As organisations increasingly focus on reducing their carbon footprints, carbon accounting has become an essential part of ESG reporting. However, carbon accounting can seem complex, particularly when it comes to tracking and reporting emissions across different scopes. At KEY ESG, we receive many questions from our customers about the process, methodologies, and challenges involved. In this article, we provide a primer on carbon accounting and address some of the most common (and tricky!) questions we receive.
What Is Carbon Accounting?
Carbon accounting refers to the process of measuring and reporting the greenhouse gas (GHG) emissions that an organisation generates directly and indirectly. These emissions are categorised into three scopes:
Scope 1: Direct emissions from sources that the organisation owns or controls.
Scope 2: Indirect emissions from purchased energy (such as electricity).
Scope 3: All other indirect emissions that occur in the organisation’s value chain, including upstream and downstream activities.
Common Questions and Answers about Carbon Accounting
1. How do I start carbon accounting if I’ve never done it before?
Answer: Begin by identifying your organisation’s emission sources. Break them down by Scope 1 (direct emissions from owned or controlled sources), Scope 2 (purchased energy), and Scope 3 (indirect emissions across your value chain). Then, gather data from departments like operations, procurement, and HR, and enter it into a carbon accounting platform such as KEY ESG’s calculator. Use emission factors relevant to your activities to calculate total emissions.
2. What’s the difference between operational control and financial control when defining my reporting boundary?
Answer: The operational control approach means you report emissions from assets and activities you directly manage or control, while the financial control approach requires you to report emissions from any activities or assets where you have financial responsibility, even if you don’t operate them. Many organisations in the EU use the operational control approach due to the CSRD requirements, while financial institutions often use financial control under the SFDR.
3. What data do I need to calculate Scope 3 emissions?
Answer: Scope 3 emissions can be the most complex, as they involve your entire value chain. Common categories include:
Purchased goods and services: If your organisation procures many goods and services, focus on accounting for the top 10 highest spend categories in the platform. This helps ensure you cover the most material emissions while simplifying the process.
Business travel: Gather travel expense reports and employee commuting data. If you cannot acquire data from your operations or procurement team about business travel expenses, make reasonable approximations, and be sure to document them and your calculations in the Attachments and Comments section of the metric.
Logistics: Contact logistics providers for emissions related to transporting goods. If you cannot acquire data from logistics companies, make reasonable approximations, and be sure to document them and your calculations in the Attachments and Comments section of the metric.
Waste disposal: Track waste generation and disposal methods. If specific data is unavailable, you can use proxies such as national recycling rates for your country or region and apply an appropriate emission factor from the KEY ESG platform.
4. What are emission factors, and how do I use them?
Answer: Emission factors are coefficients that help convert data (like energy consumption or fuel use) into the equivalent amount of CO₂ emissions. KEY ESG has access to over 70,000 emission factors, covering various sectors and geographies. This often eliminates the need for a lifecycle assessment. You can access these emission factors directly within the carbon calculators in Scope 1, 2, and 3 metrics on the KEY ESG platform. The platform automatically calculates your emissions based on the data you input. If you can’t find the specific emission factor you need, reach out to the KEY ESG team, who will be happy to assist.
5. How do I know which Scope 3 categories apply to my organisation?
Answer: Not all Scope 3 categories will apply to every organisation. Start with the GHG Protocol’s guidance on Scope 3, which includes 15 categories. Focus on the most material ones for your business, like purchased goods (Scope 3.1), business travel (Scope 3.6), and logistics (Scope 3.4 and 3.9). KEY ESG’s platform helps you identify and focus on the most relevant categories.
6. How do I report emissions from leased assets?
Answer: Emissions from upstream leased assets (assets you lease but don’t operate) fall under Scope 3 (typically, Scope 3.8). Emissions from downstream leased assets (assets you lease to others) should also be reported under Scope 3, but as downstream activities. For leased office spaces, work with your landlord to get data on energy consumption, or use standard estimates provided by emission factor databases.
7. Can I use estimates if I don’t have exact data?
Answer: Yes, you can use estimates when exact data is unavailable, but ensure these are reasonable and documented. For example, if you don’t have specific travel data, you can estimate business travel emissions based on employee surveys or typical industry averages. Similarly, for waste disposal, if specific data is missing, proxies such as national recycling rates or industry benchmarks can be used, along with an appropriate emission factor available in the KEY ESG platform. However, it’s crucial to improve data accuracy over time.
8. How do I account for renewable energy purchases in my Scope 2 emissions?
Answer: If your organisation has purchased renewable energy, you can reduce your Scope 2 emissions by applying market-based accounting. This requires you to provide proof, such as contracts with energy providers or renewable energy certificates (RECs or REGOs). Without these, you should use the location-based method, which uses the average grid emission factor.
Debugging the Trickiest Questions
1. Why is calculating Scope 3 emissions so challenging, and how can I improve accuracy?
Answer: Scope 3 is challenging because it involves emissions outside of your direct control, like those from suppliers or customers. To improve accuracy, engage with your suppliers regularly, set clear expectations for emissions reporting, and use supplier-specific data whenever possible. Over time, work towards building more detailed and transparent supply chain data.
2. What do I do if my suppliers can’t provide carbon data?
Answer: If suppliers can’t provide data, use industry-standard emission factors as a proxy. You can find these factors in databases like the UK’s Defra or the GHG Protocol. Encourage your suppliers to begin tracking and reporting emissions to improve future data quality.
3. How do I calculate the emissions from purchased goods like laptops or office equipment?
Answer: Emissions from purchased goods fall under Scope 3.1 (Purchased Goods and Services). For items like laptops or office equipment you can leverage the 70,000+ emission factors available in KEY ESG’s carbon calculators, by using the search bar for the good or service that you have purchased. Contact the KEY ESG team if you would like a complete list of Purchased Goods and Services as an Excel spreadsheet. If a specific factor is missing, KEY ESG’s support team is available to assist in finding the right data.
Conclusion
Carbon accounting is an evolving process that requires collaboration, data accuracy, and continual improvement. If you’re just starting out or looking to refine your reporting, KEY ESG is here to help. Our platform simplifies carbon accounting by guiding you through data collection and calculation for Scopes 1, 2, and 3, with access to over 70,000 emission factors for your calculations.
If you can’t acquire specific data from your organisation or suppliers, remember that you can use proxies, such as national recycling rates for waste, and apply the appropriate emission factors in the platform. If you procure many goods and services, focus on the top 10 highest spend categories to cover your most material emissions.
For more help, reach out to our team via in-platform chat or at support@keyesg.com. Start measuring your impact today!