Carbon Accounting Software Basics: Benefits, Features, and the Reasons to Use

Carbon Accounting Software Basics: Benefits, Features, and the Reasons to Use

Today, companies of different sizes, from small businesses to large enterprises, are starting to mind their own impact on the environment and are looking for ways to track emissions more effectively and become carbon neutral.

Digital solutions such as carbon accounting software or other environmental compliance tools are getting more attention, as they help organizations improve decision-making, reduce carbon footprint and promote considerable cost savings as part of their successful decarbonization strategy.

So what is a carbon accounting system? Why can it be advantageous for your company? How to choose the best tool that will ensure your business sustainability? Check out the following article to get responses to such critical questions.

What is carbon accounting software?

Carbon accounting tools help businesses manage and calculate their carbon emissions and reach sustainable development goals. The right carbon footprint software will accurately track emissions data and collect valuable insights for your organization. 

Successful greenhouse gas emissions management requires a comprehensive approach and further strategical regulation. While many companies have been trying to measure emissions in recent years, their audit still has a long way to go before it becomes fully comprehensive and practical, going beyond manual collection of data in Excel. 

Investing in a carbon accounting software platform provides greater chances of maintaining efficient data collection and management practices. Besides, robust accounting tools allow for disclosing carbon footprints to stakeholders, adding business analytics to decarbonization strategies, and addressing compliance-related challenges and supply chain issues. 

Carbon footprint software market overview

Technavio reports that:

“The carbon accounting software market share is expected to increase by USD 9.61 billion from 2021 to 2026, and the market’s growth momentum will accelerate at a CAGR of 28.66%.” The industries adopting such software solutions the most are oil and gas, manufacturing, telecommunications, technology, among the others.

Two critical factors are driving such significant growth. 

  • The key one is the demand for reducing the overall costs enterprises incur. That is because the visibility of energy consumption enables them to determine cost-saving opportunities and eliminate inefficiencies. 
  • Another factor is the increasing number of government regulations and policies to reduce carbon footprint. Governments worldwide require businesses to follow GHG emission regulatory standards. That includes observing, measuring, and monitoring carbon emissions too. 

There is also a challenge that the carbon accounting software market continues to struggle with. Companies find it hard to capture accurate energy consumption data, although such information is vital for reports on environmental sustainability. 

For example, calculating carbon emissions requires tracking utility invoices for different buildings and contacting numerous managers to check energy usage. After all, estimating energy consumption using equipment like trucks, fleets, or remote offices takes too much time and effort. 

3 Scopes of Carbon Accounting

Carbon accounting software: scopes of emissions
Source: Persefoni

 

Traditionally, carbon accounting deals with three types of scopes. That includes all activities of your organization causing greenhouse gas emissions. So, let’s dive deeper into them below:

  • Scope 1 emissions. These are direct GHG emissions caused by the production. Their primary sources cover boilers, furnaces, machines, and other fuel equipment. Providing scope 1 emission reports is obligatory in many countries across the globe.
  • Scope 2 emissions. This type is associated with indirect emissions caused by company assets and resources involved in heating, cooling, and transportation processes. Businesses perform such processes thanks to electricity, gas, or steam. In many world regions, organizations also must report relevant scope emissions. 
  • Scope 3 emissions. They are the result of activities from assets not managed or controlled by the reporting company, but that the company indirectly affects. Such emissions are caused by the company’s value chain and includes employee commute, transportation & distribution, and business travel among others. 

Why is carbon accounting important?

Calculating carbon emissions is not something new. But recently, it has become an essential industry-standard requirement for numerous businesses. 

Although providing scope 3 emissions reports is optional, it benefits companies. But they find it increasingly difficult to measure this type of emissions. Meanwhile, the relevant information can improve their decision-making when selecting resources, equipment, vendors, carriers, and many more. Businesses can also utilize this information to set their carbon footprint reduction targets and enhance corporate communications. 

Thanks to the appropriate carbon accounting software, you will know the amount of gas emission your business generates. That makes it possible to determine what parts of your supply chain are responsible for them and define relevant carbon reduction opportunities. 

Key advantages of using carbon accounting software

Calculating carbon emissions is a complicated process that takes about six months or even more. However, with the proper carbon accounting software, companies can measure emissions in a few weeks since the relevant process is automated. Also, they get an opportunity to track such footprint in real time and gain accurate data. 

But apart from time and accuracy, what are the other critical benefits of utilizing carbon accounting tools? Below, we have briefly described some. 

Environmental advantages

Carbon footprint software is undoubtedly beneficial for the environment. It provides businesses with a holistic view of the emissions they produce. In that way, companies can see clearly what operations cause the most significant damage and can address those issues in time by reducing emissions that matter. 

For instance, the glue used in IKEA’s wood-based products contributes to 6% of the company’s total climate impact. Thus, IKEA has decided to utilize bio-based or renewable glues since they aim to reduce their carbon footprint twice by 2030. 

Economic advantages

Besides environmental benefits, reducing GHG emissions and implementing sustainability communication tools lead to improved productivity and cost-effectiveness. Different teams within the organization can use the information to actively cooperate toward reducing carbon footprint. A good example is when companies switch to renewables. 

