Just as society would be chaotic without rules, so would carbon emission production be without regulations and standards. Carbon accounting standards and regulations are essential for controlling emissions and maintaining order. But what exactly are carbon accounting standards?

‍

It’s quite simple. They provide a framework for quantifying emissions and keeping them under certain limits. These standards have come a long way since the conversation on tracking and controlling emissions began. But are all standards created equal? And are they all helping achieve climate goals? These questions require a bit more information to break down, and that’s what we’ll do here.

‍

In this article, we’ll answer critical questions regarding carbon accounting standards and explore their history. We’ll also compare the various standards used today and where they are lacking, resulting in underreported emissions or – arguably worse – greenwashing.

A roadmap of developments in carbon accounting

The modern carbon accounting standards go way back to the beginning of the 21st century with the publication of the widely used Greenhouse Gas (GHG) Protocol. However, the research that supports the GHG Protocol and other standards today began way before the world took note of its impact on climate. For instance, the lifecycle assessment (LCA) method for the evaluation of the impact of a product on the environment throughout its lifecycle was published by Robert G. Hunt – in 1974.

‍

At the turn of the century, when scientists and researchers began sounding the alarm on global warming, carbon accounting came into focus. Following the publication of the GHG Protocol, more standards and frameworks were published, such as the ISO 14064 and PAS 2060.Alongside standards, software solutions were developed to help make carbon accounting more accurate. Open-source databases for emissions factors helped make carbon accounting easier.

‍

Carbon accounting standards: 2001–2024

Here’s a rundown of the major carbon accounting standards and protocols and how they impact the different industries:

2001: The GHG Protocol, all industries

• The GHG Protocol is a group of carbon accounting standards that provide a framework for calculating emissions, divided into three categories: Scope 1, 2, and 3. The GHG Protocol Corporate Standard is the most widely used globally for carbon reporting. Similarly, the Corporate Value Chain Standard (Scope 3 emissions) is used for reporting emissions from an organisation’s value chain. The GHG Protocol also has other specific standards, such as the GHG Protocol for Cities and the Product Standard.

‍

2006: ISO 14064, all industries

• International Organization for Standardization (ISO) 14064 standard is based on the GHG Protocol and constitutes three parts. The first provides requirements for estimating GHG emissions/removal. The second provides requirements for planning GHG reduction or removal activities and projects. The third provides guidelines for verifying GHG reporting.

‍

2009: EPA GHGRP, oil and gas, steel, cement, chemicals, etc.

• The US Environmental Protection Agency (EPA) introduced the Greenhouse Gas Reporting Program (GHGRP), which requires GHG reporting from large emission producers, such as fossil fuel suppliers. It also provides guidelines on how to calculate or estimate emissions.

‍

2010: PAS 2060, all industries

• The PAS 2060, developed by the British Standards Institute, is a standard for carbon neutrality. Based on established protocols, it provides a set of measures and requirements for companies to claim carbon neutrality for products, services, buildings, or the whole organisation.

‍

2015: TCFD,  finance

• The Task Force on Climate-Related Financial Disclosures (TFCD) provides information to investors on companies and their efforts for sustainability. It’s a voluntary disclosure standard for companies, requiring Scope 1 and Scope 2 emissions disclosure and, in some instances, Scope 3.

‍

2023: IFRS Sustainability Disclosure, all industries

• The International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards (S1 and S2) were published to help companies disclose sustainability-related risks and opportunities to investors. These standards are designed to encourage climate mitigation through sustainable investments.

‍

2024: CSRD, all industries (enterprises)

• The Corporate Sustainability Reporting Directive (CSRD) requires large-scale companies in the European Union (EU) to report direct and indirect emissions and take appropriate measures to keep emissions under the allowed limits. It’s poised to affect nearly 11,000 companies operating in the region.

‍

Carbon accounting standards and their shortcomings

While much work has been done in developing and implementing carbon accounting standards, there’s clearly a need for even better accounting. The current state of global warming, as per the warnings from the United Nations, is incredibly severe, indicating that carbon accounting and initiatives are far behind.

‍

Over-reliance on estimates

The biggest problem with some of the carbon accounting and reporting standards, including the GHG Protocol, is that they often rely on estimates rather than actual data. The GHG Protocol, in particular, has received criticism for allowing and, in some ways, encouraging companies to use industry averages for estimating their value chain emissions.

