Accounting for your carbon

CARBON MANAGEMENT, or carbon accounting, is a task that has traditionally been assigned to engineers, scientists and environmental managers within organisations. And there is a good reason for this – it’s a complex subject, particularly for companies that are involved in manufacturing and production.

Companies in these sectors that are regulated by the European Emissions Trading Scheme (EU-ETS), where participants have emissions in excess of 25,000 tonnes of carbon dioxide equivalent (CDE) each year, require an expert who understands the chemical processes and emissions sources in order to produce an accurate carbon footprint report.

However, since 2007, we have seen the threshold for carbon reporting drop to include organisations that are not so energy hungry and emissions intensive. The Carbon Reduction Commitment (CRC) legislation has undoubtedly helped to give the topic more focus to small and medium enterprises. Assembly companies, professional services companies, freight, logistics, transport, and distribution organisations have all started to report their carbon footprint. But, interestingly, the data underlying reports for such low intensity emitters is actually obtained from the accounts department.

The invoices for electricity, gas, oil, motor fuel, business travel, flights, taxis, water usage and refrigerants contain 90% of the data required to compile an ISO 14064, GHG Protocol, and DEFRA compliant carbon footprint report – so why are the accountants not doing it?

In a competitive marketplace, it is peculiar to think that very few accountancy firms are offering carbon accounting to their existing clients as an additional value of their service, or as a differentiator over an aggressive competitor. The main reason for this peculiar situation is that, although the accountancy firms have all the data required, there is still a challenge in generating a compliant carbon footprint report. That challenge is in deciding what should be included and what should be excluded, such as how should leased assets be reported. For example, if company A uses a car 100% of the time but doesn’t own it, should it be included? What if company B owns a floor on a building that is leased out to another company, how do we decide to include or not include these emissions sources?

With such a small piece of the puzzle outstanding to complete such a potentially profitable new revenue stream, it was by no means a shock to see Deloitte USA acquire a carbon management consultancy firm and a carbon management software firm in January this year. Presumably, by using this environmental consultancy expertise to define the organisational and operational boundaries and decide suitable data sources for each emission, the financial services giant can deliver carbon accounting and audit services to its clients with little operating cost increases. And by using a carbon management software package, accountancy firms can minimise the time and risk of error associated with delivering such a report to their clients.

This move by Deloitte has had some prior precedence in other large financial service companies, where the big players have increasingly been moving towards sustainability services, and using software and external resources to deliver these services in a cost and risk-effective way.

The time of mainstream carbon management is here, and it’s only a matter of time until the corner shop will be reporting its carbon footprint with its end of year tax returns.

Adrian Fleming is managing director of ManageCO2

Related reading