounting in place. It is necessary to know how much the company is emitting to set reduction targets, the carbon hotspots in the business’s value chain and the required insights to quantify the emissions and make informed decisions for mitigation strategies.
Globally, regulators are increasingly asking businesses to disclose their carbon emissions. Companies in US and UK have to disclose emissions under SEC and SECR respectively. In EU, CSRD will require companies which were unaffected to disclose their emissions beginning 2023. Climate impact reporting is increasing and carbon accounting ensures compliance.
Seizing opportunities involving consumers and investors has business value.
77% of consumers expect brands to be environmentally friendly and sustainable.
Carbon accounting helps to validate climate action and prevent greenwashing.
Greenwashing is a common allegation in the carbon and sustainability industry. Businesses estimate an average error rate of 30 to 40 % in their emission measurements. This accuracy gap is a risk which needs to be mitigated with carbon accounting software.
Quantifying business’s carbon footprint across the value chain reduces inefficiencies and saves costs. Carbon Accounting nurtures circular economy.
Carbon Accounting software is more than a tool for combatting climate change, it keeps businesses ahead of the curve.
The Carbon accounting software market is expected to increase by USD 9.61 billion from 2021 to 2026, with a CAGR of 28.66%. The need for carbon accounting solutions will only grow as the climate crisis becomes pressing.
Blockchain technology is a game-changer in this carbon market showcasing transparency and credibility. Blockchain enables transparency, accountability, streamlines processes and optimizes workflows. With increase in operational efficiency and reduced costs, it brings credibility to the voluntary carbon markets. Blockchain also drives the new markets through asset tokenizations.
Blockchain powered carbon accounting software brings greater data fidelity and granularity helping companies in transparent reporting. Businesses are able to accurately measure their emissions, identify and track the hotspots in real-time and work on abatement strategies. Blockchain adds a layer of trust and helps in exchange of information across the value chain. The seamless integration with IoT devices ensures a reliable system for tracking carbon credits. It provides auditable data that can be showcased to regulators and investors.
AI and machine learning technologies also help in automating the tracking activities
Carbon Accounting the first step in the Sustainability journey
Carbon accounting systems should form a integral part of data driven solutions for growth driven organizations. It is a mandatory requirement in a company’s sustainability journey. It is easy for businesses to pull off the best bets with data aggregation.
Corporate Sustainability goes hand in hand with Carbon Accounting
The need to deliver high quality data to validate climate action is great and sustainability is tied to financial, reputational and operational risks for organizations. Organizations that promote sustainability solutions can aim for long term success by capturing new opportunities and gaining a competitive edge. Green Revolution has started, and carbon accounting is the first step in the sustainability journey.
Technology can play an important role in driving climate action and accelerating the decarbonization journey. TraceX is building the Trace Carbon platform, a one stop solution for Carbon Management. Leveraging the power of blockchain, it provides a comprehensive platform for helping companies reach their sustainability and net-zero goals.