A Guide to Carbon Accounting Standards

We at Emizio, are a pioneering startup revolutionizing carbon accounting, at the forefront of automating the complex process. We recognize the importance of carbon accounting standards as they ensure accurate emissions calculations and validate the credibility of carbon accounting for businesses.

A Brief History

The establishment of the Kyoto Protocol, in 1997, marked a significant milestone in global greenhouse gas (GHG) reductions, carbon accounting standards, and guidelines. These regulations have been evolving gradually. The initial guideline, the Greenhouse Gas Protocol (GHGP), laid the foundation, but standards have become more specific and sector-oriented over time. 

‍

In 2015, The Paris Agreement brought about heightened ambition and prompted standard-setters to align carbon accounting standards more closely with financial accounting practices. This resulted in the creation of the Taskforce for Climate-related Financial Disclosures (TCFD) and the Partnership for Carbon Accounting Financials (PCAF). These initiatives aim to enhance companies' understanding of their climate impact, including financed emissions in the case of PCAF. They also facilitate more precise carbon accounting. 

Currently, global climate disclosure mandates are transitioning from voluntary to statutory, converging around these established standards. Compliance with carbon accounting standards is no longer optional but a mandatory requirement in many jurisdictions.‍

An Overview of Important Standards

The Greenhouse Gas Protocol - GHGP

Among the various carbon accounting standards, the most recognized and widely used is the GHGP. It provides guidelines for organizations to develop comprehensive inventories of GHG emissions. The GHGP simplifies and enhances consistency in carbon accounting, empowering businesses to report and manage their emissions effectively.

‍

The GHG Protocol classifies emissions into three Scopes. Scope 1 and 2 are mandatory to measure, covering direct and indirect emissions from an organization's operations, such as company vehicles and purchased electricity. Scope 3, although optional, encompasses all other indirect emissions in a company's value chain, making it the most challenging category to reduce and mitigate.

International Organization for Standardization - ISO 14064

Another prominent standard is ISO 14064, an international framework for measuring and reporting greenhouse gas emissions. Consisting of three parts, ISO 14064 provides guidance on inventory quantification, project emissions reporting, and the verification process. It aligns with and derives from the GHGP, with slight differences that make the two standards complementary. Adopting both standards empowers companies to identify what to measure (ISO 14064) and how to measure it (GHGP) when conducting GHG inventories.

Taskforce for Climate-related Financial Disclosures - TCFD

The TCFD, established by the Financial Stability Board in 2015, responds to the growing recognition of climate-related economic risks. Outlined in a 2017 report, its recommendations for climate-related disclosures establish a structured approach applicable to all organizations, offering reliable and comparable information for investors. By adopting TCFD, companies provide prospective investors with essential insights into climate risks and opportunities, aligning financial planning with climate impact. The TCFD recommendations cover four primary themes: governance, strategy, risk management, and metrics and targets. Additionally, the TCFD addresses integration, ensuring climate information is seamlessly integrated with risk and financial reporting.

Partnership for Carbon Accounting Financials - PCAF

Initially developed by Dutch banks, PCAF has become a global standard for aligning financed emissions with net-zero targets. It serves as a disclosure standard, offering methodological guidance for measuring and reporting GHG emissions from different asset classes. PCAF aligns with GHGP's Scope 3 Category 15 requirements for investment activities, allowing financial institutions to measure financed emissions consistently, assess climate risks according to TCFD guidelines, report emissions, and make informed decisions regarding climate strategies.

Conclusion

To keep up with evolving carbon accounting standards, organizations must embrace automation. Emizio's cutting-edge carbon accounting software facilitates seamless alignment with these standards, replacing manual spreadsheet-based processes and the need for specialized consultants. Our software integrates the most crucial carbon accounting standards, ensuring effortless compliance for users.

‍