Carbon Accounting for SMEs: 4 Myths That Should Be Debunked

Carbon Accounting

Measuring GHG emissions

Being in charge of the Sustainability Strategy of your company may feel like holding the weight of the world on your shoulders. Climate Change is on the news daily, with catastrophic events being broadcasted on live tv as we speak. We have a very limited amount of time to curb our carbon emissions, and the public turns to the private sector looking for answers. 

You may already have been asked what your impacts are and what your organisation is doing against Climate Change. Your clients want to associate themselves with a brand that reflects their values. Investors may ask you to report this information for their own evaluations.

While you may not yet be required to disclose due to the relatively small size of your operations, there is increasing scrutiny on the subject. A recurring figure you are asked about is your carbon emissions

We already discussed in a separate blog post the danger of Carbon Tunnel Vision. However, your greenhouse gas emissions are an important parameter to calculate and communicate transparently. 

But sometimes the task may seem overwhelming. There are an infinite number of publications, guides, different approaches and the ever-present sustainability jargon. While you get the basics, the execution looks complex. 

To a certain extent, it certainly is. Nevertheless, we have prepared a list of 4 myths to dispel to get you started.

1. It is (too) difficult

Consider a simple organisation, with a defined set of activities and facilities. Carbon footprinting boils down to one simple equation: the sum of activity data, multiplied by the relevant emission factors. It is not rocket science.  

Figure 1. How to calculate carbon footprint

 Clearly, there is a certain list of questions that can follow:  

  • Which activity data should I include?  
  • Where can I record it?  
  • Which Emissions factors should I use?  
  • Where can I find them?  

The GHG Protocol Corporate Standard comes in handy at this point. This document is the main source of answers to all the most pressing questions regarding simple organisational carbon footprints. It clearly explains the boundaries of the exercise, principles, and approaches. Most importantly, it defines the general rules for the calculations.

It is around 116 pages, so not exactly light reading material, but it contains a great FAQ section at the very start.  

While the Standard sets the rules for how to create an organisational carbon footprint, additional support and guidance are widely available on the internet.

One of the many resources for businesses is the SMEs Climate Hub, a collaboration of the UN's Race to Net Zero, Oxford University and We Mean Business Coalition. The initiative provides knowledge, courses and some simple tools for taking the first steps toward carbon emission reporting. 

Generally, any guide or resource that aligns with the GHG Protocol Corporate Standard is legitimate. We advise finding publications tailored for your sector, as there may be big differences in approaches depending on your operations! 

2. It is very expensive

As we saw above, the logic behind footprinting is straightforward. It comes down to collecting data and finding appropriate Emission Factors for it. This is an exercise that can easily be carried out with existing tools.  

MS Excel is a great example of standard software that is often used for these calculations. The flexibility and replicability of the models that can be built in Office are great pros of starting out with an online template. Again, the GHG Protocol comes to save the day, with their free tools available on their website.

Depending on your geography and sector, organisations may be able to provide tailored templates for your business. For example, in Spain, the Andalucian Climate Change Authority enables interested parties to report through their templates, provided to local companies. 

A great array of online tools is also available if you have the adversity to create your own model. Many sustainability consultancies provide a simplified version of their bespoke calculators as a free resource on their websites.

Nevertheless, these tools are often too simple, and, unlike Excel, there is limited flexibility in adjusting scope or boundaries.

It can be a good exercise to sense-check your own calculations with little effort. Some of the best free tools available  are:

If you have larger operations or an extensive and complex value chain, you may find the resources provided here limited. It is not easy to find a solution that fits your exact needs on the first try, and there is always a certain degree of bespoke considerations to be taken into account.

However, starting is the most important part of the journey. In fact, tools, models and calculations can be improved over time. We suggest you start using the free resources to gather an initial idea of your footprint and refine it later when reporting it publicly. 

3. It is a box-ticking exercise

If you already went through the exercise of creating your organisational carbon footprint, you may remember the steps you followed.

You collected all the needed information from the various data holders, had a long back-and-forth email exchange, and finally obtained sign-off on the final figures.

Then it was out of your desk and sent to be added to your Sustainability Report for the current year. You could breathe a sigh of relief, and maybe you even thought:

Now I can focus on my actual tasks 

While it is understandable that there are competing priorities in an ESG action plan, considering carbon accounting as a chore to complete every end of the year is a dangerous practice. Not only does it create a negative outlook on one of the most useful KPIs your organisation can track, but clearly misses the point of the exercise completely. 

To quote Peter Drucker, one of the most influential management consultants of the last century,

You cannot manage what you cannot measure.

The complex methodologies of carbon accounting have been developed for managing and reducing your GHG emissions. Standard development, technical reviews, and assurance are not meant to make your company's non-financial disclosure a nightmare. Instead, they aim to provide a solid framework for emission reduction.

There are benefits in a year-long collection data period, with activity figures reported per month. Not only does it remove the incredible stress of collecting all the invoices and maintenance logs in December, before every colleague goes on annual leave. It also allows the integration of GHG data in decision-making throughout the year. 

 

GHG Inventory Yearly Process

The aim is to create the habit and the process to share, elaborate and review carbon data as much as you would financial indicators. After calculating the carbon footprint of your organisation, you shouldn't put the data and indicators on the back-burner. To successfully reduce the carbon emissions of your business, you should regularly track and monitor GHG indicators.

4. It won't make a difference

This may be the hardest myth to dispel. Many would say the largest world emitters are countries where they don't have operations, or sectors that have little to do with their business, such as cement production in China. 

It is understandable to point fingers at other, massive companies, whose impacts may be thousands of times larger than that of your organisation. And it is correct to keep those players accountable by asking them to:

  • Align to ambitious frameworks;
  • Report their carbon emissions;
  • Decrease their impacts in a timely manner. 

But simply because others seem to have more responsibility than us, does not mean that there is not a role for small and medium-sized organisations to play. Extensive evidence points to the crucial role small businesses cover in reaching a sustainable world, as explored by the OECD in their 2015 publication: No net zero without SMEs. 

Climate Change Mitigation is a complex, interconnected system, in which players from all spectrums of the value chain have interdependencies. In fact, your operational emissions enter your clients' Scope 3 emissions. At the same time, their products or services influence the upstream of the value chain.

Being 90% of the business population, small enterprises have a significant stake in the effect that Climate Change will have on the environment in which they operate. Moreover, their business continuity will be heavily impacted if we do not reduce carbon emissions and align to the 1.5°C Paris Agreement Pathway.

Conclusion

There are many things that a company can do to facilitate the transition to a Net Zero carbon world. The first one is to use the information gathered with their footprint to tackle the largest emission hotspots. The Carbon Trust wrote a great guide on the most common sources of emissions per sector within small businesses. It provides guidance on lighting, heating, cooling, compressed air, processes, office spaces, fleet and wider value chain impacts. 

In parallel, aligning with international voluntary frameworks can raise your ambition for corporate climate action significantly. The Science-based Target Initiative (SBTi) accepts commitments from small-medium enterprises to reduce their emissions aligned with their modelled pathways. The Race to Zero Program, from the UNFCCC, worked alongside thousands of businesses ahead of COP 26.

The OECD launched a large platform for Financing SMEs Sustainability in November last year, linking businesses and financial institutions. 

Debunking myths around carbon accounting may be part of the solution, but Nexio Projects offers bespoke advice on how to calculate and reduce your business carbon emissions.

We hope this short guide removed some of the mental barriers that prevented you from approaching carbon accounting well.

If you are still struggling to understand your inventories or would like to gather some insights from our extensive project experience, please get in touch with our team via this link.