Insights / Are you prepared for carbon accounting?

Are you prepared for carbon accounting?

The carbon accounting revolution is coming. Almost every organisation in the UK will need to record and report its Greenhouse gas emissions (GHG) transparently – whether thanks to Government regulations or clients’ policies. What can you do to make sure you’re prepared?

Are you prepared for carbon accounting? - Hero

What is carbon accounting?

Carbon accounting is like financial accounting. Only instead of being concerned with converting an organisation’s activity into money, and recording and reporting that, it’s concerned with recording and reporting the GHG emissions that activity caused.

What’s driving carbon accounting?

To achieve our commitment to reach net zero GHG emissions by 2050, the UK needs to have a clear and accurate picture of which organisations are emitting what. Only with transparent accounting can organisations develop the plans they need to mitigate their emissions.

Large organisations in the UK are already required to record and report their emissions. Now many such organisations are putting pressure on their suppliers and partners to give them detailed and transparent information about the emissions their activities are causing too.

Your Scope 1 and 2 emissions could be someone else’s Scope 3 emissions

These organisations need this information because they have to calculate all their emissions in their own carbon accounting. That includes their Scope 1 and 2 emissions – broadly speaking the GHG they emit through their own operations and the energy they use. It also includes their Scope 3 emissions – those associated with their supply chain.

If your organisation supplies a larger business with services or goods, then the chances are that your emissions form part of their Scope 3 emissions.

In some cases, those businesses may have more demanding targets than the UK Government. For instance, global FMCG giant Unilever is aiming to achieve net zero across its value chain by 2039.

And if it doesn’t already, the cost of doing business with such organisations may soon include the adoption of carbon accounting and the creation of a fully-fledged carbon mitigation plan. Something similar is already the case with anyone seeking a government contract in the UK.

Carbon accounting needs a high-level sponsor

Because carbon accounting is so critical, it has to be led from the top of the organisation.

If there isn’t a member of the board or executive committee sponsoring the process, then it is unlikely to succeed.

Nowadays it would be inconceivable if the person responsible for financial accounting within an organisation – the Finance Director or Chief Finance Officer – were not sitting at the top table. Soon, the same will be true for the Chief Sustainability Officer or the Chief Carbon Officer. These are the people who’ll need to take the lead in developing carbon accounting within their organisation.

Start by measuring your emissions

To start your carbon accounting, you’ll need to record and report your own emissions under Scope 1 and Scope 2. For your Scope 3 emissions, you’ll need to ask your own suppliers for information about their emissions and how they impinge on your accounting.

Scope 3 emissions are split into two categories – upstream and downstream – and cover:

Are you prepared for carbon accounting - Scope 3

Future-proof your carbon accounting

The requirements of carbon accounting are increasing all the time. So, it’s crucial that when you start the process in your organisation you make sure it’s future proof. You don’t want to adopt one methodology, only to find you need to develop another one in a couple of years’ time. Some of the most significant changes cover Scope 3 reporting.

For instance, the International Sustainability Standards Board announced in 2022 that reporting Scope 3 emissions will be mandatory for organisations wishing to be considered for its new standard of corporate sustainability disclosure.

And from 2025, the European Council has stated that Scope 3 emissions must be taken into account by organisations working in the EU. This includes organisations based elsewhere.

These changes are understandable, given that Scope 3 emissions form the huge majority of most organisations’ GHG emissions. Without this information, it would be impossible to create realistic carbon mitigation plans. But these changes will inevitably make carbon accounting more challenging for many organisations in the short term.

Who can help with carbon accounting?

Making the transition to carbon accounting is clearly going to involve a large amount of work. Introducing a whole new workstream that affects every single aspect of an organisation’s activities could hardly be anything other than challenging. But ultimately, it’s the price we’ll have to pay to stay in business if we’re to avoid climate change and reach our net zero targets.

Many organisations are finding that as well as employing a dedicated team to record and report their emissions, they also need a professional partner to help them navigate the complexities.

We can help you on your journey to set up carbon accounting programmes for your organisation. We can also support you as you seek to mitigate your GHG emissions.

Through our partner, Notch, Drax customers can access the UK’s first carbon accounting energy tariff. One of the leading Carbon Accounting software platforms, Notch has been designed to make it easy for you to measure, track and report the carbon emissions in your business and supply chain.

Customers also get exclusive access to free Net Zero training, worth £2,500, designed to develop the skills of your employees to become drivers of Net Zero action.

Get in touch to find out more.

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