Demystifying Greenhouse Gas Accounting: A Comprehensive Guide
With the ever-increasing attention on climate change, many companies are striving to reduce their emissions and be more sustainable. As a business, you’re probably aware of the importance of reducing your carbon footprint and taking responsibility for your activities that contribute to global warming. But how do you get started?
That’s where implementing greenhouse gas accounting standards into your accounting processes can help. GHG Accounting is the process of quantifying and reporting the estimated amount of Greenhouse Gas (GHG) emissions a company produces throughout its operations. It takes into account direct and indirect emissions such as electricity and heating, transportation and other sources. This article aims to demystify the process and help you understand how GHG accounting works, why it’s important, and how it can benefit your company.
What is GHG Accounting?
GHG accounting is an important process for companies to measure their greenhouse gas emissions and find ways to reduce them. It’s a comprehensive approach for assessing how much carbon dioxide, methane, and other greenhouse gasses are emitted by a company, with the aim of using this information to introduce better carbon footprint management policies. It’s also used as a way to fairly account for the trading of carbon credits throughout the market.
At its most basic level, GHG accounting involves measuring and reporting the total amount of greenhouse gas emissions produced by a company or organization and finding ways to reduce those emissions through technological developments, energy efficiency upgrades, and more. GHG accounting standards should be implemented by any company that emits pollutants into the atmosphere through production or operations activities, including manufacturing plants, power plants, oil refineries, and other industries.
Benefits of GHG Accounting
GHG accounting isn’t just beneficial in helping you track your own emissions and reducing your carbon footprint. It also provides an organized, structured framework for companies to purchase carbon credits from each other and become more efficient in managing their individual emissions. This is especially true for large companies, as they can use GHG accounting to purchase carbon credits from smaller companies that have managed to reduce their emissions more than the bigger ones.
In addition, GHG accounting also provides a method by which governments and non-governmental organizations can fairly measure the individual consequences of various industries with respect to their overall emissions. This helps to provide insight into otherwise difficult-to-track sectors, such as transportation or agriculture, where emissions are often spread across large geographical areas and multiple entities. By understanding the overall environmental impacts of all industries, it enables states or organizations to develop policy initiatives and allocate funds accordingly.
Finally, ESG accounting is also beneficial for potential investors and stakeholders who would like to gain a better understanding of a company’s environmental impact before investing in them. ESG investing is a hot topic right now in the venture capital world. By having detailed data on how much a company emits every year and what strategies it has taken to reduce its impact, investors can better gauge whether they want to invest in that company or not.
Understanding the Different Types of Carbon Credits
When it comes to GHG accounting, a key concept you need to know about is carbon credits. Carbon credits are one of the main tools companies use for GHG accounting and understanding what they are, and how they work, is important if you want to get a handle on your company’s environmental impact.
Basically, a carbon credit is a tradable certificate or permit that gives the holder the right to emit one ton of carbon dioxide or other greenhouse gasses into the atmosphere. This means that purchasing one carbon credit is equivalent to paying someone else not to emit one ton of gas into the atmosphere, which helps reduce overall emissions.
Types of Credits
There are two types of credits available in the market:
Offset
Offset Carbon Credits are earned for verified and third-party-verified projects that avoid or reduce emissions through activities such as renewable energy projects or reforestation efforts.
Allowance
Allowance Carbon Credits are created by governments through either cap-and-trade systems or other systems designed to manage emission levels and minimize environmental damage.
How to Measure and Monitor Greenhouse Gas Emissions
What about measuring and monitoring your greenhouse gas emissions? Fortunately, there’s a range of tools you can use to do this, from following best practices, to building an internal carbon accounting system.
Best Practices
Start by learning about and implementing best practices for the management of greenhouse gas emissions. Establishing guidelines and policies for the types of data collection and analysis that must be done in order to accurately account for your company’s GHG is one way to do this.
Measurement Tools
You should also invest in measurement tools such as life cycle assessment (LCA), environmental management systems (EMS) or product carbon footprinting. All of these tools will help you measure and monitor emissions more accurately so that you can have a clearer understanding of how much your business is contributing to global climate change.
Internal Carbon Accounting System
Finally, it is important to build an internal carbon accounting system in order to keep track of all the relevant data associated with your emissions. This will help you stay organized while staying on top of your performance progress and any issues that may arise. Additionally, having a well-documented system will ensure that any potential investors or stakeholders understand the measures that your company has taken towards reducing greenhouse gas emissions.
The Difference Between Carbon Accounting and GHG Accounting
You may have heard of carbon accounting—but what’s the difference between carbon accounting and greenhouse gas (GHG) accounting?
Put simply, GHG accounting is a more comprehensive method for measuring emissions. Carbon accounting generally just measures emissions from projects that relate to carbon dioxide emissions.
GHG accounting, on the other hand, accounts for more than just carbon dioxide. It measures all six different types of notable GHGs:
- Carbon dioxide (CO2)
- Methane (CH4)
- Nitrous Oxide (N2O)
- Hydrofluorocarbons (HFCs)
- Perfluorocarbons (PFCs)
- Sulphur hexafluoride (SF6)
GHG accounting takes into consideration not only the sources of your company’s emissions, but also any relevant sinks like reforested areas that absorb your company’s emissions naturally. Furthermore, GHG accounting looks more holistically at the life cycle of a product or service – that is, what its entire production involves from start to finish. Carbon Accounting takes a less comprehensive approach by focusing solely on how much carbon dioxide is being emitted in one particular process or area.
Tips for Implementing GHG Accounting in Your Business
If you’re looking to incorporate greenhouse gas accounting into your business, you’re in the right place. GHG accounting can help you take control of your emissions and understand how many carbon credits you need to trade or purchase in the market. Here are a few tips to get started:
Start with the Big Picture
When it comes to GHG accounting, looking at trends and averages across industries can help guide your decisions. It’s important to note that there are many different sectors in the market—agriculture, energy, transportation and others—so it’s important to look at larger trends in GHG accounting as a whole.
Gather Your Information
Once you have an understanding of what’s going on the market, gather information from all areas of your business related to producing — or mitigating — emissions. This will give you an accurate assessment of what kind of impact you’re having on the environment and how much credit you need to purchase or trade for each sector.
Invest in Technology or Software Solutions
Technology can make GHG accounting easier and more efficient. Investing in software solutions that track emissions is a great way to streamline your greenhouse gas calculations, reduce human errors and effectively manage data. Additionally, such software solutions offer analytics tools that allow businesses to better understand their emissions data so that they can make smarter decisions when trading carbon credits in the marketplace.
Conclusion
In conclusion, GHG accounting offers an invaluable tool in the fight against climate change. It allows companies to accurately identify and track their emissions, and to potentially offset them via carbon credits on the market. With the help of GHG accounting, individuals and organizations can make informed decisions based on accurate data and information. While GHG accounting can be complex and intimidating, hopefully, this guide has provided you with an in-depth understanding and appreciation of the numerous benefits it provides.
About Zanovoy, a Leading NetSuite Alliance Partner
Zanovoy is a leading NetSuite Alliance Partner that provides implementation, integration and managed services for businesses across a wide range of industries. With a team of experienced consultants and developers, Zanovoy helps businesses to leverage the full potential of NetSuite ERP and achieve their business goals. Zanovoy offers a range of services, including NetSuite implementation, customization, integration, and support, as well as managed services for industry-leading cloud products such as Coupa Spend Management, Avalara and Adaptive Insights. By partnering with Zanovoy, businesses in the carbon sequestration industry can access the expertise they need to succeed in a fast-changing business environment.
