Understanding the environmental impact of your business is critical in today’s environment, not only as a result of government and regulatory mandates, but also given increased demand by consumers. As such, businesses of all types and sizes need to get their emissions number in order – and carbon accounting is fundamental to success in that area.
This is particularly true if you’re a small business that provides goods and services to a larger organization, many of whom have a magnifying glass on their entire business operations, ensuring every component of their supply chain is compliant with new requirements.
Luckily, Xero is connected to a number of powerful carbon accounting apps that can help get businesses started on this journey. What used to be time-consuming and cost-prohibitive is now quick and affordable, and readily available to businesses of all kinds.
What is carbon accounting?
Carbon accounting is simply the process of assessing an organization’s overall impact on the environment by calculating its emissions of carbon-based greenhouse gases (GHGs); these emissions are calculated by multiplying business data (e.g., employee travel data) by an “emissions factor”, or the average emissions generated by that activity. The end result of this – when completed for a business’ entire operation – will leave you with your carbon footprint, a term more commonly used.
Understanding your carbon footprint
Up until recently, carbon footprints had been calculated and recorded on large, complex spreadsheets that often left much to be desired – both from a productivity standpoint, as well as in regards to how they impacted behavior following. But fortunately, we’re now seeing streamlined software solutions, such as Greenly and Sumday, managing this process from start to finish.
Through this software solutions, and within your carbon footprint, emissions will be broken down and reported into three scopes:
- Scope 1: Direct emissions that occur from sources owned or controlled by the company (e.g., driving a petrol vehicle, powering a diesel generator or operating a fuel-powered forklift).
- Scope 2: Indirect emissions from the generation of purchased electricity.
- Scope 3: Indirect emissions that occur as a result of your operations, that are generated by the goods and services in your supply chain (e.g., business flights, third-party delivery services, cloud-hosting services or even employee commuting).
What methodologies should you align to?
Carbon accounting can certainly be considered complex, but thankfully, global standards have been developed to help ensure how businesses measure carbon emissions is consistent and comparable. The most widely used global framework has been developed by the Greenhouse Gas (GHG) Protocol; they have developed a corporate standard that provides the methodology and process to follow.
Why is this important to your business?
As you likely know, we’re seeing a shift towards a low-carbon economy. At its core, carbon accounting is an important step in even small business owners better understanding their business’s environmental impact; it also helps with transparency and communication thereafter, both of which have been put under a microscope in recent years. In fact, a company’s carbon footprint is increasingly becoming a key indicator for external stakeholders that may be assessing your company as a potential customer, business partner or investor.
The time to get ahead of this process is now, so that you not only future-proof your business, but also secure a place in the broader green (and growing) economy.
How can you start carbon accounting?
One of the easiest ways to get started is by using a carbon accounting app from the Xero App Store – these apps provide a secure way to connect to your Xero account, so you can analyze business data and calculate your carbon footprint efficiently. Additionally, these apps offer guidance along the way to ensure a smooth way forward through the entire process.
About the Author
Tamara is a seasoned ESG leader and changemaker, with global experience spanning multiple continents. Tamara joined Xero in 2021 and as GM/VP Sustainability & Impact, she is responsible for managing, monitoring and reporting on Xero’s sustainability performance, with a focus on approaching ESG matters through use of whole-of-business initiatives. She’s passionate about embedding ESG in businesses as part of core strategy and organisational DNA. Prior to joining Xero, Tamara worked in ESG reporting and strategy at Telstra and Glencore, was an Australian diplomat, and worked in strategy consulting with Bain. Tamara holds the Competent Boards ESG Designation and a PhD in Arts from Monash University.
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