Carbon accounting is the process of measuring and tracking an organisation’s greenhouse gas (GHG) emissions. It helps businesses understand their carbon footprint, establish a baseline and identify where emissions can be reduced.
Emissions are usually reported in tonnes of carbon dioxide equivalent (tCO2e), allowing different greenhouse gases to be measured using one consistent unit.
For accountants, carbon accounting is increasingly relevant because much of the data needed to calculate emissions already sits within financial and operational records.
What are the principles of carbon accounting?
The GHG Protocol sets out five core principles:
- Relevance: Include emissions that accurately reflect the organisation’s activities.
- Completeness: Account for all relevant emissions and explain any exclusions.
- Consistency: Use consistent methods and boundaries between reporting periods.
- Transparency: Clearly document data sources, assumptions and estimates.
- Accuracy: Use reliable data and recognised calculation methods.
These principles create a reliable emissions baseline that can be compared over time.
What is the GHG Protocol?
The Greenhouse Gas Protocol (GHG Protocol) is a widely used framework for measuring and reporting greenhouse gas emissions.
Its main corporate standards include:
- Corporate Standard: Covers organisational boundaries and Scope 1 and Scope 2 emissions.
- Scope 3 Standard: Covers indirect emissions throughout the value chain.
- Scope 2 Guidance: Explains how purchased electricity, heat, steam and cooling should be measured.
What are Scope 1, Scope 2 and Scope 3 emissions?
Under the GHG Protocol, business emissions are divided into three scopes: Scope 1 covers direct emissions, while Scope 2 and Scope 3 cover different types of indirect emissions
Source: GHG Protocol
Scope 1: Direct emissions
Scope 1 covers emissions from sources an organisation directly owns or controls.
Examples include:
- Fuel used in company vehicles
- Gas or oil used in boilers
- On-site generators
- Refrigerant leaks
Think of Scope 1 as what the business burns directly.
Scope 2: Purchased energy
Scope 2 covers indirect emissions from energy purchased and used by the organisation.
This most commonly includes:
- Electricity
- Purchased heating
- Purchased cooling
- Steam
Think of Scope 2 as energy the business buys.
Scope 3: Value chain emissions
Scope 3 covers other indirect emissions associated with the organisation’s activities.
Examples include:
- Purchased goods and services
- Business travel
- Employee commuting
- Waste
- Freight and distribution
- Suppliers
- Use and disposal of sold products
Scope 3 can be more complex because the information often comes from several different parts of the business and its supply chain.
How are carbon emissions calculated?
Two main approaches are used: activity-based and spend-based carbon accounting.
Activity-based method
Activity-based calculations use physical consumption data such as:
- kWh of electricity
- Litres of fuel
- Miles or kilometres travelled
- Tonnes of material
The calculation is:
Activity data × relevant emissions factor = emissions
Activity-based data is generally preferable where available because it connects emissions directly to actual consumption.
Spend-based method
Spend-based calculations estimate emissions using financial expenditure.
The calculation is:
Spend × relevant emissions factor = emissions
This can provide a useful starting point when physical activity data is unavailable, particularly for Scope 3 categories.
Most organisations use a combination of both methods.
What data is needed for carbon accounting?
Much of the required information may already exist within accounting and business systems.
Scope 1 data may include:
- Fuel receipts
- Fuel card statements
- Gas or oil invoices
- Vehicle mileage records
- Refrigerant maintenance records
Scope 2 data may include:
- Electricity bills
- Energy consumption records
- Renewable electricity documentation
Scope 3 data may include:
- Supplier invoices
- General ledger data
- Expense claims
- Travel records
- Payroll or HR information
- Waste invoices
- Freight and logistics records
How do you create a first carbon footprint?
A basic carbon accounting process can be broken into seven steps:
- Set the organisational and reporting boundaries.
- Choose a base year for future comparison.
- Collect available emissions data.
- Choose an activity-based or spend-based method for each category.
- Apply the appropriate emissions factors.
- Document assumptions, estimates and data gaps.
- Report the results and identify priorities for improvement.
UK organisations should use the latest UK Government greenhouse gas conversion factors when calculating emissions.
For UK activities, the UK Government publishes greenhouse gas conversion factors that organisations can use to calculate Scope 1, Scope 2 and Scope 3 emissions from activity data. These factors are updated annually.
Source: UK Government greenhouse gas conversion factors
How Sustainability Suite supports accountants
Carbon accounting can become a practical advisory opportunity for accountants, but having the right technical understanding is an important starting point.
Sustainability Suite members have access to training, tools and expert support designed to help accountants build their sustainability knowledge and turn it into practical client conversations.
Our recent course on Carbon Accounting covers:
Introduction to Carbon Accounting
A practical course covering carbon accounting fundamentals, the GHG Protocol, Scope 1, 2 and 3 emissions, data collection, calculation methods and government emissions factors.
Carbon Accounting Practice Workbook
Worked examples and exercises covering activity-based and spend-based calculations across Scope 1, Scope 2 and Scope 3.
Carbon Accounting Excel Workbook
An editable spreadsheet designed to help members practise using business data, emissions factors and carbon calculation formulas in Excel.
A further carbon accounting course is also coming soon, giving members the opportunity to continue building their knowledge and confidence in this area.
If your firm wants to develop its carbon accounting knowledge and support SME clients with more confidence, Sustainability Suite gives you the training and practical resources to turn learning into advisory work.
Sources
GHG Protocol: https://ghgprotocol.org/standards-guidance & https://ghgprotocol.org/corporate-standard-frequently-asked-questions
UK Government greenhouse gas conversion factors: https://www.gov.uk/government/publications/greenhouse-gas-reporting-conversion-factors-2026