Why is carbon management important?

Environmental sustainability means using our planet’s current resources without compromising the wellbeing of future generations. Carbon management is one way to turn that ideal into a reality. By tracking emissions, businesses can take an important first step towards reducing their carbon footprints whilst improving energy efficiency and maintaining the delicate balance of our planet’s ecosystems.

That’s not just the right thing to do—it’s good for business, too. Climate change represents a major risk to every aspect of how we live, work, and conduct business. It destabilises markets, disrupts supply chains, and endangers lives and livelihoods around the globe. With a thoughtful approach to carbon emissions management, companies can mitigate these risks while maintaining compliance with stricter global regulations, including mandatory reporting requirements in the United Kingdom and European Union.

Effective carbon management also offers an opportunity to win the loyalty of a growing cohort of environmentally conscious consumers—helping ensure the long-term health of the business. In fact, research shows that Gen Z and Millennial customers are 27% more likely to buy from a brand that cares about its environmental impact.

What is a carbon footprint and why does it matter?

A carbon footprint is the total amount of greenhouse gases released into the atmosphere by any activity, expressed in equivalent tonnes of carbon dioxide (CO2). Just about everyone and everything leaves a carbon footprint—including people, pets, products, businesses, cities, and countries.

A large portion of our planet’s carbon emissions comes from the production and distribution of goods and services. By measuring the impact of these and other activities, businesses can reduce emissions, improve efficiency, and design products that promote greater sustainability.

So, how can businesses get started? The first step towards effective carbon management is to understand the different types of greenhouse gas emissions, which can be categorised into three scopes.

How to calculate your carbon footprint

Calculating a carbon footprint requires measuring the total amount of greenhouse gas emissions (GHG) emitted as a result of any activity. Here are some of the most common calculation methods, each with its own advantages and disadvantages. (These methods align with the GHG Protocol, the most widely used international framework for calculating emissions.)

Supplier-specific method

How it works:

Calculates emissions based on data provided by suppliers, taking into account the emissions associated with purchased goods and services for a comprehensive view of Scope 3 emissions

Pros

• Helps clarify and manage emissions throughout the supply chain
• Can foster closer relationships with suppliers who are also focused on sustainability

Disadvantages

• Depends on the quality and availability of suppliers’ data

Average-data method

How it works:

Estimates GHG emissions using industry-average factors for specific types of goods and services

Pros

• Easier to implement when supplier-specific data is not available

Disadvantages

• Relies on industry averages, which may not accurately reflect specific operations or suppliers

Expenditure-based method

How it works:

Estimates GHG emissions based on the economic value of goods and services, multiplying by industry-average emissions factors

Pros

• Can be easier to calculate, especially if detailed data isn’t available
• Links directly to financial expenditure, making it straightforward for budget analysis

Disadvantages

• Can be less precise since it relies on average data, not specific activities or suppliers
• May not capture the full picture of emissions, especially for diverse or complex operations

Hybrid method

How it works:

Combines supplier-specific activity data with secondary data to fill the gaps

Pros

• Provides a comprehensive view of emissions by integrating multiple data sources
• Can be tailored to fit an organisation’s specific needs

Disadvantages

• Can be more complex to implement, requiring integration of various data types and calculation methods
• May require significant time, effort, and expertise to manage effectively

The business implications of carbon emissions management

Effective carbon emissions management is all about seizing opportunities, managing risks, and building a sustainable future. Here’s how measuring and reporting carbon emissions can impact businesses in practical and meaningful ways:

• Compliance

  Businesses in the European Union are already subject to mandatory reporting requirements. They could face large fines and legal penalties for failing to comply. Staying ahead of regulatory demands not only helps avoid these consequences, but also positions them as proactive leaders.

• Market positioning

  Eco-conscious customers are more likely to support businesses that are transparent about their environmental impact. Similarly, investors are looking for companies that manage emissions responsibly, because that’s a sign of smart risk management and long-term viability.

• Operational efficiency

  When businesses are aware of their carbon footprints, they can find new ways to consume less energy and produce less waste. That can lead to significant cost savings over time—potentially boosting the bottom line.

• Risk management

  Extreme weather events are just one of the risks associated with climate change. By measuring and analysing emissions, businesses can identify which operations, processes, or locations are more vulnerable to climate-related natural disasters.

• Supply chain resilience

  Diversifying suppliers and sourcing locally can reduce vulnerabilities to extreme weather events that could disrupt transport and logistics.

• Stakeholder engagement

  Considerate transparency builds trust. Businesses can foster stronger connections with employees, customers, and investors by openly sharing emissions data and progress towards reduction goals.

Seven tips for getting started with carbon emissions management

You recognise the need. You understand the advantages. Now here’s how you can take concrete action. Here are seven things you can do to get your business’s carbon management efforts underway. (Bear in mind that some of these tips may not apply to every business. We recommend focusing on the practices and processes that align with the priorities of your organisation.)

