Carbon accounting is a concept used to designate the evaluation of an organization's greenhouse gas emissions. This new discipline appeared about fifteen years ago and has been deployed in France thanks to the Bilan Carbone tool, and is currently undergoing profound changes.
Indeed, the tightening of regulations linked to "climate" issues(Climate-Resilience Law), the democratization of carbon criteria within Purchasing departments, and the rising costs linked to carbon emissions (carbon tax at borders, explosion in the price of carbon credits & quotas) are pushing carbon accounting standards upwards.
In short, organizations must now be prepared to measure their carbon emissions more accurately and more often than before.
This paradigm shift is leading to an increase in the complexity of carbon accounting rules. And it is to respond to these new complexities that new technologies are emerging, including SaaS solutions. These solutions can address several difficulties of carbon accounting, including 5 that we have listed and detailed below:
1. A company's carbon footprint is measured over time
Warning! If you are not familiar with what a carbon footprint is, the rest of this article may seem rather complex 🙂 If necessary, a little reminder in this article.
Making a carbon footprint is good enough. Updating it every year is even better. And why? Because it allows you to visualize your progress in terms of emissions reduction.
This advantage makes sense as the years go by. Indeed, when a company commits itself in 2020 to a reduction target for 2040 or 2050, it implies that it will have to measure its emissions every year to verify that it is on the right track.
However, when a company has already carried out three or four carbon audits, many difficulties arise:
- A consistent data structure must be maintained over time in order to properly measure progress, even if the company grows (external growth, international development, etc.)
- All data must be kept in one place, including information on data processing (e.g. if the person responsible for the carbon footprint is replaced)
- Reduction targets for future years must be recalculated based on the results of previous years.
A CSR team has probably better things to do than to manage all this by hand :)
2. Emission factors change over time
In line with the first one, the updating of this carbon footprint presents a difficulty often underestimated: the updating of the emission factors.
Here are two examples to illustrate the type of problem a company may encounter when updating emission factors.
1st example: I want to update my emissions factors every year, in particular to take into account the progress made by my country in terms of the carbon impact of its energy mix
Example 2: A key emission factor in my balance sheet has been corrected. This correction leads to a sharp increase in my balance sheet! I must therefore recalculate my previous balances with this new factor to see the "real" decrease.
In this second case, this means having to recalculate all the previous carbon balances with the new corrected emissions factor. And if this factor is corrected again in 3 years, the correction will have to be passed on to all the carbon balances again.
You see the problem if you keep all your carbon footprints in simple files.
3. The action plan must be manageable at any level of the company
To ensure that a company reduces its emissions, an "action plan" will be defined, which is a roadmap made up of several internal projects whose aim will be to reduce the company's emissions, if possible without impacting its activity.
These reduction projects can be extremely varied: they can involve people from all professions (purchasing, CSR, production, etc.), can be more or less long (some projects are just one-off actions to be carried out, while others will extend over 5 years) and can involve several entities of the company in several different countries.
These various elements make the monitoring of emission reduction projects complex, particularly for multi-country projects involving several trades (people with a little experience in project management know what we are talking about).
Carbon project monitoring solutions must therefore be able to :
- create a collaborative and intuitive workspace, as it must involve a wide variety of users within the company
- manage the complexity of geographical differences (language, data format, etc.)
- To be able to come and collect the operational data related to the project, on a recurring basis (monthly or quarterly)
These features are necessary to ensure that the Bilan Carbone goes beyond the CSR framework and keeps all employees involved.
4. The historical record of environmental data should be easily accessible and auditable
If a client or shareholder asks you to provide your carbon footprint, how do you do it?
If a client, a shareholder or the legislator asks you to provide your emissions over the last 3 years, how do you do it? And for a specific subsidiary of your company?Â
If these particular cases may seem far from your problems, you should know that some companies have to answer this kind of questions very regularly, and in particular within the framework of calls for tender.
Indeed, more and more purchasing departments are taking this criterion into account, and it is even becoming the main criterion in some public tenders.
These new rules require companies to have easy access to structured and auditable data (for example, by attaching an electricity bill to the related emission item). A problem to which a SaaS solution perfectly responds.
5. It must be possible to easily exchange data between customers and suppliers
Here's the million-dollar question of carbon accounting: How can I accurately determine my supplier's emissions ?
Indeed, since scope 3 of a carbon assessment is mainly linked to the emissions of suppliers and subcontractors, it is essential to know the emissions of its partners in order to accurately measure those of its organization.
A great many companies are getting to grips with the subject, driven in particular by the major international groups that have made public commitments on the climate.
A small diagram to explain the impact of these commitments on the entire value chain:
This paradigm creates new difficulties:
- It is necessary to ensure the traceability of the data provided by the various actors in the value chain.
- A common data exchange system must be established.
Solutions are being developed, and we can already see some large accounts setting up blockchain-type systems to fulfil this function.
Against this backdrop, the benefits of a collaborative carbon footprint platform that simply allows a company to request data directly from its suppliers becomes obvious.
Conclusion
The carbon accounting exercise is becoming increasingly complex, driven by tighter regulations, rising emissions costs and the democratization of carbon criteria within purchasing departments.
This increase in standards is leading to a professionalization of the sector, with the appearance and development of firms specializing in carbon accounting and strategy and the emergence of SaaS solutions designed to facilitate the measurement and monitoring of these emissions for the greatest number of people.
In some complex cases, it may be appropriate to refer to a specialized consulting firm and to back up a carbon accounting platform with their conclusions, by carrying out an analytical exercise before the project to define a collection grid and an action plan adapted to the company's activity, and then deploying the SaaS tool to monitor performance and provide long-term decision support.
At Traace, we are convinced that all these approaches will help accelerate the transition of companies towards a sustainable model for the environment and society.
If you would like to learn more about our carbon accounting and tracking platform, please feel free to schedule a demo of our tool 🙂
If you have any questions or suggestions regarding this article, please feel free to write to us at contact@traace.co!
