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CARBON ACCOUNTING

As businesses increasingly prioritize sustainability initiatives to reduce their carbon footprints and comply with regulatory legislation, the need for a robust carbon accounting strategy has become critical. In this article, we explore the landscape of carbon accounting and the pressing need for companies to adopt new technologies and processes to track and trace their greenhouse gas (GHG) emissions.

THE CURRENT STATE OF CARBON ACCOUNTING

There are several key drivers that are forcing businesses, particularly in the Group of 20 major economies (G20), which collectively account for 78% of global greenhouse gas (GHG) emissions, to integrate carbon accounting into their operations. Below, we discuss the current carbon accounting scenario:

  • An expanding regulatory landscape: Navigating the maze of ESG regulations is increasingly becoming a headache for companies. According to Ernst & Young, there are over 600 ESG frameworks, many of which include carbon accounting reporting, worldwide.
  • Stakeholder and market dynamics: Companies face increasing pressure from stakeholders, including investors, financial institutions, customers, and employees, to disclose their environmental impact. This demand reflects a growing market trend where environmental responsibility significantly influences company growth and long-term viability.
  • Fragmentation in carbon accounting practices: In a recent report by Gartner, carbon accounting and management is still in its early-stage phase, marked by fragmented strategies and technology solutions to track, trace and reduce carbon emissions.
  • While companies have begun reporting on Scope 1 and 2 emissions, many challenges remain for them to capture Scope 3 emissions. And that is where the problem resides. As little as 10% of GHG emissions are from Scope 1 and 2. The World Resources Institute notes that an average of 75% of a business’ emissions fall under Scope 3. However, to measure Scope 3 emissions, a company has to track all activities and emissions from all actors of a product’s lifecycle as well as corporate emissions.
  • As Florent Bougin, CTO at OPTEL and Forbes Councils Member indicates in recent article: “Scope 3 reporting hinges on estimates or counting on supply chain partners for accurate emission measurements.”
  • Despite the emergence of many carbon accounting technology solutions, many have varying degrees of capabilities when it comes to painting a clear, accurate and real-time portrait of a company’s Scope 3 emissions—especially in today’s multi-faceted supply chains that can span several countries and hundreds of supplies, both upstream and downstream.
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STRATEGIC APPROACHES TO CARBON ACCOUNTING

Organizations can initiate their transition by developing a comprehensive supply chain traceability strategy. This strategy includes defining the standards, procedures, technologies, and roles and responsibilities of stakeholders, all aimed at enhancing and facilitating thorough monitoring and assessment of emissions.

Effective carbon accounting starts with three pillars:

  • Data capture and management
  • Supply chain mapping
  • End-to-end supply chain traceability

Robust data capture and contextualization from various supply chain sources is a must, albeit difficult without the right tools. Supplier adoption, system interoperability, technology maturity, stakeholder onboarding, and training are just some of the considerations to be taken into account.

Lower CO2 emissions and reduce carbon footprint

CARBON ACCOUNTING DATA CAPTURE AND MANAGEMENT

When looking for a technology partner that can help you with advanced primary data capture, make sure it can collect and share real-time data, down to the material level, of any product in the supply chain from cradle to grave.

In addition, it should enable you to capture data from a variety of sources: third-party systems like ERPs, WMS and MES (via APIs), mobile/web apps, IoT objects, logistics software and even Excel/CVS files.

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SUPPLY CHAIN MAPPING

Next, your technology partner should have the expertise and proven track record to support you in mapping out your supply chain. This visualization is key to connecting raw material producers and all other stakeholders all the way to finished goods, distribution and end-of-life disposal/ recovery.

By analyzing supplier facilities and processes, including quality assurance, labour practices, and environmental impacts, you gain insight into the full product lifecycle. Supplier mapping also helps in identifying potential risks and provides the backdrop to remain up-to-date on each supplier’s ESG scorecards, audits and certifications.

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END-TO-END TRACEABILITY

End-to-end traceability not only ensures compliance with regulatory requirements but also serves as a tool for fostering transparency and accountability across the supply chain. By tracing emissions through every tier of the supply chain, companies can identify inefficiencies, pinpoint areas for improvement, and optimize resource allocation to minimize their carbon footprint.

Moreover, complete traceability empowers companies to respond effectively to evolving consumer demands for sustainability and ethical sourcing. It enables them to provide verifiable proof of their environmental efforts, thereby enhancing brand reputation and customer loyalty.

Furthermore, in an increasingly interconnected global economy, end-to-end traceability fosters resilience against supply chain disruptions. By understanding the intricacies of their supply networks, companies can proactively mitigate risks associated with climate-related events, regulatory changes, and geopolitical uncertainties.

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SELECTING THE RIGHT CARBON ACCOUNTING SOFTWARE

In selecting the right carbon tracking software, it is important to consider not only the compliance aspect of deploying such a tool, but also its long-term value in driving sustainable business practices. A robust carbon tracking platform will enable you to pinpoint low-hanging fruit to decrease emissions in the short term—all while identifying room for improvement with long-term strategies.

Beyond basic GHG protocol support, vendors should be able to offer innovative solutions, from granular data capture through serialization to access to comprehensive emission factor libraries. When crafting requests for proposals (RFPs), it’s essential to pose questions regarding Scope 3 emissions reduction, regulatory compliance, and validation of supplier data. By prioritizing software vendors with cross-industry capabilities, user-friendly interfaces, and robust supplier portals, organizations can ensure they are equipped with the tools necessary to conduct reliable carbon accounting and drive meaningful change toward sustainability.

OPTEL

In conclusion, as the demand for more rigorous and actionable carbon accounting practices grows, businesses must adapt by implementing advanced technologies and strategies. By understanding the regulatory, stakeholder, and market pressures—and leveraging cutting-edge sustainability solutions like those offered by OPTEL—companies can achieve greater transparency and compliance in their efforts to shrink their environmental impact.

 

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