1. Identify the main drivers of carbon emissions
   One of your first priorities is to collect data on energy consumption, transport, waste, and other relevant activities. A comprehensive carbon audit will provide a clear baseline and identify potential areas for improvement.
2. Set clear, achievable goals
   Your goals should be specific, measurable, and time-bound. They should align with broader sustainability targets, such as achieving net-zero emissions by a certain year. And they should provide direction and motivate your team to work towards a common purpose.
3. Treat carbon like money
   Think of carbon emissions as a valuable resource—just like money—that needs careful management. By assigning a cost to carbon emissions, either through internal carbon pricing or by tracking the financial impact of emissions, you can encourage greater efficiency and accountability across every aspect of the business.
4. Embed sustainability into your business processes
   Include carbon management in your day-to-day operations by considering the environmental impact of every decision—from procurement to product design to supply chain management. That way, your business can continuously improve its environmental performance and adapt to changing regulations and market expectations.
5. Certify your use of renewable energy
   Certifying your use of renewable energy such as solar, wind, hydropower, and geothermal can significantly lower your reported emissions. Here are a few ways to get certified:
   - In the United States, Renewable Energy Credits (RECs) will match your energy use with renewable generation.
   - In the United Kingdom, Renewable Energy Guarantees of Origin (REGO) certify that your energy comes from 100% renewable sources.
   - RE100 is an initiative for companies committed to sourcing 100% of their electricity from renewable sources.
6. Turn recycling into a procurement strategy
   Minimise waste by buying recycled or used goods and leasing office equipment. Encourage a circular business model where items are repaired and maintained rather than replaced. Every item diverted from the landfill helps lower your overall emissions.
7. Make it a team effort
   You can create a sense of shared responsibility by involving employees, customers, and suppliers in your carbon management initiatives. Encourage a culture of sustainability by providing training and resources to your staff. Keep them informed of your progress and achievements.

What is carbon management software?

Carbon management software offers specialised tools to help you measure, manage, and reduce your carbon emissions. When integrated with your existing systems, processes, and data sources, a software solution can provide a comprehensive view of your carbon footprint. Here are just a few things that carbon emissions software can help you achieve:

• Emissions tracking and calculation
  At minimum, a carbon management platform should automate the collection of data from different systems and sensors, giving you a single source of truth for monitoring emissions and analysing trends.
• Carbon reporting
  Accurate reporting is an essential part of carbon management. A carbon management platform can simplify the reporting process by automatically generating compliance reports, capturing and formatting all the necessary data to help you avoid penalties and fines.
• Data integration and analytics
  To be effective, a carbon management platform should collect data from multiple systems and sensors, giving you a single source of truth for monitoring emissions and analysing trends.
• Goal setting, progress monitoring, and scenario planning
  Carbon emissions software can help you set environmental targets and monitor your progress. You can even analyse scenarios that might impact your sustainability goals—for example, an increase in energy prices—and calculate the potential impact on your carbon footprint.
• Supply chain management
  You can create a more sustainable supply chain by tracking and reducing emissions produced by your suppliers and partners. Some platforms facilitate carbon data exchange with suppliers, making it easier to share emissions data across your supply chain.
• Cost management and savings
  Carbon emissions software can help you identify opportunities for cost savings in combination with low-carbon alternatives—potentially delivering a substantial return on your software investment.

The future of carbon management

Carbon management is still in its infancy, and the climate crisis continues to evolve rapidly. But one thing is clear: emerging technologies will play a major role in helping businesses find the right way forward. Here are a few trends to keep on your radar:

Embracing a green ledger

Similar to a financial ledger, a green ledger provides a transparent and detailed account of all sustainability-related activities within your organisation—making it easier for your business to treat carbon like money. To be effective, a green ledger should be continuously updated with real-time data from many sources across the business to provide complete transparency and accountability on an ongoing basis.

Putting AI and other technologies to work

Technologies like artificial intelligence (AI), machine learning, and the Internet of Things (IoT) are already essential tools in the fight against climate change. IoT devices with smart sensors can monitor emissions in real time. AI and machine learning can use that data to automate reports, identify inefficiencies, and forecast future emissions based on predictive analytics. While these technologies consume a great deal of energy and may contribute to your business’s carbon footprint, they can be a net positive for lowering carbon emissions when thoughtfully deployed. It’s also worth noting that AI will become more autonomous in the months and years ahead, so you can expect the roles and contributions of AI tools to expand and evolve significantly.

Making transparency a top priority

Consumers, investors, and regulatory bodies expect detailed and accurate information about a company's carbon footprint. This will likely mean equipping carbon emissions software with better data visualisation tools and more accessible reporting formats, making it easier for stakeholders to understand and trust the reported data.

Integrating with broader sustainability goals

As we move forward, carbon management should become more deeply embedded in many businesses environmental, social, and governance (ESG) goals. That means focusing not only on reducing carbon emissions, but also promoting social equity, biodiversity, and resource conservation. With this more holistic approach, carbon management becomes part of a comprehensive sustainability strategy that addresses a broad range of environmental and social challenges.

Embracing collaboration and partnerships

Collaboration among businesses, governments, and non-profit organisations is likely to be crucial in advancing carbon management. Partnerships can lead to shared knowledge, resources, and solutions that drive collective progress. Going forward, industry-specific coalitions and public-private partnerships are likely to play a greater role in carbon emissions management.

Taking advantage of financial incentives and green financing

An increasing number of governments and financial institutions are creating mechanisms such as carbon credits, green bonds, and sustainability-linked loans to support businesses in their carbon reduction efforts. These financial tools provide capital for companies to invest in sustainable technologies and practices.

Creating stricter regulations and global standards

As the urgency to combat climate change grows, businesses may need to comply with new standards and reporting requirements. This will likely drive further innovation and adoption of best practices in carbon management.

Focusing on net-zero and carbon removal

For many companies, the long-term goal is to achieve net-zero emissions or even become carbon-negative. That will involve not only reducing emissions but also investing in carbon removal technologies and projects that capture and store CO₂ from the atmosphere. Innovations in carbon capture and storage (CCS) and natural solutions such as reforestation could play a role in those efforts.

As more businesses make carbon management a priority, many elements will come into play: technological innovations, new regulations, and evolving market expectations. By anticipating and adapting to those dynamics, you can reduce both your carbon footprint and your operational costs. That’s how you can meet the growing demand for more environmentally responsible business practices—and lead the way to a more sustainable future.

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