Carbon accounting is the process of tracking and measuring the greenhouse gas (GHG) emissions produced directly or indirectly by an organization, project, or activity. This systematic approach helps entities understand their carbon footprint and its impact on climate change. By quantifying emissions, organizations can identify key areas for improvement, set reduction targets, and develop strategies to mitigate their environmental impact. Carbon accounting is crucial for promoting transparency and accountability in efforts to achieve sustainability and meet global climate commitments.

What are Carbon Accounting Standards?

Carbon accounting standards are guidelines and frameworks that establish consistent methodologies for measuring, reporting, and verifying greenhouse gas (GHG) emissions. These standards aim to enhance comparability, reliability, and transparency in carbon accounting practices across different organizations and sectors. By adhering to established standards, entities can accurately assess their emissions, ensure compliance with regulatory requirements, and effectively communicate their sustainability efforts to stakeholders.

Top Carbon Accounting Standards for Businesses

Greenhouse Gas (GHG) Protocol

The Greenhouse Gas (GHG) Protocol is a globally recognized framework designed to help businesses, governments, and other organizations measure and manage their greenhouse gas emissions. Established by the World Resources Institute (WRI) [1] and the World Business Council for Sustainable Development (WBCSD) [2], the GHG Protocol plays a pivotal role in standardizing how emissions are quantified, reported, and reduced. This protocol serves as the foundation for many climate-related reporting frameworks and helps ensure transparency and consistency in emissions data.

To effectively categorize emissions, the GHG Protocol divides them into three distinct scopes:

1. Scope 1 (Direct Emissions): These are emissions that come directly from sources owned or controlled by the organization, such as fuel combustion in company vehicles, boilers, or on-site industrial processes.
2. Scope 2 (Indirect Emissions from Energy): This scope accounts for indirect emissions from the generation of purchased electricity, steam, heating, or cooling that an organization consumes but is produced by another entity.
3. Scope 3 (Other Indirect Emissions): These emissions cover all other indirect emissions across an organization’s value chain. This includes emissions from activities like business travel, transportation of goods, and the production of purchased goods and services.

Each scope helps organizations identify different areas of their environmental impact, enabling more targeted strategies for reducing emissions.

ISO 14064

ISO 14064 [3] is a set of internationally recognized standards specifically developed to guide organizations in managing their greenhouse gas emissions in a structured and credible manner. Unlike other frameworks like the GHG Protocol, ISO 14064 is part of the broader ISO 14000 family, which focuses on environmental management, and it emphasizes not only the measurement and reporting of emissions but also the validation and verification process. This makes ISO 14064 particularly useful for organizations seeking formal certification or third-party validation of their GHG data and reduction efforts.

The ISO 14064 standards are broken into three distinct parts, each with a specific focus:

• ISO 14064-1 (Organization-Level GHG Inventory): This part focuses on the requirements for designing, developing, and managing GHG inventories at the organizational level. It covers both direct emissions (Scope 1), such as emissions from company-owned vehicles and on-site operations, and indirect emissions (Scope 2) from purchased electricity, heat, or steam. The standard helps organizations account for their GHG emissions comprehensively, providing a foundation for tracking and reducing their carbon footprint.
• ISO 14064-2 (GHG Projects and Reductions): This section provides guidelines for quantifying GHG emissions and removals at the project level. It is aimed at activities that lead to emission reductions or enhance the removal of greenhouse gases from the atmosphere. Whether through renewable energy projects, energy efficiency initiatives, or carbon sequestration efforts, ISO 14064-2 helps organizations measure the impact of these projects and ensure they contribute meaningfully to GHG reduction goals.
• ISO 14064-3 (Verification of GHG Inventories and Projects): This part outlines the principles and requirements for verifying and validating an organization’s GHG inventory and projects. It ensures that both emissions data and claims of reductions are accurate and credible through independent verification. This verification process is essential for organizations looking to demonstrate their commitment to transparency and gain the trust of stakeholders, regulators, and investors.

In contrast to other frameworks, ISO 14064 emphasizes rigorous validation and independent verification, making it a go-to standard for organizations seeking to substantiate their GHG data and commitments in a formal, certifiable way.

