Carbon Accounting: You Can't Manage What You Can't Measure
How To Implement Effective Emissions Tracking To Drive Business Value and Generate Measurable Impact
Quick:
If you want to trim your company’s overhead budget by 15%, what do you cut first? If you trim corporate travel by 5%, does that get you there? Or should you renegotiate your contract with your packaging supplier? What about headcount?
If you’re like most business people, your eyes glazed over at the mention of accounting categories and percentages.
But you’re not most business people—you’re a business leader, concerned about making your business stronger and thinking about environmental sustainability. So your thoughts immediately went to “wait, how much money is 15% of the overhead budget”, “how much do we spend on travel?” and “but packaging isn’t typically overhead.”
Followed by “why are we talking about financial accounting in a post about sustainability?
Because in environmental sustainability, the old accounting adage holds true: You can’t manage what you can’t measure.
Step One: Find Your Starting Point
You couldn’t launch a successful cost-reduction project in your company without knowing what your current costs are. You wouldn’t know where you’re overspending, and more fundamentally, without knowing your starting point you wouldn’t know if you were successful in your cost-cutting efforts or not.
The same holds true for environmental sustainability.
Although my focus is on helping your business identify ways to create a long-term competitive advantage through becoming more environmentally sustainable, you need to have a baseline understanding of where your business is to identify high-impact areas to focus on and to measure the outcome of your work.
Without this foundation, you don’t know where you currently stand, you don’t know for certain where to focus and you don’t know the magnitude of the impacts that your improvements make.
It’s like changing suppliers without knowing what anyone is costing you. It’s unlikely to have the impact you want.
Enter: Carbon Accounting
Hence the need for a basic carbon accounting system.
What is this?
It’s a system, designed to meet the needs of your company, that can show you how much carbon (the primary sustainability measurement to track for companies worried about the climate crisis—or European Union regulation) your business is generating through each step of your value chain.
At its most robust, a carbon accounting system can automatically pull data from all your other systems to show you how much carbon is generated by each of your suppliers, how much your business generates through its operations, how much your employees generate and how much your users or customers generate in an elaborate, graphical dashboard. It’s like NASA’s mission control, for carbon.
At its most simple, it’s a spreadsheet that takes basic operational data from your business and calculates how much carbon your company generates.
Just like financial accounting software, solutions range from a DIY spreadsheet to a simple online system that could cost $20/month to a full enterprise platform that costs thousands of dollars (or more).
What does your business need? You want the simplest solution that gives you reliable data you can start making decisions from.
(Spoiler: If you’re just starting out, you probably want a consultant with a few spreadsheets. Not only does this get you started quickly, but you’ll learn where your data gaps are and what other issues exist in your current systems, which will help you implement a longer-term solution more effectively.)
Let’s Start Counting!
Many businesses nowadays have some sort of carbon accounting software in place. If yours does, congratulations! You can go focus on how to improve your numbers.
If you don’t, you’re falling behind and your business needs one. A few recommendations to keep in mind:
Accuracy Over Precision
Many businesses—and sustainability teams in particular—get bogged down in determining the exact number for a given source of emissions. This is understandable: Most sustainability professionals either are ex-scientists or have some scientific background, and in science, whether the answer is 2.230209 or 2.23020883 makes a difference.
In business, it rarely does.
2.230209 and 2.23020883 in a business context are typically “about 2” and “less than 10”, meaning the business implication doesn’t change with the added precision. Often what the business needs is the order of magnitude of a carbon source (“is it 2, 20, or 20,000?”), how it compares to other carbon sources (is it the highest? lowest? or 3rd biggest source of carbon?), how it generally compares to the industry, and how easily it can be improved.
Anything over that is unnecessary precision. You want to start making an impact and showing value for your sustainability efforts ASAP. Go quick, get close and move on. Quick and close is better than slow and exact.
(Nuance: The danger in focusing on unnecessary levels of precision is that this work isn’t about the accounting—it’s about identifying where and how to impact the company’s sustainability. Spending all your time on fine-tuning the 4th decimal point takes attention away from the point of the work—eliminating the carbon source entirely).
Don’t Die In Reporting
Related to precision, many sustainability teams spend so much time gathering data, inputting it into the system and then reporting those figures out that they never focus on their true mission: Driving sustainability improvements for the organization. They spend their entire time generating and updating reports.
Create a system that is simple, lightweight and actionable for the rest of the business, then focus on ways to make your business stronger through sustainability.
Don’t Overbuy
There are a lot of very big, very complicated, very shiny carbon reporting platforms out there. You may not need that yet. Particularly if you’re just starting out, you may just need a spreadsheet and access to your business’s operational numbers to get started.
You can always upgrade systems later, once you start seeing the impact of the improvements you’re making.
Reporting Is the Start, Not the Goal
Carbon accounting providers, like any systems seller, like to position their platform as the solution—if you just implement carbon accounting platform X, everything takes care of itself.
In reality, reporting is just the starting point. Knowing that your product’s packaging results in X metric tonnes of carbon annually doesn’t matter. What you do with that knowledge (switch to a more sustainable provider? change to a reusable package? eliminate layers of packaging entirely?) is what matters. The numbers and reports are just a starting point for your team to make an impact.
Go Start!
Remember, fundamentally your carbon accounting process (whether it’s an elaborate software system, an outside consultant or Bob over in the corner) exists to provide you two key pieces of knowledge:
A starting number that you can measure options and progress against
A prioritization of where the biggest emissions sources in your organization and its processes are
However you can get to that cheaply and quickly is the best solution for you.