Is it time for e-invoices to include carbon data?

Climate change is everywhere, manifesting in various facets of our lives and increasingly influencing corporate strategies and responsibilities. As Peter Drucker famously said, "you can't manage what you can't measure." This principle is especially pertinent today, as businesses grapple with the challenge of quantifying their environmental impact.

It starts with the invoice

In the realm of business, the primary document used to value a transaction is the invoice. An invoice includes details about the services provided or the goods supplied, including their quantity or weight, and tracks the journey from the point of supply to the destination. This critical document serves as a record of economic activity and, crucially, a potential source of data for carbon accounting.

It is widely accepted that suppliers are generally better equipped to estimate the carbon impact of a transaction than customers. Suppliers possess more comprehensive information about the location of people, production processes, energy consumption, and transportation logistics involved in delivering their goods or services. Consequently, the accuracy of carbon impact estimates can be significantly enhanced when suppliers provide this data.

E-Invoicing is a powerful digital tool that offers numerous advantages, including the potential to share the carbon impact of transactions. Despite its capabilities, there has been a lack of progress in incorporating carbon impact details into e-invoice standards. As of now, none of the major e-invoicing standards, such as the European taxonomy (EN16931), CII, or any Peppol variant, have included provisions for carbon impact data as standard data elements.

Does accuracy matter?

Any accountant will agree that profit is always an estimate whilst a business is a going concern, yet few people question the value of this estimate as it follows generally accepted accounting principles (GaaPs). Currently, all carbon measurements are estimates derived from varying methodologies and principles. Just as accountants are the experts in measuring profit using agreed standards, it is conceivable that in the near future, accountants will also be responsible for estimating carbon footprints using methodologies and standards defined by environmental experts. We area already seeing this with the main accounting standards boards around the globe taking over management of environmental reporting standards.

Accountants (or accounting software) can follow appropriate accounting principles to calculate the carbon impact and report it as part of the services they provide. Logically, they could do this by extracting information from invoices (ideally e-invoices to enable automation) and end by recording the calculate carbon impact in the financial statements.

The article on AccountingWeb highlights the importance of integrating carbon accounting into financial reporting. It emphasizes that as environmental regulations evolve and stakeholder expectations rise, businesses must adapt by incorporating carbon metrics into their accounting practices. This shift will not only enhance transparency but also enable companies to manage their carbon footprints more effectively.

As reducing the impact of climate change continues to move up in strategic priority, it is imperative for accounting and ESG professionals to take the lead in integrating carbon accounting into financial and business practices. By leveraging the detailed information in invoices and adopting standardized methodologies for carbon measurement, accountants can play a pivotal role in driving sustainability and accountability in the business world. The future of carbon accounting starts with the humble invoice, and the time to act is now.

Hastags and mentions

AccountingWEB.co.uk Tom Herbert George Sandilands James Lizars FCCA

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