A New Growing Field: Carbon Accounting

Explore The Emerging Field of Carbon Accounting and How To Enter

Carbon Accounting is a method used by companies to calculate how much carbon dioxide emissions they are responsible for, either directly or indirectly, throughout their operations and supply chain. The importance of carbon accounting lies in its ability to provide visibility and incentives for more climate friendly products and purchasing decisions, such as the supplier sources of companies.

The need for companies to measure their carbon emissions has become more pressing as research from The Rocky Mountain Institute, shows that the average company’s supply-chain greenhouse gas emissions are 5.5 times higher than the direct emissions from its own assets and operations. This means that companies have a significant opportunity to reduce their carbon footprint by focusing on their supply chain emissions.

Demand for Carbon Accounting

The proposed Federal Supplier Climate Risks and Resilience Rule has the potential to significantly increase demand for carbon accounting in the future. The requirement for major federal contractors to publicly disclose their greenhouse gas emissions and set science-based emissions reduction targets would incentivize contractors to implement carbon accounting practices in order to accurately report their emissions.

Furthermore, the rule's emphasis on disclosing climate-related financial risks could encourage contractors to assess their carbon footprint and invest in emissions reduction measures to mitigate their financial risk. The rule would cover a vast majority of the emissions associated with the federal supply chain, estimated to be twice as large as the emissions from operating the government's buildings and vehicles combined. Although the rule would exempt small businesses with less than $7.5 million in annual contracts, the overall impact of the proposed rule is promising and demonstrates the federal government's commitment to taking bold climate action.

(Table Source: Office of the Federal Chief Sustainability Officer)

As the United States continues to prioritize climate action and work towards achieving its net-zero emissions procurement goal by 2050, demand for carbon accounting is likely to increase across various sectors. The Federal Supplier Climate Risks and Resilience Rule could serve as a precedent for other organizations and governments to adopt similar regulations, further increasing demand for carbon accounting services. The potential increase in demand for carbon accounting could create opportunities for businesses specializing in carbon accounting and create a more robust and reliable carbon market. Ultimately, the proposed rule has the potential to contribute to a more sustainable future by promoting transparency and accountability in the supply chain and encouraging the adoption of sustainable practices.

The Standard-Setter

As the world continues to grapple with the challenges posed by climate change, stricter standards are being set by organizations such as the Greenhouse Gas Protocol. The Greenhouse Gas Protocol supplies the world's most widely used greenhouse gas accounting standards, and companies are increasingly adopting these standards to measure and reduce their carbon footprint. The GHG Protocol Corporate Standard covers the accounting and reporting of the six greenhouse gases covered by the Kyoto Protocol across three different scopes. Scope 1 refers to direct emissions from sources that are owned or controlled by the company. Scope 2 includes indirect emissions that occur from the consumption of purchased electricity and power. Scope 3 covers all other indirect emissions that occur in the company's value chain. Below you can find a table highlighting the scope of emission sources for the varying industries in the energy sector.