Key challenges in carbon accounting

Sustainability has become a strategic priority for finance teams, not just a reporting requirement. To comply with evolving regulations, meet stakeholder expectations, and create economic value, CFOs and their teams must measure and manage carbon throughout the value chain with the same rigor they apply to financials.

The stakes are rising fast. About 60% of the world’s largest companies have made net‑zero pledges, yet 90% are not reducing emissions quickly enough. At the same time, more than 80 countries now use carbon‑pricing instruments, and the cost of carbon is expected to increase sharply, influencing procurement, product design, and overall strategy. This research blog summarizes key insights from the report, Applying Financial Discipline to Carbon Management, and explores how SAP Green Ledger helps finance leaders turn “carbon intelligence” into a driver of margin, resilience, and growth.

Why carbon management needs financial discipline

Regulations such as the EU’s Corporate Sustainability Reporting Directive and Carbon Border Adjustment Mechanism (CBAM) are raising the bar on transparency and carbon pricing. CFOs, chief sustainability officers, and their teams want to know how decarbonization initiatives can improve the bottom line, strengthen supply chain resilience, and increase credibility with stakeholders, auditors, and customers.

Most organizations now set climate targets, but many struggle to connect those goals to financial performance. Carbon pricing schemes, regulatory frameworks such as CBAM, and growing disclosure requirements mean that carbon management has real balance-sheet and P&L implications. Finance leaders are asking questions such as:

• What is our total financial exposure to carbon across operations and supply chains?
• How would new regulations or carbon prices affect product margins and capital plans?
• Which decarbonization initiatives create the greatest financial value, and which simply add cost?

To get there, organizations need more than annual emissions reports. They need a steering tool: a carbon accounting and management practice that identifies key metrics, sets targets, and compares plans with actuals, much like financial accounting does for money. Experts interviewed for the report describe this shift as building “carbon intelligence:” an enterprise capability that embeds carbon insights in decision-making across the organization.

As Professor Stefan J. Reichelstein of Stanford University and the University of Mannheim notes, companies and academics are “racing toward the adoption of more informative corporate carbon accounting systems,” and there are “no real roadblocks” to achieving this goal with the right processes and technology.

Common challenges in carbon accounting today

Despite growing ambition, many organizations are still struggling to translate targets into action. According to Accenture’s  Destination Net Zero  research, as referenced in the report, 90% of the world’s largest organizations are not reducing emissions fast enough. The report highlights several key obstacles organizations may experience:

Lack of complete and standardized data

Emissions data often resides in disconnected systems and formats, making it difficult to build a single, trusted view.

Poor visibility into Scope 3 emissions

Indirect emissions across upstream and downstream value chains remain largely opaque, even as regulations and stakeholders increasingly demand this visibility.

Reliance on spreadsheets and manual processes

Many teams still manage emissions factors, activity data, and calculations in spreadsheets, creating fragile processes, version-control issues, audit risk, and fragmented data not fit for consistent decisions.

Limited understanding of the cost of carbon
Without connecting carbon data to financial structures, it is hard to see how carbon pricing like CBAM and other mechanisms affect margins and capital.

No common system architecture
Calculation engines, reporting tools, and operational systems are often not harmonized or integrated, making it difficult to align methods, processes, and data access.

The result is that decarbonization initiatives risk becoming isolated projects, making it hard to demonstrate bottom-line impact, build supply chain resilience, or credibly communicate with regulators, auditors, and customers.

What’s possible with mature carbon management

Carbon accounting maturity varies widely across regions and industries. Historically, European businesses and companies in sectors such as energy, chemicals, and life sciences have led the way. Yet experts interviewed for the report are optimistic: with the right processes and technologies, organizations can move from estimates to actuals and from compliance to value creation.

Jens Freiberg, board member at BDO, sees four notable trends among more mature organizations:

• Greater rigor in data collection, with more streamlined processes and controls.
• Stronger integration of financial and sustainability data, improving data quality.
• More granular datasets, including supplier data, that illuminate carbon hotspots in the supply chain.
• Growing use of internal carbon prices, aligning decisions with the future cost of emissions.

As these capabilities mature, carbon data becomes a strategic asset, aided by the increasing integration of AI. Companies gain improved transparency at the product level, more focused management steering using carbon intelligence, decreased Scope 1, 2, and 3 emissions, and enhanced credibility with regulators, auditors, investors, and customers. AI can help automate and simplify these tasks, improving speed and agility.

Applying financial discipline: Key steps from the research

The report outlines concrete steps organizations can take to build a financially disciplined carbon accounting and management practice. These steps mirror how Finance would approach any major transformation: start with clear goals, choose the right systems, and invest in the data and expertise to make them work.

