Make Your Business Resilient from Climate Risk with GHG Accounting

Businesses can become resilient to climate risk with the help of net-zero emissions. It is required for organizations to restrict their rate of carbon and greenhouse gas emissions. This is possible with the help of GHG accounting. More and more companies are becoming responsible and using strategies that will result in more net-zero emissions. This way, it is only possible to make your business sustainable to the upcoming climate challenges, such as global warming. This blog discusses the ways businesses can use to make it thrive while avoiding contributing to any climate change. It can be said that modern businesses cannot continue expanding their branches without the use of GHG accounting.

What Is GHG Accounting?

GHG accounting, or Greenhouse Gas accounting, is the process for businesses to measure the amount of greenhouse gas and other emissions that are occurring within the environment. This way, businesses can identify the amount of emissions their activities are causing and rectify them if required. This is also a way to highlight the positive impact of net-zero emissions.

The investors and other stakeholders become aware of a particular organization’s activities. Investors and other stakeholders are more willing to connect with an organization that is following the GHG accounting properly and therefore causing zero or less greenhouse gas emissions through their operational activities.

GHG Accounting mainly aims to provide a clear framework for organizations that they can follow. This way, it will be possible to create environmental sustainability and remain transparent about the organizational activities that can be further portrayed via sustainability reporting.

Difference Between Carbon Assessment And GHG Accounting

Carbon assessment and GHG accounting are interconnected with each other. The main purpose of GHG accounting is to identify the amount of emissions produced during business activities. However, carbon assessment can be considered as the next step of GHG accounting. Carbon assessment helps to assess the data that is collected during the GHG accounting process.

GHG accounting is the measurement tool that helps to identify which activities are causing damage to the company in terms of climate risk. With the help of carbon assessment, it is possible to identify the activities that can be used to reverse the damage and create a more sustainable approach.

How Does It Work?

There are two ways Greenhouse Gas accounting can be used within an organization: the activity-based method and the spend-based method.

Spend-based Method

Spend-based method uses the amount of expenditure while identifying the amount of emissions. In simpler terms, this method is dependent on the organizational financial data. All information related to GHG accounting is collected from the spending areas of the business. However, it is difficult to retract data related to the emission when any supplier-specific data is available within the information. This generalizes the collected data, and for that reason, the data is less accurate.

All the gathered data can be used quickly, but that data is mostly useful at the starting points of the GHG accounting process. It will not be possible for organizations to identify the overall amount of carbon footprint it is causing with the help of the spend-based method. Due to this reason, this methodology is quick but incomplete on its own while trying to identify the greenhouse gas emission rates.

Activity-based Method

Activity-based method, on the other hand, helps to provide the actual raw data of the activities that are occurring within the organization. It focuses on the wastage, fuel usage, energy consumption, and other issues. Based on this data, it derives the amount of emissions that have occurred within the organization. All the emission factors are connected with the existing activities. For this reason, it is possible to gather more accurate data related to carbon accounting with an activity-based methodology.

This method requires more data in comparison to the spend-based method because organizations need to go deep into the organizational habits during this method. However, the data used is of high quality and provides accurate information while conducting GHG accounting.

How to Organize Different Levels of Emission with GHG Accounting

Organizations can differentiate the level of emission with different types of scopes, and there are three types of scopes in GHG accounting.

Scope 1

Scope 1 emissions are the emissions that mix directly with the environment. This type of emission happens from any type of vehicle or industrialization. The energy used during this process is non-renewable, and therefore, it directly goes back to the environment. It is not possible for the companies to recycle that energy. However, organizations need to take proper measures for scope 1 emissions so that the emissions do not directly harm the environment.

Scope 2

Scope 2 emissions are indirect emissions that are not caused by industrial activities. Rather, this type of emission happens to provide energy for operating a resource. In simpler terms, Scope 2 emissions occur when organizations operate any type of machine, and energy consumption takes place during that process. This energy consumption causes the GHG emissions. The emission is not directly causing harm to the environment. However, it still causes harm by using the natural resources and creating GHG from them.

Scope 3

Scope 3 helps to measure the emissions that occur due to the value chain process. It is difficult to measure the scope 3 emissions cause any type of miscellaneous activity falls under this scope. Activities from the carbon footprint caused by the employees to the emissions caused during the supply chain process all fall under this scope.

Scope 3 carbon emission is not the amount of carbon emission occurring within the organization. It goes beyond that as it includes the surrounding individuals connected to the organization. Measuring this scope is one of the major tasks during the GHG accounting process.

Why Businesses Need GHG Accounting

There are four major parameters that businesses need to follow, and for that reason, GHG accounting is important for organizations.

Stakeholder Trust Increase

The level of trust among stakeholders increases with the help of GHG accounting. This portrays the organizational transparency of their operational processes.

These organizations are constantly following the procedures required to provide a safer environment. This increases potential investors as well as buyers, and the employees are more willing to work with this type of organization.

Science-based Method Usage

GHG accounting helps organizations to follow GHG protocols, and these protocols are based on scientific evidence. This tells that the activities that are occurring within the organizations are not harmful to the overall society.

Identify Emission Reduction Opportunities

The carbon assessment process helps organizations identify the areas where emission reduction can happen. Organizations can identify those areas and improve their activities so that further emissions do not occur.

Following Global GHG Accounting Standards

Finally, it is important to follow a standard for greenhouse gas emission control globally. GHG accounting ensures that the global GHG protocols and standards are followed properly within an organization.

Wrapping Up

GHG accounting is an important step for organizations to avoid climate risk and create resilience towards it. It highly recommends the organization as a responsible authority within the industry and therefore provides an additional gain to the business. However, identifying the different scopes of GHG accounting can be difficult, and it requires an expert to conduct that activity. RiskMan Consulting is an expert business consulting firm that will support you during your GHG accounting journey. Reach out to us if you need further support in this area.