As the world intensifies efforts towards net-zero emissions, carbon accounting has become a best practice for businesses, investors, and governments. Carbon accounting is quantifying, reporting, and verifying greenhouse gas (GHG) emissions to have transparency and accountability of climate action. Since there are various standards and frameworks available, selecting the appropriate one can be challenging.
Some of the more widely recognised carbon accounting standards and guidelines are as follows:
- GHG Protocol: Most widely accepted gold standard, the GHG Protocol provides comprehensive guidelines to estimate and report GHG emissions for Scope 1 (direct GHG emissions), Scope 2 (indirect emissions from purchased electricity), and Scope 3 (indirect GHG emissions related to the value chain).
- ISO 14064: International Organization for Standardization's ISO 14064 offers a systematic approach to organisations to validate, report, and quantify GHG emissions to guarantee uniformity and accuracy in carbon accounting.
- Science-Based Targets initiative (SBTi): This is a platform that assists companies in establishing GHG reduction goals that are consistent with the present climate science, and which can be utilised to avoid global warming at 1.5°C above pre-industrial levels.
- Task Force on Climate-related Financial Disclosures (TCFD): TCFD provides recommendations for companies to disclose climate-related financial risk and opportunity, enhancing transparency to investors and stakeholders.
- Carbon Disclosure Project (CDP): CDP is an international initiative providing companies and cities with the chance to disclose their environmental impacts, encouraging transparency and driving action against climate change.
- Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS): The EU has adopted these regulations, mandating large businesses to provide large-scale sustainability reporting, which brings about greater comparability and transparency within the EU.
- International Financial Reporting Standards (IFRS) S2: This standard provides a global baseline for sustainability reporting, with special focus on climate-related disclosures to assist investment decisions.
- Global Reporting Initiative (GRI): GRI establishes a system that allows organisations to report their social, environmental, and economic impact, making the organisation more accountable and transparent.
- Publicly Available Specification (PAS) 2060: This guide specifies the minimum requirements for companies to demonstrate their carbon neutrality such as quantifying emissions, mitigating emissions, and offsetting emissions.
- Carbon Trust Standard: Recognized certification for measuring and reducing carbon footprints, demonstrating a commitment to environmental responsibility.
Choosing the right carbon accounting system depends on the following factors:
- Organisational Scope and Size: Larger organisations or organisations with a complicated supply chain may find value in more extensive systems like the GHG Protocol or ISO 14064.
- Regulatory Obligations: Organisations operating within jurisdictions with stringent requirements, such as the EU's CSRD, are regulated by local norms.
- Industry Sector: Certain sectors may benefit from sector-specific guidance provided by standards like the SBTi or GRI.
- Reporting Objectives: Companies that are aiming for carbon neutrality can utilise PAS 2060, while companies with a financial disclosure focus can utilise TCFD.
Most organisations use a combination of frameworks to meet diverse compliance, stakeholder, and business requirements. For instance, an organisation can use the GHG Protocol for emissions quantification, SBTi for reduction target setting, and TCFD for financial disclosure. With changing regulations, standard harmonisation is anticipated, such as the convergence of International Sustainability Standards Board (ISSB) and European Sustainability Reporting Standards (ESRS), which will make reporting easier.
Effective carbon accounting is vital for organisations that are dedicated to climate action and sustainability. With the right standards and frameworks in place, companies can advance transparency, comply with regulations, and make meaningful contributions towards global climate objectives.
