Carbon Accounting For Small Businesses & Beyond

In an age where businesses and consumers alike are waking up to the effects of climate change once and for all, having a gauge of your organisation’s carbon footprint is no longer a nice-to-have.

This awareness is nigh-on a necessity for businesses looking to minimise their negative impact on the environment and earn the loyalty of green-minded consumers.

The first step in any problem-solving endeavour is assessing the scale of the problem at hand - but when it comes to something that feels so intangible to the uninitiated, knowing where to start can be pretty daunting.

Today, we’re putting the practice that is carbon accounting under the microscope to give environmentally conscious business owners the know-how they need to measure and tackle this urgent 21st-century problem.

What carbon accounting is

Let’s start with a definition. Carbon accounting is a framework for the measurement and reporting of a business or organisation’s greenhouse gas emissions.

If you’re a business owner, the aim of carbon accounting is to quantify the amount of carbon emissions emitted by your operations - which can include anything from energy consumption to transportation, waste management and beyond.

Data on your business’s emissions can be largely gathered via your existing accounting data, using a spend-based methodology that takes the financial value of goods or services purchased and multiplies that value by an emissions factor.

Purpose-built software exists to help businesses track and analyse their carbon footprint, including numerous online calculators along with more sophisticated offerings able to automate elements of carbon accounting for a more efficient process in the long term.

Of course, laying a foundation for accurate and useful carbon accounting involves meticulous tracking of your organisation’s activities and spending. Good data breeds good data.

The benefits of carbon accounting

Taking on a new accounting responsibility leaves many business owners less than enthused. The world of business accounting can be complex and it’s little wonder entrepreneurs wonder what’s in it for them beyond the obvious compliance factors.

The good news is that carbon accounting brings with it a range of welcome benefits for sustainably minded entrepreneurs and savvy businesspeople alike:

• Sustainability: of course, top of the list of benefits is the improved sustainability that comes with understanding your business’s carbon emissions and identifying areas for improvement. Environmentally conscious business owners will gain invaluable peace of mind through knowing they’re taking active steps to reduce their organisation’s impact on our precious environment and contributing to a healthier planet for all of us
• Cost savings: reducing greenhouse gas emissions can result in highly sought-after cost savings for businesses looking to run an efficient operation. For example, improving your business’s energy efficiency, or making the move to renewable energy sources, can drive a reduction in your energy bills (which couldn’t come at a better time)
• Reputation building: environmental responsibility is becoming an increasingly key decision-making factor for consumers weighing up their options. By not only shouting about the importance of combatting climate change but, far more importantly, practising what you preach, you can avoid the dreaded greenwashing and gain the trust of prospective customers to build a reputation worth having
• Funding opportunities: this reputation-building activity has benefits that reach beyond customer acquisition, too. Funding opportunities are available to progressive businesses and organisations that are transparent about their carbon footprint and committed to making the change. Opening doors to working with sustainable investment funds and on carbon offset projects, as well as having the potential to increase investor confidence and even your company valuation, carbon accounting pays
• Data-led decision-making: if you’re wondering where to start with improving your business’s sustainable credentials, you can’t go wrong with empirical data. Decision-making in the world of business is more often than not driven by data, giving entrepreneurs a degree of confidence in the outcome they can expect. The same should be true of your environmental efforts - hard data makes decision-making easier and altogether more informed

Whichever way you slice it, carbon accounting is a worthwhile undertaking for businesses of all sizes - helping to improve their efficiency, their profitability, their brand image and, naturally, their carbon footprint.

Is carbon accounting a legal requirement for small businesses?

At time of writing, there’s no formal legislation in place that requires SMEs to commit to carbon accounting - but the climate change movement marches on, and we expect compliance to become a legal requirement in the coming years.

As with all things sustainability, the incentive to adopt carbon accounting for your business should ideally come from a sincere commitment to protecting the planet for the generations to come. If that doesn’t do it for you, though, there’s always the raft of commercial benefits to sweeten the deal.

To demystify all things accounting, choose Harlands Accountants. Making sense of business finances is our specialty, and we’re here to help you get to grips with your accounting in 2023 and beyond. Get in touch to get started.