Carbon accounting: Green ledger

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  Quantumrun Foresight
• July 25, 2024

Insight summary

Carbon accounting is a vital tool for measuring an organization's greenhouse gas (GHG) emissions, helping to identify areas for improvement and ensure compliance with regulations. This practice is driven by increasing regulatory demands and investor focus on sustainability, pushing companies to adopt new technologies and transparent reporting methods. As carbon accounting becomes more widespread, it is poised to impact consumer choices, corporate strategies, and government policies, fostering a global shift toward a greener economy.

Carbon accounting context

Carbon accounting, a crucial technique for quantifying GHG emissions, enables organizations to measure their environmental impact by tracking direct and indirect emissions. This process involves categorizing emissions into three scopes: 

• Scope 1 encompasses direct emissions from owned or controlled sources, such as company vehicles and manufacturing facilities; 


• Scope 2 includes indirect emissions from purchased electricity, steam, heating, and cooling; 


• Scope 3 covers all other indirect emissions from activities like business travel and supply chain operations. 

By calculating an organization’s GHG emissions footprint, carbon accounting provides a comprehensive view of its environmental performance, helping to identify areas for improvement and align with regulatory requirements.

The growing importance of carbon accounting is driven by evolving regulatory landscapes and increasing investor emphasis on Environmental, Social, and Governance (ESG) considerations. For example, the US Securities and Exchange Commission (SEC) mandates public disclosure of corporate emissions, climate risk impacts, and other ESG issues, compelling companies to adopt rigorous carbon accounting practices to avoid accusations of greenwashing. Accurate emissions data also facilitates comparison with historical data and industry benchmarks, offering valuable insights into a company's progress toward sustainability goals. Additionally, carbon accounting is key in accessing capital and maintaining investor confidence.

Notable carbon accounting frameworks include the Greenhouse Gas Protocol, ISO Standard 14064, and the Climate Registry’s General Reporting Protocol, which provide standardized approaches for calculating and reporting emissions. Some companies are leveraging hybrid methodologies that combine spend- and activity-based data to improve the accuracy of emissions estimates. As of February 2023, with 92 percent of global gross domestic product committed to reaching net zero by 2050, the role of carbon accounting in driving climate action and corporate sustainability has never been more pivotal.

Disruptive impact

Individuals may see changes in the products they buy, with more companies offering sustainable options to meet carbon reduction goals. Consumers might also encounter more transparent labeling about the environmental impact of products, helping them make informed choices. Moreover, increased awareness and education about personal carbon footprints could drive lifestyle changes, such as using public transportation or reducing energy consumption at home. As sustainability becomes a priority, individuals may experience shifts in job markets, with more opportunities in green industries and roles focused on environmental management.

Companies may need to invest in new technologies and processes to accurately track and reduce emissions. For example, logistics companies might optimize delivery routes to cut fuel use, while manufacturers could adopt cleaner production methods. This trend can also drive innovation in product design as businesses seek to create goods with lower environmental impacts. Additionally, companies that successfully reduce their carbon footprint can enhance their reputation, attract environmentally conscious customers, and gain a competitive edge in the market.

Governments may implement stricter emissions reporting requirements and offer incentives for businesses and individuals to reduce their carbon footprint. For example, tax credits for renewable energy installations or grants for energy-efficient infrastructure projects could encourage the widespread adoption of sustainable practices. Governments might also engage in agreements to standardize carbon accounting methods and collaborate on global emissions reduction targets. 

Implications of carbon accounting

Wider implications of carbon accounting may include: 

• Increased investment in green technologies, leading to more jobs in renewable energy and sustainability sectors.


• Development of more efficient public transportation systems, reducing urban traffic congestion and pollution.


• Introduction of stricter emissions regulations, encouraging businesses to adopt cleaner production processes.


• Rising demand for transparency in carbon reporting, prompting companies to innovate in tracking and reducing their carbon footprints.


• Expansion of carbon trading markets, allowing businesses to buy and sell emissions credits, impacting financial strategies.


• Growth of educational programs focused on environmental science and sustainability, increasing public awareness and engagement.


• Shift in consumer preferences towards sustainable products, influencing market trends and business models.


• Enhancement of urban green spaces and infrastructure to offset emissions, improving community health and well-being.

Questions to consider

• How could understanding your personal carbon footprint change your daily habits and choices?


• What steps can your workplace take to track and reduce its carbon emissions effectively?