Whether you own, work for or advise a business - one of the first steps towards taking climate action is to reduce the direct contribution of the business to carbon emissions. Everything a business does in the process of operating is part of their carbon footprint and environmental sustainability starts with managing the size and trajectory of that footprint.

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Enter, Carbon Management…!

Carbon management is fast becoming a critical activity for all businesses to undertake if they want to take responsibility for their impact on the environment. You might be wondering what on earth this involves and you wouldn’t be alone! 

Until recently, carbon management has been a discipline reserved for consultants and ESG specialists. With the growing urgency of action, best practices are becoming more readily available and technology platforms are emerging to help any rigorous and passionate stakeholder take responsibility for a company’s carbon emissions and become a ‘carbon manager’. 

With every emission of greenhouse gas (GHG) avoided or removed (‘sequestered’) from the atmosphere, we are closer to achieving our global goals of limiting global warming to 1.5 degrees celsius.

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What is carbon management?

Carbon management is all about understanding how your business operations are contributing to carbon (or other GHG) emissions and taking steps to mitigate or reduce them as much as possible. This includes considering emissions produced directly by your business, by businesses in your supply chain and even your customers when they use your product or service; referred to as your scope 1, 2 and 3 emissions.

What’s involved in carbon management?

In simple terms, carbon management involves measurement, reduction/ avoidance and, where relevant, offsetting. It also means implementing systems, processes and policies to manage and achieve each of these elements. In fact, carbon management is emerging as an area of non-financial disclosure that requires the rigour and attention to detail of accounting professionals. ‍

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Step 1: Understand your emissions baseline

As our co-founders, Cat and Jo, always say: “what’s measured can be managed.” You might hear the terms - carbon inventory, carbon footprint or carbon assessment - which are all synonymous with the breakdown of how much carbon you produce across different areas of your business. Take a look at the pie graph below for an exemplary high-level breakdown of one company’s carbon footprint (visualised in the Trace app).

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Understanding the indirect and direct emissions associated with your business - that’s scopes 1, 2 and 3 - is the essential first step to developing a carbon management plan or strategy. With this data, you can identify your greatest opportunities for improvement, start to plan your carbon reduction initiatives and set achievable goals.

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Step 2: Use the carbon management framework or hierarchy to prioritise tactics

Once you understand where your emissions lie, you can turn this into an actionable strategy. A commonly used framework called the ‘carbon management hierarchy’ can help guide you (see the diagram below).

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This framework shows you the ideal way to approach uncovering the activities you will undertake to manage your carbon footprint. This does not necessarily mean your business should complete these stages in sequence. For example, you can start offsetting your operations on ‘day 1’ while you figure out how to reduce your emissions. Instead, use this as a framework to think through the different ways to solve a problem; the biggest section at the base of the pyramid represents the best potential course of action if you can achieve it, and if not, you move up the pyramid.

Let’s break them down:

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Avoid

This is the most favoured course of action; not doing activities that cause GHG emissions in the first place. 

This can be difficult when you’re trying to run a business and you have existing processes in place, but some examples include:

• Running a team event or meeting online rather than in person to avoid the associated travel emissions.
• Switching to EVs for your business’s car travel by choosing EV hire cars or EV ride share services.
• Deciding to be an online-only business, rather than also having a bricks and mortar shop front which requires additional energy and resources to operate.

As more clean technologies for energy, transport and materials are more widely available, avoiding GHG emissions will only become easier in the years to come, so staying on top of emerging innovations is important.

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Reduce

Right now, while fossil fuels (namely coal and gas) are still a prominent source of energy and fuel, avoiding producing emissions can be tricky but it’s not impossible to reduce your emissions significantly. The rise of renewable energy, improving technology for waste management and more general awareness of sustainable business practices mean you don’t need to look far for solutions that will have an almost immediate and significant impact on reducing your emissions.

Reducing your emissions is very achievable across almost every aspect of your carbon footprint, it just requires a commitment and willingness to change the way you do things. This could include, switching to renewable energy for your offices or buildings, reducing the number of car trips and flights your team takes for business travel or offering more plant-based catering for your staff at team events.

A more technically complex tool you can use to assess the best areas to focus your attention on is a Marginal Abatement Cost Curve (MACC). The MACC approach is a way to map potential sustainability projects on a graph based on CO2 impact and cost factors. Once finished, the graph can help clarify the areas of highest priority for your business.

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Substitute/ Replace

Sometimes it’s impossible to switch to a completely emissions-free option - particularly as you navigate these changes in the short term, however you can almost always find low-carbon options that will still drastically reduce the emissions of an activity. For example:

• Flying economy is more carbon-efficient per passenger than flying business or economy class.
• There are many ways to make your advertising campaigns more sustainable, by producing shorter digital videos at lower resolutions or conducting more eco-conscious film shoots.
• Look for an office space with a high energy efficiency rating. NABERS is the prominent star rating process for buildings in Australia - look for offices with 6 stars!

