Emissions accounting – Challenges and solutions

Companies are now accounting their emissions in droves, driven by tightening reporting regulations. Although the legislation doesn’t directly affect small and medium-sized enterprises (SMEs) yet, they too are forced into emissions accounting due to requirements set by financial institutions and buyers.

Emissions accounting, referred to as GHG Protocol Corporate accounting, is a comprehensive process that companies should prepare for carefully. In this article, we outline some common challenges and solutions in emission accounting process.

Data Collection

Collecting data on company operations is one of the most crucial and resource-intensive stages in building a greenhouse gas inventory. Understanding the company’s processes and suppliers is important, and data collection mainly involves coordinating with various stakeholders. The quality of data also determines the quality of emissions accounting results.

In data collection, it’s essential to assess the reliability of the information. For example, the amount of electricity used is often easy to verify from electricity bills or fuel consumption from accounting records. However, data on commuting or purchased goods and services can be challenging to collect due to numerous variables and involved individuals.

Before embarking on data collection, it’s important to outline what information will be gathered.

In addition to reliability assessment, the record should include at least the data’s date, source, and any limitations or allocations.

We’ve found that it’s beneficial to create a project plan and schedule for data collection. Setting deadlines for data submission when requesting information from various stakeholders is helpful. Without this, emissions accounting can drag on, leading to fatigue and frustration.

In addition to data collection, information must be documented carefully. This documentation is crucial for reporting, where transparency is paramount.

➡️ Also, explore tips for ensuring data transparency.

Emission Factors

Once activity data is collected, it’s time to select appropriate emission factors. Some suppliers, such as electricity companies, may provide not only the amount of electricity used but also the emission factor directly. However, this isn’t always the case, and the emission factor must be sought or modeled. In both cases, it’s important to record at least the following:

• Why the emission factor was chosen
• Source of the emission factor
• Modeling year

For major emission sources, it’s advisable to use emission factors based on primary data, i.e., self-modeled emission factors.

For smaller emission sources, different literature sources and databases can be utilized as emission factors. However, their use requires careful consideration. Emission factors are provided in different frameworks that should not be mixed without understanding what one is doing. Some factors are intended, for example, for product lifecycle assessment, while emission accounting for companies utilizes location- and market-based factors, and consumption-based factors are used for assessing the carbon footprint of services.

➡️ Read more about the use of emission factors.

Resources Utilization

To ensure successful accounting, ensure an adequate number of skilled individuals and financial resources. Time is spent on tasks such as:

• Coordinating data collection
• Hunting for emission factors
• Setting boundaries and allocations
• Quality assessment
• Documentation
• Calculation
• Verification of results
• Reporting

Surprisingly, a considerable amount of time is spent on making small decisions, such as decisions on the relevance and reliability of data, sufficiency of documentation, and selection of emission factors.

Companies can utilize internal resources or external service providers for emissions accounting. Often, the initial calculation is done with an external service provider.

The actual calculation is usually done using digital software solutions, where both data collection and documentation are standardized. These tools typically also include ready-made emission factor databases that can be supplemented with company-specific data.

Third-party audit is always necessary when emissions accounting is done for regulatory reporting.

Level of Uncertainty

In emissions accounting, the quality of production data and the accuracy of emission factors bring uncertainty.

A good rule of thumb is to compare results with various literature values throughout the entire process to ensure the quality of conclusions. Additionally, uncertainty is mitigated by carefully documenting quality assessment. All emissions allocations, calculation boundaries, and secondary data-based information are disclosed openly, along with the reasons behind the choices.

This also facilitates future calculations in subsequent years, allowing for the improvement of poor-quality data.

By addressing these considerations, companies can navigate emissions accounting more effectively, ensuring accurate and transparent reporting in line with evolving regulatory requirements.