Partnership for Carbon Accounting Financials (PCAF)

Launched in 2015 by a group of Dutch financial institutions [4], PCAF provides a comprehensive framework for financial institutions to account for the carbon impact of their portfolios, allowing them to better understand and manage their contribution to climate change. The PCAF methodology is aligned with the GHG Protocol and covers various asset classes, including loans, bonds, equities, and project finance.

As more financial institutions commit to aligning their activities with the goals of the Paris Agreement [5], PCAF has become a key tool in driving transparency and accountability within the financial sector. By providing a consistent and comparable approach to carbon accounting, PCAF enables institutions to assess the climate risks and opportunities in their portfolios, make informed decisions about decarbonization, and set science-based targets for reducing financed emissions. PCAF’s growing global presence, with hundreds of financial institutions as members, highlights the increasing recognition of the financial sector’s role in addressing climate change.

The Task Force for Climate-Related Disclosures (TCFD)

The Task Force for Climate-Related Financial Disclosures (TCFD) was established in 2015 to develop recommendations for companies to disclose climate-related financial risks and opportunities. The TCFD’s aim is to foster transparency in how organizations assess and manage these risks, enabling stakeholders to make more informed investment and lending decisions. The recommendations focus on four core areas:

1. Governance: Organizations should describe the governance structure in place to oversee and manage climate-related risks and opportunities, including board oversight and management’s role in assessing and managing these impacts.
2. Strategy: Companies should also assess the actual and potential impacts of climate-related risks and opportunities on their business strategy and financial planning, taking into account various climate scenarios, including a 2°C or lower scenario.
3. Risk Management: Organizations need to disclose how they identify, assess, and manage climate-related risks. This includes integrating these risks into their broader risk management framework.
4. Metrics and Targets: It is essential for organizations to provide the metrics used to assess climate-related risks and opportunities, including GHG emissions, and to disclose their GHG reduction targets aligned with their overall strategy, outlining how they measure progress towards these targets.

The TCFD has also recommended 11 additional disclosures under these four key elements, aimed at enhancing the transparency in carbon reporting. Furthermore, it has successfully addressed some of the shortcomings in previous reporting models by emphasizing the integration of climate data with risk and financial information. This ensures that climate information is seamlessly incorporated into mainstream reporting.

PAS 2060

PAS 2060 [6] is a specification that provides requirements for organizations seeking to demonstrate carbon neutrality. It establishes a clear framework for measuring, managing, and reducing carbon emissions to achieve net-zero status. This standard encourages organizations to think holistically about their carbon footprint, encompassing both direct and indirect emissions, while promoting strategies for reducing overall impact. By following the guidelines set by PAS 2060, companies can enhance their credibility and accountability in climate action.

In addition to setting requirements for carbon neutrality, PAS 2060 also emphasizes the importance of transparent reporting. Organizations must provide evidence of their carbon neutrality claims through accurate documentation and third-party verification. This ensures that stakeholders can trust the claims made by organizations and understand their commitment to sustainability. By adhering to this standard, businesses can not only improve their environmental performance but also gain a competitive edge in an increasingly eco-conscious market.

How Can Seneca ESG’s AERA help with Carbon Accounting Standards?

AERA offers precise, auditable GHG emission calculations that adhere to international standards like the Greenhouse Gas Protocol and ISO 14064. With real-time visibility and automated emission monitoring, businesses can easily track Scope 1, 2, and 3 emissions, identify emission hotspots, and set strategic reduction goals. Our robust platform helps businesses make informed sustainability decisions by offering over 50,000 emission factors and comprehensive coverage of seven greenhouse gases.

Beyond accuracy, AERA’s features are designed to future-proof sustainability efforts, ensuring alignment with global standards. The platform’s intuitive interface, data-driven insights, and customizable scoring methodologies empower organizations to strategically plan for climate scenarios while enhancing stakeholder transparency. Whether you’re aiming to meet compliance or drive deeper ESG performance, AERA provides the tools needed for a sustainable future.

References:

[1] https://www.wri.org/

[2] https://www.wbcsd.org/

[3] https://www.iso.org/standard/66453.html

[4] https://carbonaccountingfinancials.com/files/downloads/PCAF-Global-GHG-Standard.pdf

[5] https://unfccc.int/process-and-meetings/the-paris-agreement

[6] https://www.bsigroup.com/en-GB/capabilities/environment/pas-2060-carbon-neutrality/