With risks from climate change at the forefront of many boardroom and investor conversations today, corporations are facing increased pressure to have more to show for their efforts than broad goals with far-off timelines or summary bullet points in their ESG reporting. Measurable, organized, and clean data helps companies document their true carbon footprint — and as they work towards net zero or clean energy adoption targets, show the impact of their decarbonization efforts.
Carbon Accounting Software platforms play a critical role in not only bringing together disparate data sources, enabling internal teams to better manage initiatives, but also in proving their impacts on ESG and sustainability goals over time.
In this post, we’re sharing a comprehensive rundown of what Carbon Accounting Software is and how businesses can maximize its potential.
What is Carbon Accounting Software?
Carbon Accounting Software helps organizations measure their greenhouse gas (GHG) emissions so that they can better understand their carbon footprint and set goals to reduce carbon emissions over time.
Documenting and analyzing GHG emissions is the first step in creating an actionable decarbonization plan or informing an existing environmental (the “E” in ESG) strategy. Carbon Accounting Software can help combat climate change by guiding companies towards effective decarbonization decisions.
Benefits of Using Carbon Accounting Software
The journey to meeting your decarbonization goals starts with understanding your organization’s current emissions; this is where Carbon Accounting Software comes into play. There are numerous benefits of using software to streamline and centralize your emissions data collection and reporting.
Showcase Sustainability in Real Time
Carbon Accounting Software creates a single source of truth for an organization’s carbon impact. By centralizing, integrating, and enriching your carbon emissions data, you can stand behind your sustainability claims and performance.
Companies today are facing increasing scrutiny from investors, stakeholders and ratings agencies, and regulators at the city, state and federal level in a number of markets have issued new rules requiring businesses to disclose information on their carbon emissions. This is creating an urgent need for companies to have a firm grasp of their energy use and carbon footprint.
In addition, buyers are paying attention and seeking products and solutions that align with their own core values as well as corporate ESG and sustainability goals. This is creating new market opportunities for companies that prioritize sustainability leadership as part of their business operations, including the renting of highly energy efficient and sustainably built corporate office space or selecting a data center running on renewable energy.
Advancing on sustainability goals and meeting compliance requirements means that companies need the right tools to help them measure their impacts and make data on those initiatives easy to use and report. When it comes to energy and carbon emissions, that’s where Carbon Accounting Software becomes critical.
Reduce Your Organization’s Total Carbon Emissions
Not only does Carbon Accounting Software help measure actual carbon emissions, but it can also provide insights that help businesses mitigate and manage emissions on the path toward meeting a reduction goal.
By understanding where the biggest sources of carbon emissions are within an organization, you can take steps to reduce, mitigate or offset those emissions.
For example, if an organization learns that the carbon footprint of their data center is responsible for the bulk of their Scope 2 emissions, leaders could explore the potential for alternate data centers that are committed to 100% clean energy around the clock. Having access to the data available in Carbon Accounting Software allows for actionable decisions based on the carbon impact of their business operations.
Reduce GHG Emissions to Reach “Net Zero” Faster
“Net Zero” has become a hot topic for sustainable businesses, with over 110 companies in the “Climate Action 100” group committing to a goal of net zero emissions in a certain period of time. “Net zero” means that GHG emissions are counterbalanced or offset by an equal value of carbon reduction or storage. It’s important to note that “net zero” does not refer to having absolutely zero emissions.
With better, clearer data, companies can more accurately understand which activities contribute to the process of decarbonization. Carbon Accounting Software can help organizations make critical decisions around how power is generated onsite or procured, and how to make facilities and manufacturing processes more efficient.
Provide Auditable, Assurance-Ready Third-Party Proof of Decarbonization
The right Carbon Accounting Software can also provide not just complete but auditable and assurance-ready (i.e., able to be verified by third parties as part of ESG reporting) proof of sustainability performance, particularly for companies that are required to submit performance data to governing bodies, rating agencies, investors, regulators or other stakeholders.
Some carbon accounting methodologies can also provide audit-quality data that can be independently verified by third parties.
Climate Disclosure Requirements for Publicly-Traded Companies
In March 2022, the Securities and Exchange Commission (SEC) published a highly anticipated proposal that would require public companies to disclose “extensive climate-related information in their SEC filings.” While this rule is still being finalized, such a huge step would require companies to conduct far greater diligence in gathering, monitoring and reporting climate-related data.
Unless access to information is already established and easy to access, proof of climate-related steps and strategies may be difficult and very time-consuming to gather and produce. A reliable Carbon Accounting Software platform removes the stress of having to collate this data and enable sustainability teams to focus on how to achieve their goals
Differences Between Carbon Accounting Scopes
The Greenhouse Gas (GHG) Protocol classifies a company’s emissions in three “scopes.” These scopes include:
Scope 1 Emissions
Direct emissions from owned or controlled sources form Scope 1 emissions. When fossil fuels are released into the atmosphere as a direct result of a company’s activities, they count as Scope 1 emissions. Scope 1 emissions are divided into four primary categories:
- Stationary combustion
- Mobile combustion
- Fugitive emissions
- Process emissions
Scope 2 Emissions
Indirect emissions from purchased energy form Scope 2 emissions. This includes emissions from things such as:
- Purchased electricity
- Steam sources
- Heating and cooling
For most companies, electricity is often the only source of Scope 2 emissions. This can come from grid-procured energy (purchased directly from utilities providers) or on-site generation (such as rooftop solar panels). Another option is renewable energy purchasing, which is usually done through processes such as:
- Renewable Energy Credits (RECs)
- Power Purchase Agreements (PPAs)
- Virtual Power Purchase Agreements (VPPAs)
Scope 3 Emissions
Indirect emissions that occur in the value chain of the organization are considered Scope 3 emissions. This includes both upstream and downstream emissions from purchased goods and services, business travel, employee commuting, use of sold product, waste from operations, and more. According to the GHG Protocol, Scope 3 emissions are further divided into 15 categories.
How Do Businesses Use Carbon Accounting Software?
As a direct result of the complexities outlined above, measuring carbon emissions isn’t always an easy task. Businesses can leverage Carbon Accounting Software to track, analyze, and manage their carbon footprint. A reliable accounting software platform provides important insights into things like:
- Energy and emissions data
- Hourly energy attributions
- Energy procurement and generation data
- Decarbonization metrics
In a market that’s increasingly concerned with renewable energy and decarbonization, having simplified data at your fingertips is not only beneficial—it’s the way forward.
Leverage Carbon Accounting Software to Prove Sustainability Claims
A company’s digital proof of decarbonization may soon be a requirement for compliance, mandated government actions, and other corporate sustainability rules.
Take charge of your decarbonization process, and get one step ahead with intuitive Carbon Accounting Software that helps you prove and support your sustainability claims.
Request a Cleartrace demo today to start your decarbonization journey.