Moreover, economic benefits are not only about saving money. That also helps businesses de-risk future carbon prices. Since the amount of emissions is constantly increasing, their price will increase too. Therefore, understanding the issue and reducing carbon emissions now means lower costs in the future and a better environment. 

In the United Kingdom, large enterprises must publicly report their energy consumption and GHG emissions in the Directors’ Report. Although such a practice remains voluntary for small and medium-sized companies, more and more organizations are choosing to calculate and report their carbon emissions. 

Social and branding advantages

Today, sustainability is a crucial issue for customers, impacting their decision when selecting a company to work with or purchase products and services. The question is not whether businesses should reduce their carbon footprint but when they will do so. In this case, calculating and reducing GHG emissions is necessary to drive client engagement. 

Besides, organizations showing their commitment to sustainability are more attractive to potential employees. The last ones intend to find a workplace suitable for their values. According to the Reuters survey, “65% of respondents said they were more likely to work for a company with strong environmental policies.” 

What are the must-have features of carbon accounting tools?

Managing all aspects of your sustainability efforts using disparate software solutions is challenging. But how to have a sustainable business strategy in place effectively, including carbon emissions measurement, management, and reporting? The answer is simple — companies should have one tool to maintain their sustainability program. So, let’s define the crucial features such a tool must offer. 

Custom sustainability reporting software: carbon accounting system
Source: Apiko

Scope 1,2,3 emissions automated calculations

Companies aiming to improve their climate impact must measure their GHG emissions through the already mentioned scopes and convert relevant outputs to CO2 equivalent. But such conversion is complex and pretty challenging if you do not use a carbon accounting system. 

With the correct tool, you can take critical inputs automatically. That involves electricity consumption, energy waste, vehicle use, business purchases, etc. Finally, using carbon accounting software allows for customized tracking of the emissions for various buildings, staff members, equipment, and products at all your company’s locations. 

Guidance on reducing emissions

Although calculating and benchmarking carbon emissions are vital steps toward future enhancements, companies must create a detailed plan and initiatives to manage and reduce them effectively. 

Thus, a robust accounting platform should help organizations understand how their behavior affects emissions and assist in cutting them down. For example, such tools enable users to assess their baseline performance, implement ESG strategies, get guidance, and create policies depending on their priorities. 

Data storage and a central point for tracking progress

Companies should store their emissions information in one place. That allows the entire staff to find it easily instead of wasting time looking at different systems or spreadsheets. So, when there is time to report your emissions, keeping your carbon footprint data, updating documents, making notes, and using customizable tags in one tool can save you a lot of time and money. 

Also, an effective carbon accounting system may offer flexible dashboards and valuable insights depending on locations, teams, and types of scopes. Such information helps increase the ROI of your business's sustainable investments. 

Accurate assessment of the supply chain

Unfortunately, many organizations lack the appropriate resources to determine how far down their carbon footprint goes within the value chain. Thus, they cannot calculate them accurately. 

But with an all-in-one carbon accounting platform, businesses can analyze their entire supply chain better, create supplier requirements, and improve relationships with them. Such a tool allows surveying and scoring suppliers and provides valuable resources to enhance their sustainability efforts. 

Intuitive interface

Many data-centric platforms are often tough to navigate, look unfriendly, and require long onboarding. There are many carbon accounting systems that are also built in this way, which makes it hard for employees to use and benefit from them. 

By choosing or building from scratch the proper carbon accounting system that has the exact functionality your organization needs, you can foster collaboration instead of isolation, and make the process of collecting and analyzing data smooth and effective. 

Also, such a digital solution can provide all stakeholders with customizable sustainability reports to bring valuable insights into your organization’s sustainability progress and priorities. 

Compliance with regulations

Soon, thousands of businesses will find it mandatory to reliably report their carbon emissions to their private investors and the general public. Thus, the proper carbon accounting software should comply with the GHG Protocol and demonstrate how your sustainability activities and progress correspond to specific frameworks and standards. Also, it can help your organization prepare for different third-party audits.

How much does it cost to build a carbon accounting system?

While there are numerous carbon accounting solutions available on the market, the custom one will match your company’s size, complexity, and needs more effectively. A tailor-made solution can satisfy your exact business requirements and fit perfectly with your operating environment for you to derive the most business value.

The cost of developing such environmental software will depend on the scope and boundaries you define for it. That may range from twenty thousand dollars to low six-figure sums. Developing this solution may be complicated, but experienced software engineers will ensure the proper delivery of desired outcomes. To get a detailed estimate of your software development project, feel free to get in touch with our team.

Conclusion

Controlling carbon emissions and ensuring the appropriate harmful material management are ongoing practices that organizations should regard as vital components of their bottom line. 

Since rules and regulations constantly evolve and companies deal with more severe reduction objectives  to address climate change, utilizing carbon accounting software is crucial for growth-oriented businesses. The right tool will help you ensure carbon zero emissions and achieve your corporate sustainability and sustainable development goals. 

Get a rough estimate of your carbon accounting software

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