Know your carbon countdown

Most business leaders are aware that they need to account for, and report on
the carbon costs inherent in their operations.

Schemes like the carbon disclosure project are, for the first time, forcing
corporate leaders to measure and communicate their carbon balances.

But the price of carbon can vary from one accounting period to the next, and
carbon itself is a cost-cutting concern. To measure and report it properly, the
carbon count needs to be allocated to every line of the standard balance sheet
and P&L.

Accounting software can lead the bull by the nose and we are in discussions
with all of the major vendors of accounting software to, for the first time,
include a new column on these venerable standard reports.

That column – the carbon column – measured in tonnes of CO2 equivalent, would
show for everyline-item the associated carbon cost or benefit of each key
business activity.

Why not just add a new row for carbon? For a typical carbon-emitting
business, costing carbon is a separate function to accounting for it. The price
of carbon is anything but fixed.

It can vary on a day-to-day basis. Most companies that choose to offset their
carbon emissions typically do so annually, not daily.

Also, following the principle of what you measure you manage, granular carbon
accounting gives finance departments the tools needed to monitor carbon
emissions and hence apply their usual fiscal style controls. Carbon budgets can
be set across business activities. By standardising the reporting of carbon,
businesses can benchmark against each other, and against industry best practice.

The simple act of adding a new column for carbon will serve to drive
emissions down naturally, as behavioural and structural changes will be rapidly
introduced and the mechanics of competition will kick into play.

Right now, many business observers believe that it’s only large firms that
need bother reporting on their carbon, but our experience in provision of carbon
audit services for a very wide range of businesses shows this is not the case.
Larger companies are pushing carbon awareness down their supply chains and
within a couple of years the entire global business community will be forced
into a kind of virtual compliance. It doesn’t matter where you stand on the
science of global warming. The carbon train has left the station. This evolution
of corporate acccounting is set to be the most significant change to the
standard accounts since the invention of double-entry book-keeping.

Dave Sag is CEO of Carbon Planet

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