IT Sustainability Think Tank: Carbon accounting and the changing regulatory landscape
There is an ever-growing list of rules and regulations for enterprises to get their heads around when it comes to sustainability, but what can they do to keep on top of things?
Interest in carbon accounting amongst businesses is growing in parity with the demands and expectations of industry and investors. For companies looking to achieve sustainable growth over the next 20 years, many are innovating to meet the demands and expectations of private and public tenders that mandate full disclosure of carbon reduction activities as a prerequisite for business collaboration and investment.
Larger businesses also expect suppliers to provide a date for compliance within the next 36 months, and I expect to see accurate and reliable carbon accounting being as common as cyber essentials training.
Digital Catapult has seen industry expectations around carbon change, and with this, so too should the carbon accountability and disclosure mechanisms that businesses have. Embracing carbon accountability will be a key determinant of success in a changing regulatory environment.
The importance of being clearer on carbon accounting
When we think of carbon accounting, the term can often seem quite abstract, and at times, difficult for businesses to fully understand. Organisations of all sizes sometimes struggle to understand how they can improve their carbon accounting processes, and usually, what’s missing is a simple understanding of what carbon accounting is.
In simple terms, carbon accounting refers to the process of quantifying the amount of greenhouse gases (GHGs) produced directly and indirectly from a business or organisation's activities within a set of boundaries. This can include the GHGs emitted from a business’ manufacturing process, its mode of transportation or mechanism for waste management.
Digital Catapult collaborates with businesses of all sizes, promoting the adoption of emerging technologies and innovative solutions to reduce carbon emissions and enhance energy efficiency. However, it is crucial for businesses to not only understand the concept of carbon accounting but to be clear on how emissions are categorised too. By gaining this understanding, companies can effectively implement the appropriate carbon accounting mechanisms and make necessary improvements, paving the way for long-term success in an uncertain regulatory environment.
Understanding the three scopes
Emissions are calculated in three separate parts: Scope 1, Scope 2, and Scope 3. Scope 1 emissions refer to direct GHGs that are emitted from sources that are controlled or owned by an organisation. This includes emissions associated with fuel combustion in boilers, furnaces and vehicles.
Scope 2 refers to indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling equipment, and although these emissions may physically occur at another facility, these emissions are accounted for in an organisation’s GHG inventory.
This is because they result from an organisation’s overall energy use. Scope 3, however, is where most businesses struggle. These emissions are the result of activities from assets not owned or controlled by the reporting organisation.
Once a business is aware of these emissions, the first step to achieve effective carbon accounting is establishing an appropriate boundary. This entails understanding where an organisation’s influence ends, what counts as scope 1-2 emissions within their organisation, and what’s considered scope 3 GHGs. Once this is clarified, a business is ready for the next step to successful carbon accounting.
An organisation should next set the parameters around what counts as scope 1-2 emissions, who they are reporting to, and how to measure these emissions. Unfortunately, when it comes to measuring scope 1 and 2 emissions, many organisations don’t know where to begin. What they often do not know, however, is that this can be achieved by accurately measuring energy, water and material consumption on site. Once consumption has been measured, it’s equally as important for businesses to identify how these activities and the waste produced from them convert into carbon dioxide equivalents.
This can be a cause for concern amongst businesses that do not know that there are tools available that might help them.
Leveraging innovative tools to improve carbon accounting
There are tools and technologies out there to enable businesses to effectively account for their carbon, and meet the demands of stakeholders and commercial partners. One example is the 'Eco-meter,' which has been developed by Digital Catapult to slash the amount of GHGs emitted during the manufacturing process by leveraging emerging technologies such as Internet of Things (IoT) and artificial intelligence (AI).
By capturing energy consumption and process variables data, the Eco-meter provides real-time carbon footprint visualisation for decision-making and planning, to help businesses cut down on scope 1,2 and 3 emissions, and to disclose how they account for their carbon to stakeholders. By leveraging technologies and initiatives like the Eco-meter, more businesses can facilitate effective carbon accounting, and achieve environmental success in an uncertain regulatory landscape.
Carbon accounting is essential for businesses seeking sustainable growth, enabling understanding and measurement of emissions across scope 1, 2, and 3, and offering insight on where emissions can be cut down. More businesses should embrace carbon accounting as a means of ensuring sustainable growth and success, and innovative tools aid in visualising carbon footprints and making informed decisions.
