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January 25, 2024

5 Principles to Consider for Calculating Carbon Emissions

5 Principles to Consider for Calculating Carbon Emissions

About the author: Tim Croker is a former Fellow Chartered Accountant with the Institute of Chartered Accountants in England and Wales. He has been calculating carbon emissions since 2007, with his most recent role being the Head of Carbon Accounting at Climatiq.

It’s a myth that you can’t manage what you can’t measure; you don’t necessarily need to know your carbon footprint to reduce it. Simple steps like cutting energy use and opting for renewable sources are effective. However, for businesses aiming for net-zero, measuring and systematically reducing their environmental impact is a challenging mission that demands robust solutions for carbon accounting and decision support.

As you set out to address the environmental impacts of your business, your success will depend on the quality of the tools and insights you have available. 

This article explains some of the principles behind carbon measurement and how to ensure the tools you use to manage and mitigate your carbon impact are both accurate and effective.

Why calculating carbon emissions is inherently challenging

Calculating carbon emissions may appear simple; it can be reduced to a three-part formula:

Emissions = Activity x Emission Factor

However, delving deeper reveals significant complexity; depending on the data you have and the purpose of your reporting there are many choices to be made and a lot of detailed guidance to be interpreted. You will find yourself asking: what data should I use? What is the most appropriate methodology? Which emission factor is most relevant? What exactly does the guidance mean in this situation? How do I know if I’ve got it “right”? 

The challenge begins with securing high-quality emission factor data, which forms the foundation of carbon measurement.

Accessing this data often involves aggregating information from various sources, including hard-to-parse documents like PDFs – each with differing methodologies and units of measurement. Processing and standardizing such diverse data is resource-intensive, and requires expert knowledge which many organizations lack.

A more substantial challenge emerges in handling the many calculation variables: boundary conditions, lifecycle assessments, geographical splits, activity units, unit conversions, currency conversions, inflation, and more. These factors can affect emission measurement accuracy, posing a risk of over- or under-reporting.

Given the complexity and risk of manual calculation errors, many organizations seek external help. However, with a range of services and solutions available, choosing a trustworthy solution can be daunting.

With this in mind, we’ve outlined 5 guiding principles that every business should be aware of to help you get it right.

The 5 guiding principles for compliant carbon measurement 

The Greenhouse Gas Protocol (GHGP) establishes a framework to guide corporate standards for carbon accounting and reporting based on five principles:

  • Relevance
  • Completeness
  • Consistency
  • Transparency
  • Accuracy

1. Relevance

The emission metrics you provide must meet the needs of whoever is going to be looking at them or fulfill the requirements of the regulations they are used for. They should provide useful insights that help the user make decisions.

Context is also crucial - emission metrics are much more actionable when presented alongside other relevant information. Embed them into existing reports, dashboards, and workflows when possible. For example, a procurement manager can only make an informed decision about how to reduce emissions if the financial or other implications are provided alongside.

Our recommendation: Choose a carbon calculation solution that can embed insights into existing operational tools, such as dashboards and workflows. Surfacing insights within existing tools allows stakeholders to optimize their decision-making, eliminate data silos, and remove any friction involved with switching to another environment.

2. Completeness

Completeness means that you should include all significant sources of emissions in your reporting. You must be able to identify what assets and activities you own or control (mainly for scopes 1 and 2) and have the necessary data from those assets. You also need a way to convert this data into emission estimates. Reporting scope 3 emissions, once a “nice-to-have”, is now more often a business requirement, especially given they can typically account for 90% of total carbon emissions in some industries.

Our recommendation: Choose a carbon calculation solution that can take whatever data you have and provide emission estimates for scope 1 and 2, and all the scope 3 categories relevant to your business. 

3. Consistency

Decision makers within and outside your company are already able to compare financial information between companies and over time as financial reporting has become largely standardized. This cannot yet be said for carbon reporting, but there are things that help provide some consistency - most notably following the latest guidance, applying the most appropriate emission factors and having a carbon accounting system that works consistently from transaction to corporate level.

Our recommendation: Choose a carbon calculation solution that:

  1. Is built on a unified and high-quality dataset, with continuous updates to the data and methodology.
  2. Uses consistent calculations for decision-making at a transaction level, and corporate reporting at the company level.
  3. Has data versioning to ensure that your results from previous years can be recalculated even when there are subsequent changes to methodologies and emission factors.

4. Transparency

Stakeholders need to trust the emission metrics that are reported. Without confidence in the underlying data and methodology, they’re less likely to take them into consideration when making a decision. The lack of a robust audit trail also exposes businesses to additional compliance risk.

Our recommendation: Choose a carbon calculation solution that provides transparency tools, such as the ability to audit the underlying data and sources, access to methodology documentation, and a granular breakdown of how calculations are made.

5. Accuracy

Carbon emission estimates are subject to many more sources of uncertainty than most financial reporting but that doesn’t mean you can’t get results that are accurate enough for your needs. To do this you need to be able to reliably convert the data you have into emissions using the most suitable methodology, calculations and emission factors.

Our recommendation: Choose a carbon calculation solution built on a quality-controlled scientific dataset with a wide range of emission factors from multiple sources and regions to ensure you will find the “right” match. Check that your provider uses an accredited methodology and has third-party certification.

Carbon calculations made easy

At Climatiq, we’ve combined our decades of experience in carbon accounting, data management, and software development to build a carbon calculation engine powered by the world’s largest and most comprehensive database of scientifically-vetted emission factors.

Our API makes it easy to calculate emissions, and integrate the output into your existing tools, reporting and workflows. Our methodology and approach are compliant with the requirements of the GHG Protocol, TCFD, SBTi, SECR, ISO 27001 and 14067, GLEC, and other reporting regulations and initiatives.