If fighting climate change were like baking bread, carbon accounting would be the flour. Just as there can’t be bread without flour, we can’t stop climate change without accurate, reliable carbon accounting. It’s an incredibly crucial part of the climate puzzle, one that governments and organisations have struggled with for a long time. The methodologies and standards for carbon accounting have transformed significantly over the years and continue to evolve, with the goal being better accountability.

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In this article, we’ll explore the future of carbon accounting, and dig into the trends of this critical component to ensure temperatures don’t rise beyond 1.5° C by the year 2050 relative to pre-industrial levels.

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The state of climate change

Despite carbon accounting being adopted by governments, corporations, and medium and small businesses worldwide, multiple reports show that the world needs to do more. The Emissions Gap Report 2022 says that the current climate pledges leave the planet on track for a temperature rise of over 2° C by the end of the century. July 2023 was the hottest month ever recorded, which led the United Nations to announce that the world was entering an era of ‘global boiling’.

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In short, climate change is in full effect, and despite renewed pledges and frameworks to reduce emissions, the actual emissions the world is adding to the environment are dangerously high.

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A glance at current carbon accounting standards

The Greenhouse Gas (GHG) Protocol, published in 2001, has been the corporate standard for climate accounting for the longest time. It has provided a blueprint for organisations worldwide to measure their carbon footprint and set climate targets based on emissions data.

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Historically, Scope 3 emissions have been underreported, mainly due to challenges gathering value stream emissions data or poor calculation methodologies. This has led to criticism of the GHG Protocol, as many companies use estimates for their indirect upstream and downstream emissions, which results in inaccurate emission data reporting.

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Carbon accounting forms the cornerstone of environmental, social, and governance (ESG) reporting for businesses in many countries. Mandated by governments and regulatory bodies, ESG reporting data also helps implement climate regulations. While governments in the European Union (EU), the United Kingdom (UK), Canada, New Zealand, and some Asian countries mandate ESG reporting, many countries have yet to implement policies to promote carbon accounting.

Five carbon accounting trends and predictions

Over the last two decades, carbon accounting has witnessed increased standardisation, providing stakeholders with a blueprint for measuring their direct and indirect emissions. There has also been comprehensive research on carbon accounting methodologies, practices, and challenges. However, changes will continue to impact how countries, cities, and companies measure their carbon footprint.

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Here are five trends to look forward to in 2024:

1. Tougher regulations

The continuous push from climate advocates, the public, and lawmakers has resulted in many governments worldwide adopting stringent climate regulations. As multiple reports point to the reality that the climate crisis is worsening, governments will have no choice but to implement stricter regulations, especially for large enterprises.

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The EU is at the forefront of climate policy-making. The Corporate Sustainability Reporting Directive (CSRD) is going into full effect beginning with the 2024 financial year. CSRD will impact over 49,000 companies in the EU, mandating more transparent and comprehensive emissions reporting.

2. Expansion of carbon markets

European countries pioneered the cap and trade program for carbon emissions. It incentivises organisations to reduce environmental impact and cash out emissions credits. The system has created a thriving market for carbon credits, which will expand further.

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Other countries may adopt similar cap and trade systems to limit the emissions for large corporations and promote greener practices. Mexico has been running a pilot emissions trading program since 2020, and with its success, more countries in the region may follow suit. It’ll be crucial for governments to ensure that any carbon pricing program isn’t abused to simply buy more emissions and put more carbon into the atmosphere.

3. Adoption of AI and ML

Perhaps the most significant development in carbon accounting will be technologies like artificial intelligence (AI) and machine learning (ML). AI adoption is already growing exponentially, and it’s only a matter of time before companies use large language models to produce reliable emissions data.

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From analysing Scope 3 emissions data to recommending intelligent energy/waste-saving schemes, AI models can facilitate and accelerate the efforts to fight climate change. Carbon accounting software in the coming years will likely feature AI models to help companies with ESG reporting and target setting, and, hopefully, the carbon footprint of AI will be reduced significantly.

4. Public advocacy for increased transparency

A sizeable worldwide survey from 2021 showed that a significant portion of the population is concerned with climate change. As extreme weather events become more common, people are fully realising the impact of unchecked carbon emissions and are now calling for action.

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The increased public awareness of climate change, global warming, and emissions will result in calls for more transparency from companies. From sourcing raw materials to production in factories, conscious consumers want brands to be transparent about every step of production. This will only result in increased pressure on companies to adopt sustainable practices.

5. Improvement in Scope 3 emissions reporting

Measuring and reporting Scope 3 emissions has been challenging, especially for large multinational corporations with complex, globalised supply chains. Getting accurate numbers from all suppliers worldwide can be expensive, so many companies resort to estimates instead.With stricter regulations from lawmakers, increased calls for transparency, and more efficient carbon accounting software solutions, Scope 3 emissions reporting will most likely improve in the near future. Reducing these particular emissions is essential for the world to achieve targets in line with the Paris Agreement.

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A more accountable future

The future developments in carbon accounting standards and technologies are largely positive, indicating an improvement in ESG reporting, especially Scope 3 emissions reporting. The alarm bells on the climate crisis and soaring global temperatures have made it crystal clear that there’s a dire need for more accountability.

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With the help of government intervention and better technology, carbon accounting can be made more accurate and impactful. With CSRD coming into full effect next year, we hope that this signals a turning point in accountability reporting, and, by 2025, reporting accurate data will be as logical and expected as fiscal reporting.

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comundo is part of the revolution in carbon accounting, providing a way for building owners to measure the true impact of their properties on the environment. With real energy consumption data, comundo’s technology provides owners and investors an accurate carbon footprint of their portfolio.