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Carbon accounting is the term used to describe the evaluation of an organization's greenhouse gas emissions. Introduced some fifteen years ago and deployed in France with the Bilan Carbone tool, this new discipline is 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 now need to be prepared to measure their carbon emissions more accurately and more often than ever before.
This paradigm shift is making carbon accounting rules increasingly complex. And it's in response to these new complexities that new technologies are emerging, including SaaS solutions. These solutions address a number of carbon accounting challenges, including 5 that we have listed and detailed below:
1. A company's carbon footprint is measured over time
Warning! If you're not familiar with what a carbon footprint is, the rest of this article may seem rather complex 🙂 If need be, a quick reminder in this article.
Having 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 takes on its full meaning 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 check that it is on the right trajectory.
However, when a company has already carried out 3 or 4 carbon audits, a number of difficulties arise:
- We need to maintain a consistent data structure over time, so that we can measure our progress, even as the company grows (acquisitions, international expansion, etc.).
- All data must be kept in the same place, including details of data processing (e.g. if the person in charge of the carbon balance is replaced).
- Reduction targets for future years must be recalculated on the basis of previous years' results.
A CSR team probably has better things to do than manage all this by hand :)
2. Emission factors change over time
Following on from the first, updating this carbon footprint presents a difficulty that is often underestimated: updating emissions factors.
Here are 2 examples to illustrate the type of problem a company may encounter when updating emissions 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 causes my balance sheet to rise sharply! So I have to recalculate my previous balances with this new factor to see the "real" decrease.
In the latter case, all previous carbon balances would have to be recalculated using the new, corrected emissions factor. And if this factor is corrected again in 3 years' time, the correction will have to be passed on to all carbon footprints.
You can see the problem if you keep all your carbon footprints in simple files.
3. The action plan must be manageable at every level of the company.
To ensure that a company reduces its emissions, we define an "action plan", which is a roadmap made up of several internal projects whose aim is 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 lengthy (some projects are just one-off actions to be carried out, while others will extend over 5 years) and can involve several company entities in several different countries.
All these factors make monitoring emissions reduction projects a complex task, particularly for multi-country projects involving several trades (anyone with a little project management experience will know what we're 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.)
- Be able to collect project-related operational data on a recurring basis (monthly or quarterly).
These features are necessary to ensure that Bilan Carbone goes beyond CSR and keeps all employees involved.
4. The historical record of environmental data must be easily accessible and auditable.
If a customer or shareholder asks you to provide your carbon footprint, how do you go about it?
If a customer, shareholder or legislator asks you to provide your emissions over the last 3 years, how do you go about it? What about a specific subsidiary of your company?
While these particular cases may seem far removed from your own problems, you should be aware that some companies have to answer questions of this kind on a regular basis, particularly in the context of invitations to tender.
In fact, 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, auditable data (for example, by attaching an electricity bill to the related emission item). A SaaS solution is the perfect answer.
5. Data must be easily exchanged between customers and suppliers.
Here's the million-dollar question in carbon accounting: How can I know exactly what emissions are linked to my supplier ?
As scope 3 of a carbon footprint is mainly linked to the emissions of suppliers and subcontractors, it is essential to know the emissions of your partners in order to accurately measure those of your organization.
A large number of companies are getting to grips with the subject, spurred on in particular by the major international groups that have made public climate commitments.
A short diagram to explain the impact of these commitments on the entire value chain:
This paradigm creates new challenges:
- Data supplied by the various players in the value chain must be traceable.
- We need to set up a common data exchange system.
Solutions are being developed, and we can already see some major accounts setting up blockchain-type systems to fulfill 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-related costs and the democratization of carbon criteria within purchasing departments.
This rise in standards has led to a professionalization of the sector, with the emergence and development of firms specializing in carbon accounting and strategy, and the emergence of SaaS solutions designed to make it easier for as many people as possible to measure and track these emissions.
In certain complex cases, it may be a good idea to refer to a specialized consulting firm and back up a carbon accounting platform with their conclusions, by carrying out an analytical exercise upstream of the project to define a collection grid and an action plan adapted to the company's activity, and then deploying the SaaS tool with a view to monitoring performance and supporting decision-making over the long term.
In any case, we at Traace are convinced that all these approaches will help accelerate the transition of companies to a sustainable model for the environment and society.
If you would like to find out more about our carbon accounting and tracking platform, please don't hesitate to make an appointment with us for a demonstration of our tool. 🙂
If you have any questions or suggestions regarding this article, please don't hesitate to contact us at contact@traace.co!
