Three simple ways to improve your carbon accounting

According to a Morning Consult poll conducted in 2019, most adults strongly or somewhat agree that businesses should take action to combat climate change. As these calls for action from customers, investors, regulators, and employees continue to grow, business leaders are scrambling to determine how to confront the crisis.

Setting long-term, net-zero targets has become a positive first step for organisations to demonstrate their ambition - but far-off goals are not achievable without capabilities to measure them. The C-suites of forward-looking organisations are therefore focusing on how to effectively measure and report greenhouse gas emissions, a process commonly called “carbon accounting” -though it also includes tracking other harmful pollutants like methane.

Carbon accounting can be a daunting task that requires organisations to gather disparate data or otherwise make assumptions that can poorly reflect true emissions and fail to capture incremental reductions. Investment in the collection and management of more precise data to power carbon accounting activities is one of the most effective ways to enable more environmentally sustainable operations.

In this article, we’ll cover three examples of actions a business can utilise to improve carbon accounting accuracy:

1. Move away from spending-based carbon accounting for business travel.

2. Avoid square footage estimates for office space emissions.

3. Use survey data to better understand employee commutes.

1. Move away from spending-based carbon accounting for business travel

What is spending-based accounting?

Spending-based accounting is the practice of estimating emissions based on monetary spending for a given business activity. Climate agencies publish emissions factors that correspond to a plethora of goods and services, allowing organisations to simply multiply total spending for an activity by its emissions factor. This simplifies the carbon accounting process substantially, as most organisations already closely track their financial activity. In many cases, however, businesses can and should do better.

What are its shortcomings?

Spending-based accounting falls short in identifying areas for improvement, is subject to price volatility, and may not accurately reflect improvements once they are implemented. One of the most common uses for spending-based accounting is business travel, where organisations utilise employee expense reports to estimate emissions from flights and hotels. Fortunately, there are readily available opportunities to improve tracking for both.

Track your flights in miles

Take an example of a traveler who selects a slightly more expensive direct flight over a cheaper flight with a connection. In this case, the direct flight results in fewer emissions but is recorded as increased travel expenditure, and thus emissions, when using spending-based accounting.

Increased prices due to a busy travel season or low-volume segments cause further spending-based inaccuracies. A popular route such as New York to Dallas-Fort Worth (DFW) could cost as little as £165, while a shorter route such as DFW to Northwest Arkansas National Airport might cost over £575. Businesses can avoid these situations by tracking flights in miles, rather than pounds, as that most accurately captures the distance traveled.

The best option for tracking flight mileage is working with your organisation’s travel partner that often has this information available. And if not, organisations can generate even broader change by signaling to these partners that data for carbon accounting should be a valuable part of their services. In the absence of such a partner, businesses can create their own solution by recording airport departure and destination codes.  

Track hotel visits by counting nights

As with flights, the cost of hotels fails to reflect their impact on the environment. Events occurring in a city and the time of year are just a couple of the many factors that substantially affect hotel prices and can inflate emissions calculations. Most expense reports only capture total cost, but collecting the number of nights employees spend in hotels and multiplying by an emissions factor will yield a more accurate picture.

For organisations looking for advanced opportunities, there are new services popping up from travel partners that screen hotel options based on environmental impact (derived from square footage and utility sources) which can provide another avenue for reduction.

2. Go beyond square footage in estimating office space emissions

Most organisations that track emissions from their buildings and office spaces aren’t able to gain an accurate picture of their utility usage, especially when leasing. Instead, they typically use the square footage of office space as a proxy to estimate. As with spending-based accounting, this method can be inaccurate and fails to reward any efforts to decrease emissions other than downsizing office space.

Organisations should instead work with property managers to source site-specific information like kilowatt-hours of electricity or standard cubic feet of natural gas used. If that data is not available, organisations can rethink lease agreements to include utility submetring to make emissions reduction efforts more visible. Large companies with extensive real estate portfolios can work to implement a utility data solution that standardises and tracks monthly utility statements from each property, making detailed and frequent large-scale tracking feasible.

3. Get more precise with employee commutes

For many organisations, especially those in professional services, employee commuting is the biggest contributor to Scope 3 emissions. Organisations often take a high-level approach to estimate commuting emissions by using their number of employees, and then making assumptions such as commute mileage, a five-day work week, and automobiles as the dominant mode of transportation. This works reasonably well for some organisations, but can be improved upon for those with considerable presence in cities that have public transit ridership and remote working.

Better data is gathered in one of two ways:

1. A representative sample survey of employees to capture typical days in office, commute mode, and distance.

2. Using a hybrid internal anonymised data and external third-party data.

Surveys can quickly capture relevant data points for calculating your organisation’s unique employee commuting patterns. Even better, some carbon accounting software platforms feature the capability to administer surveys automatically on a regular basis and aggregate the necessary data.

For the second method, trips to the office could be measured by tapping into facility management systems that track the number of unique visitors each day via a badge system, while anonymised ZIP code data from HR systems can provide a more accurate average commute distance for employees. Then, commute modes by city or country are taken from third-party data to accurately reflect the transit mix.

Taking action for environmental sustainability

Becoming more environmentally sustainable has become an expected responsibility for all organisations, and it starts with accurately tracking greenhouse gas emissions. While carbon accounting can become complex very quickly, we believe these three strategies reveal how changes in data collection and methodology can begin to improve an organisation's view of its true emissions.

To learn more about how Credera is tackling the issue of environmental sustainability, view our Sustainability page.