‍

Understandably, calculating emissions from suppliers and other entities in the value chain is challenging. However, easing the process has come at the expense of underreported emissions by large and small organisations alike.

‍

Greenwashing

Unfortunately, loose climate standards have enabled many companies worldwide to deliberately, and at times, inadvertently, greenwash authorities and consumers.

For instance, the GHG Protocol allows the use of secondary data for Scope 3 emissions. If a company undertakes a carbon capture project and reduces its emissions, others may also be able to claim the reductions via secondary data for value chain emissions. Scope 3 emissions are primarily voluntary, allowing companies to claim to be sustainable without calculating and reporting emissions from their value chain. Sneaky! But it happens quite often.

‍

More importantly, there’s a lack of standardisation and rules for verifying sustainability claims. H&M, the world’s second-biggest clothing retailer, was criticised by the Norwegian Customer Authority for misleading advertisements. The brand’s ‘Conscious Collection,’ released in 2012, claimed to be made from recycled materials. However, the company provided no further details, proof, or certification to authenticate its claim. Here’s the good news: New rules and standards, including the IFRS Sustainability Disclosure, are aiming to target greenwashing.

‍

Lax approach

The governments and regulatory authorities must also shoulder some blame for poor emissions accountability. While the standards have their shortcomings, in many parts of the world, they’re either not followed or are implemented poorly. Many standards are voluntary, so governments don’t mandate companies to follow them. Those that do often do it for marketing purposes, rendering the very purpose of accounting useless.

‍

The standards must be comprehensive, accounting for all emissions upstream and downstream, leaving no room for redundancy. Furthermore, the standards must be made mandatory to implement worldwide for a more cohesive action against global warming. The new CSRD directive that goes into effect in 2024 sets a good example for the kind of carbon accounting we need to keep temperature rise below 1.5 °C.

Giving back to the planet

Carbon accounting standards are only beneficial if companies follow them strictly and don’t try to find loopholes for exploitation. There are many ways to better comply with standards and improve carbon accounting. It’s high time organisations and their leaders, regardless of the industry, did more to curb emissions and replenish the planet.Here are some proven ways to reduce emissions:

‍

• Moving away from fossil fuels: This one is a no-brainer, as the increased reliance on fossil fuels is what has got us in the current fiasco in the first place. Ending the use of fossil fuels can dramatically lower Scope 1 and 2 emissions
• Increasing energy efficiency and opting for renewable sources: Energy efficiency in buildings benefits everyone, from owners to occupants. Similarly, switching to renewable energy sources can eliminate carbon emissions through energy usage
• Do not exploit carbon credits: If your company can afford to buy carbon credits to offset emissions above the set limits, it doesn’t mean you should. Think of “girl math” – buying two shirts for the price of one means you have spare money to buy something else. Not quite! Just as a company shouldn’t emit more carbon into the atmosphere because they’ve bought their way past the limits. The priority should be reducing emissions year-on-year. Consistently relying on offset credits beats the purpose of the cap-and-trade system
• Involving different community stakeholders: Throwing money at big sustainability projects without involving all the stakeholders is a mistake. With any initiatives and investments aimed at reducing emissions, it’s imperative to involve stakeholders from every level. Consulting with people in communities the investments will affect can bring insights to make the project more impactful

‍
Investing in advanced carbon accounting technologies: Climate-conscious companies should invest in carbon accounting solutions that leverage new technologies to get accurate findings. Such tools can make data useful for assessing actual environmental impact.

‍

Following carbon accounting standards

Carbon accounting standards such as the GHG Protocol and those based on it have helped companies, cities, and even countries evaluate their emissions, but they do leave room for inaccuracy and greenwashing. For a greener future, it’s important to revisit and continuously improve these standards. Robust standards, paired with technology, can make carbon accounting even more reliable. Tools that empower companies to use accurate data and comply with standards and regulations can help effect positive change.

‍

‍comundo is exactly that: a tool for businesses, real estate owners and investors to get real data on the energy consumption of their properties. Empowered with data, stakeholders can deliver accurate reports and make the right decisions to reduce their carbon footprint.