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Offset

Avoiding, reducing and replacing emissions-intensive activities is not an overnight process, so in the short-term your business will still be producing some emissions. 

To responsibly manage the emissions you’ve been unable to avoid or reduce, carbon offsets provide a great way to take immediate climate action. Carbon offsetting allows businesses, governments and even individuals to support projects all around the world that sequester (remove/ drawdown) carbon from the atmosphere, or avoid it being released in the first place. Businesses can purchase one carbon credit for every tonne of CO2 they wish to offset from their own carbon footprint. That credit represents a verified positive carbon impact via a specific climate project that wouldn’t have otherwise been able to exist, without the financial support offered by carbon credits.

Trace offers our business members the ability to offset their unavoidable emissions via our portfolio of projects, handpicked to ensure credibility and a range of benefits outside of the carbon impact alone, supporting UN Sustainable Development Goals.

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Carbon management vs Carbon accounting: spot the difference

Whilst carbon management focuses on the strategic and analytical lens on emissions data, carbon accounting is focussed on the quantifiable measure that a company or individual can be held accountable for. 

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Carbon management is beneficial to any business wanting to operate sustainably and have a positive impact on the planet, however there are many benefits beyond this, including:

• Cost savings. As our economies continue to decarbonise, switching to ‘greener’ alternatives for energy, transport and other business inputs will not just be the right thing to do, but also the more cost-effective option. Carbon management helps businesses identify cost-saving areas within and beyond its direct operations through improved energy and resource efficiency.
• Reducing regulatory risk. As more countries adopt ambitious climate targets, this will translate to more stringent regulatory requirements for businesses to manage their carbon emissions. Setting up a carbon management system now will ensure your business is future-proofed as the regulatory landscape evolves.
• Responding to stakeholder demands. Increasingly, investors, customers, employees and industry associations are voicing greater expectations that businesses of all types demonstrate they are doing their part to respond to the climate emergency. An effective carbon management process should mean you have the ability to answer questions posed by these stakeholders and show you’re on the front foot when it comes to making your business more sustainable.
• Improving competitiveness and promoting innovation. By realising the above benefits, your business will be a step ahead of your competitors and demonstrate your role as a leader in your industry.

From the list above - cost-savings to regulatory risk and advisory services - it becomes apparent that the rigour, discipline and customer-first work ethic of accountants makes them well placed to deliver on both the management and accounting aspects of carbon reporting.

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Why should your business implement carbon management?

Carbon management is beneficial to any business wanting to operate sustainably and have a positive impact on the planet, however there are many benefits beyond this, including:

• Cost savings. As our economies continue to decarbonise, switching to ‘greener’ alternatives for energy, transport and other business inputs will not just be the right thing to do, but also the more cost-effective option. Carbon management helps businesses identify cost-saving areas within and beyond its direct operations through improved energy and resource efficiency.
• Reducing regulatory risk. As more countries adopt ambitious climate targets, this will translate to more stringent regulatory requirements for businesses to manage their carbon emissions. Setting up a carbon management system now will ensure your business is future-proofed as the regulatory landscape evolves.
• Responding to stakeholder demands. Increasingly, investors, customers, employees and industry associations are voicing greater expectations that businesses of all types demonstrate they are doing their part to respond to the climate emergency. An effective carbon management process should mean you have the ability to answer questions posed by these stakeholders and show you’re on the front foot when it comes to making your business more sustainable.
• Improving competitiveness and promoting innovation. By realising the above benefits, your business will be a step ahead of your competitors and demonstrate your role as a leader in your industry.

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How to implement a carbon management strategy or system

If you’re ready to begin the process of carbon management in your business, you may wish to adopt a software platform to support this. An effective software platform will bring everything you need to measure and manage your emissions into one place.

Trace for Business offers an accessible, streamlined platform for any business to start their journey to net zero. First, it makes measuring your footprint fast and easy and then gives you an easy-to-interpret overview of your carbon footprint. You can also take immediate climate action by investing in carbon offset projects and planting trees, with your impact clearly visible in the Trace platform. And, most importantly, you can start planning ways to reduce your emissions with a list of suggested actions any business can implement without outside expertise or support. You can invite your whole team to access the platform, meaning everyone can play a role in your business’s journey to net zero.

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If you’re interested in how Trace can support your business’ carbon management strategy, get in touch with our friendly team!

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To find out more about carbon accounting, read here- Carbon Accounting Guide

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To find out more about carbon footprints and how to reduce see here.