November 11, 2020 - By David Solsky, Envizi
Carbon Accounting is Complex. Software Can Help.
“The launch of this energy efficiency plan will equate to taking X number of cars off the road...” and “We are committed to this carbon emissions reduction that equates to planting X number of trees in the next 10 years...” are common claims of companies that aim to humanize carbon emissions reductions in hopes to make the initiative resonate with their stakeholders. While making commitments and quantifying results is the critical first step to a carbon reduction journey, companies will find that carbon accounting is much more complicated than quantifying emissions in terms of cars or trees.
Though the root of basic carbon accounting can equate that simply, the process to reach traceable, auditable metrics to inform the analysis can be much more complicated. As the industry evolves and the level of importance placed on carbon accounting becomes more critical, calculations become more sophisticated and the process to reach an ‘X number of trees’ statistic comes with nuanced qualifications. While this is a new journey for most organizations, it is critical to get started with a proactive approach. As more and more organizations commit to emissions reduction targets the costs to achieve those reductions will increase, and accounting for emissions will only get more complicated. It’s better to get good at the accounting now, so you are well placed to cope with the increasing complexity, and with the steadily increasing compliance pressure. Spending time to do the hard work now is time well spent.
The critical takeaway is this: The costs and compliance risks are the reason that the carbon accounting process has evolved from simple metaphors into auditable reports for investors. More than ever, investors are looking critically at the metrics associated with GHG Emissions, whether from a risk and liability perspective or from a corporate responsibility perspective. These investors are looking for data-driven reports to reassure them that they are able to invest with confidence and at minimal risk to the brand. Investors also want to know that their investment is spent efficiently. Through sophisticated carbon accounting, a data-backed report can help organizations accurately match consumption to the proper emissions factor, instead of assuming a residual mix and paying more money for offsets to account for assumed rates of consumption.
Similar to financial reporting, the process to reach a data-backed report requires organized data collection, self-reporting, and auditing and can be heavily nuanced due to the categorization and scale. The carbon accounting process is similar, since the process is heavily reliant on categorizing emissions factors and properly assigning those factors to the data that is collected.
A sustainability reporting platform lays out the groundwork for an auditable accounting strategy, which is the key to reporting to investors with confidence. Such software starts with timely and accurate data collection (both automated and manual) establishing a single system of record to report to a variety of stakeholders. Ensure the platform you’re using provides a robust system of audit trails that contain supporting data and documents for a simple auditing process.
Not all sustainability technologies are created equal. If emissions calculations are important to your business, ensure your sustainability reporting platform can capture your certificate allocation decisions, store and manage your emissions factors (whether they be sourced from your utility, contract, or supplier), and calculate your emissions inventory, including your market-based emissions. If you’re on the pathway to Net Zero, you’ll want a tool that will allow you to determine how much you will need to spend on certificates to achieve Net Zero at a site, state, country level, or across your entire organization.
Finally, a sustainability reporting platform equips teams and company leadership to visualize and grasp this otherwise complicated accounting process with a clarity that has not otherwise been seen in one cohesive system. While this process can be intimidating, it will only get more complicated as carbon accounting becomes more critical to our future. Now is the time to do the ‘hard work’ to set up auditable, traceable data to report with confidence in the future.
You can learn more about utilizing data as a foundation for carbon accounting and every other step in your decarbonization journey by watching this recent Smart Energy Decisions webinar sponsored by Envizi titled “Optimizing the Pathway to Low-Carbon.” Click here to watch on demand.
A passionate technology entrepreneur, David Solsky is CEO and Co-Founder of Envizi, a market leader in data and analytics software for sustainability and energy. Before launching the company in 2008, David spent a decade in the IT industry, building several successful companies in Australia and New Zealand. Prior to this, David spent seven years in the Corporate Finance and Assurance divisions at PricewaterhouseCoopers, and this experience helps ensure Envizi’s solutions meet the rigorous information-integrity standards of the corporate sector. David plays a key role in the ongoing design and evolution of Envizi’s technology platform and oversees the development of the company’s global partner channel.
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