Carbon accounting now a ‘must-have’
The threat of emissions reporting legislation isn’t the only reason why companies need to better understand their carbon footprints. Brought to you by Cogo.
Accounting firms are taking a risk if they fail to offer a carbon accounting service to their clients, an industry insider has warned.
As ESG pressures increase and consumers switch to more sustainable brands and products, the need to accurately measure a company’s carbon footprint is becoming an essential business tool.
Imminent legislation will make it mandatory for companies to report on their environmental impact.
“Regulations like the ‘Streamlined Energy and Carbon Reporting (SECR) in the UK force large companies to quantify their greenhouse gas emissions,” Julie Lindenberg, Cogo’s APAC CEO, says. “The Treasury is currently consulting on a similar approach in Australia, and many experts think it’s only a matter of time before regulations are enforced here.
“If you think about accounting as how you manage financial numbers, then carbon accounting is how you manage carbon numbers.”
The first step in managing carbon is measurement, which can be a complex calculation with so many factors to consider. Expert consultants can work out a ‘footprint per dollar spent’ for the output of each department and also for the company’s products.
“Once you have that information, you’ll see ‘hot spots’ where emissions are higher than elsewhere,” Lindenberg explains. “That will help you to start building carbon literacy among staff and identify areas where reductions will be much easier to achieve.”
Carbon footprint reports
Accountancy firms can then prepare annual carbon footprint reports that are incorporated into advisory meetings. “It’s impossible for your clients to reduce their impact or commit to net zero if they can’t accurately assess their impact,” she warns. “And that’s a very risky situation to be in.”
“It’s impossible for your clients to reduce their impact or commit to net zero if they can’t accurately assess their emissions.”
Reducing carbon has become a big priority for customers - globally, 85% of people are proactively buying more sustainably than they did five years ago, with a third willing to pay a premium. Having green credentials is becoming a prerequisite for doing business.
“I met a turf company executive who told me they’d been working at reducing their impact for years through replacing the chemicals they use, electrifying their fleet and reducing freight journeys. They mentioned these efforts during a tender process and were told it won them the contract!”
Lindenberg says that two benefits of embracing sustainability surprise many CFOs.
1. Leveraging sustainability for cost benefits
“Contrary to what people might think, it can deliver a significant long-term reduction in costs. Switching to electric vehicles, installing solar panels or replacing high energy light bulbs are all significant investments, but they’ll actually end up saving you money.”
2. Making it easier to attract and retain business
Carbon accounting also looks at the energy intensity of suppliers as every aspect of production has to be included in the assessment. This means that when contracts with original equipment manufacturers need to be renewed, for example, they might be asked to provide details of the progress they’ve made in switching to renewables. Firms who can prove this sort of thing will find it easier to win new and repeat business.
So, carbon accounting is no longer a nice-to-have, value added offering - it should be an integral service for every accounting firm.
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For details of how Cogo can expand the carbon accounting services you offer to clients, visit cogo.co