Everything You Need To Know About Calculating Your Carbon Emissions

Concerns about the impact of greenhouse gas (GHG) emissions on climate change are now a predominant focus for all socially responsible businesses. Environmental accountability and sustainability in business operations have grown in importance as a result of not only new regulatory obligations, but also increasing expectations from both internal and external stakeholders.

Many organisations are starting their sustainability journey with carbon accounting – the process of quantifying the GHG emissions associated with your business activities and expressing this in carbon dioxide equivalent units. By calculating your organisation’s emissions, you can determine a baseline against which you can compare your future years’ emissions and monitor your progress towards decarbonisation targets.

In this article you’ll find a step-by-step guide to calculating your baseline carbon emissions, as well as practical insights into challenges, considerations and next steps.

Why calculating your carbon emissions matters

Australia has recently adopted our own sustainability reporting standards – AASB S1 and AASB S2. While AASB S1 is a voluntary reporting standard for the disclosure of sustainability-related financial information, AASB S2 is a mandatory reporting standard that will be rolled out to larger organisations beginning from 1 January 2025. The Standard dictates how some organisations will have to report on climate-related financial information in their annual reports.

A key aspect of preparing a Sustainability Report will include disclosing GHG emissions, and this will include looking to your suppliers for information about their emissions as well.

While the main driver for undertaking carbon accounting may be to ensure regulatory compliance, there are other strategic benefits to integrating carbon accounting into your business.

• Meeting stakeholder expectations

Although your business might not meet the mandatory reporting thresholds for AASB S2 right away, getting started on carbon accounting now can offer a host of strategic benefits.

If your business sells goods or services to an organisation who is reporting, they may start asking you about your GHG emissions as part of preparing their own Sustainability Reports, and the ability to provide this information to your customers could offer you a competitive edge in the market.

Other stakeholders such as banks, investors, and even employees are also becoming increasingly more interested in the sustainability performance of businesses.

• Bottom line benefits

The process of carbon accounting can also identify opportunities for improving operational efficiencies, resulting in cost savings for the business. Many actions taken to reduce emissions can also result in cost savings.

• Measurable goals

It’s impossible to set realistic goals without a starting point for comparison. Understanding your baseline emissions is a crucial first step in developing emissions reduction strategies and setting targets for your business.

A guide to calculating your emissions  

• Step 1: Define your boundaries

Before calculating your emissions, you need to define your emissions boundary to establish what entities, operations, and specific emissions sources should be included in your baseline.

Emissions sources are broken down into three categories, called scopes:

• Scope 1: direct emissions from sources you own and control, such as fuels combusted in vehicles and machinery.
• Scope 2: indirect emissions arising from the consumption of purchased electricity or other energy.
• Scope 3: all other indirect emissions arising from sources you don’t own or control, such as the goods and services you purchase, travel and transport, and the waste you generate. These emissions often account for a vast majority of an organisation’s total emissions, but they can be the most difficult to measure.

For GHG emissions reporting in Australia, your boundary should include, at a minimum, all scope 1, scope 2, and upstream scope 3 sources that are relevant to your business. Downstream scope 3 sources can be optionally included.

• Step 2: Gather data

Collect emissions data relating to business activities such as onsite energy usage, vehicle fuel consumption, business travel, purchases, and waste generation. Useful data sources include utility bills and invoices from fuel suppliers, delivery companies, travel agencies and waste processors.

• Step 3: Choose a carbon accounting tool

Using a carbon accounting software tool can help to facilitate the process by streamlining data inputs, providing relevant emissions factors, and assisting with emissions reporting and management.

Consider enlisting a carbon accountant to help you navigate the process and ensure your GHG emissions have been compiled accurately and in line with the relevant frameworks and standards.

• Step 4: Calculate your emissions

Now you, or your chosen carbon accountant, can quantify the emissions output of your organisation over a set period. Your emissions reporting period should align with your financial reporting period.

The calculation process involves taking a data input (this may be litres of fuel, kilowatt hours of electricity, or dollars spent on a purchase) and multiplying it by a factor representing the emissions intensity of the activity to estimate the emissions occurring.

• Step 5: Report and Monitor

Once you have calculated your emissions, you now have an emissions baseline against which to track your progress year on year. It’s important to make sure that your boundaries, calculation methodology, assumptions and data sources have been well-documented to ensure consistency in future years’ carbon accounting and reporting.

Measure and monitor your emissions annually and share your progress with internal and external stakeholders.

Challenges and considerations

Calculating your baseline carbon emissions can be complex, and many businesses face challenges in accurately capturing data and quantifying emissions.

• Insufficient data

Calculating your emissions can require a lot of data that might not usually be important for your business to capture. Scope 3 related data can be particularly difficult to obtain, as most of these sources are outside of your direct control. When doing this for the first time, there may be inconsistencies and gaps in your data, and you may have to make a lot of estimations and assumptions. The best thing to do is to start now, with the data you do have, and make sure you disclose the estimates and assumptions you’ve made when calculating your baseline. You can then work on improving your data quality year on year to produce a more accurate and precise result.

• Engaging your supply chain

Accurate scope 3 reporting relies on engaging with your value chain and obtaining emissions information from your specific suppliers. This can be a challenge when your suppliers can’t provide this information, or the information they can provide isn’t up to scratch for your purposes.

Ensuring that you adopt the internationally recognised framework, the Greenhouse Gas Protocol, and encouraging your suppliers to do the same, can help to maintain consistency and make sharing of emissions data easy.

• Lack of resources

Small and medium-sized businesses are unlikely to have the resources to tackle carbon accounting internally. This is where enlisting a carbon accounting specialist and choosing the right software tool for your business can help you maximise results with minimal disruption to your business.

Next steps after establishing your baseline emissions

Establishing your baseline is only the first step in adopting carbon accounting. Your emissions baseline can be used to develop measurable and actionable emissions reduction strategies that align with your broader business objectives. It’s important to continue quantifying and reporting on your emissions annually to allow you to track your emissions, monitor progress towards your goals and targets, and improve the efficiency and accuracy of your emissions accounting year on year.

Consider involving internal and external stakeholders in your emissions reduction initiatives:

• Employee engagement can be enhanced through internal training on corporate sustainability topics such as energy efficiency, waste reduction and sustainable procurement. Incentives and recognition programs could be established for efforts such as cycling to work, carpooling or minimising unnecessary business travel.
• Collaborate with suppliers on projects such as reducing packaging waste and sourcing more sustainable materials. Consider giving preferred supplier status to those who can provide emissions data and have set sustainability targets.
• Share your sustainable business practices and achievements with customers by communicating your sustainability efforts and progress towards decarbonisation.
• Include your GHG emissions accounting in your regular reports to investors, highlighting your sustainability initiatives and progress.

Your sustainable future starts here

Even though your business might not be subject to mandatory sustainability reporting just yet, there’s a lot to be gained by starting carbon accounting now. It can help you to meet a key ESG expectation of your stakeholders, improve efficiencies and identify cost savings, and establish your brand as a sustainable business.

Bentleys has a team of experts specialising in ESG and carbon accounting. Contact your local Bentleys office to learn more about how they can help you with your baseline carbon emissions.

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Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.