1. Establish your goals

Deploying a small, niche solution can generate quick wins, but experts in the report recommend taking a longer view. Start by asking which outcomes matter most for your organization:

• Are you primarily focused on achieving regulatory compliance?
• Do you want to differentiate your products or business in the market?
• Are you trying to reduce carbon‑related costs and manage financial risk?
• Do you need to maintain market access or enter new, more regulated markets?

“Where are you now, and where do you want to be? What are the stepping stones to reaching your goal?” asks Lauren Ing, managing director and UK and Ireland sustainability strategy lead at Accenture. Mature organizations, she notes, understand that the end state “needs to be an enterprise solution,” because that is where all the transactional data lives.

2. Select ERP‑centric tools and work with IT

Once your direction is clear, the next step is to choose technologies that integrate carbon management with your core business systems. Point solutions can calculate, track, and report emissions, but they often sit outside day-to-day decision-making, making it harder to drive decarbonization and ensure transparency.

An ERP-centric approach connects sustainability and operational data, supports audit readiness, and enables more granular decisions. “It’s one thing to produce an annual report that summarizes your emissions profile,” says Derek D. Przybylo, partner in the climate change and sustainability service at the EY organization. “It’s another thing to manage a specific product line or business operation, where the information you need to make decisions and perform analysis is at a significantly higher level of variability and volume. That’s where you need to tap your ERP data.”

Finance and sustainability teams should also partner closely with IT to maximize existing ERP investments. “Have a conversation with IT leaders about what is possible through the ERP system, since they’re focused on maximizing the ERP investment and its effectiveness and efficiency,” advises Brian Jobe, carbon accounting lead for Deloitte & Touche LLP. “You’re making the rest of your business decisions based on ERP data. Why wouldn’t you treat carbon data the same way?”

3. Build your data foundation and seek expertise

With a vision and architecture in mind, organizations need to build the underlying data foundation and governance. Professional services firms can help you move faster and avoid missteps by:

• Assessing ERP data readiness: PwC, for example, often starts with an ERP data-readiness assessment to demonstrate how existing data, such as product weight or distance traveled, can be used to support sustainability footprint management and carbon calculation.
• Strengthening methodologies and controls: Many leaders need support in developing calculation logic, documentation, and processes that will withstand audit scrutiny and support strategy execution.
• Addressing industry‑ and region‑specific issues: Requirements differ by market and sector, from utilities that must outline detailed decarbonization paths to automotive firms whose customers expect transparent product carbon footprints.

“If you want to have a competitive business model, you need to provide carbon information, because this will be needed across all of the value chains of the future,” says Benjamin Lösken, director of the sustainability platform at PwC Germany. “And do your homework in terms of getting the data right, especially on the ERP layer and the data management layer.”

These integrated steps enable finance teams to bring their proven financial rigor to carbon accounting, building a solid operational foundation that supports the Green Ledger capabilities, and business applications outlined below.

How SAP Green Ledger compares to other approaches

By placing carbon directly into the financial system of record, SAP Green Ledger helps organizations move beyond periodic ESG reporting toward continuous, decision-grade carbon intelligence. Different approaches to carbon accounting offer different strengths and trade‑offs.

With SAP, companies can acquire, calculate, exchange, and account for carbon using the same dimensions finance uses for money, preparing for tighter regulations and mounting customer requests for carbon cost and risk information.

How SAP Green Ledger embeds carbon into finance

SAP Green Ledger is designed to help organizations manage carbon with the same rigor as financials by embedding carbon in the ERP and reusing existing financial controls, master data, and audit trails.

Treating carbon like money

SAP Green Ledger applies double-entry accounting principles to carbon, enabling organizations to:

• Record carbon at the transactional and product level, not just as aggregated totals.
• Allocate emissions based on real operational data and, increasingly, actual supplier data, rather than static averages.
• Maintain auditable, explainable rules for allocations and adjustments, similar to financial accounting policies.

This approach enables the cost attribution of carbon and “CFO-grade” lineage, which increasingly becomes a necessity under CBAM, building a separate, parallel ESG stack. Carbon becomes part of the same system of record that governs financial decisions.

Ledger-based planning for carbon costs

By using transactional data at the product level, SAP Green Ledger supports ledger-based planning for carbon costs:

• Finance teams can forecast exposure to different carbon pricing regimes, simulate internal carbon prices, and test decarbonization capex scenarios.
• Margin analysis can incorporate carbon costs directly, helping organizations understand the true profitability of products, customers, and markets under various regulatory futures.
• Liabilities linked to carbon (e.g., future CBAM payments) can be identified and optimized as part of broader financial planning.

In short, organizations can start managing carbon like money with the same discipline, foresight, and controls as finance uses for money.

End-to-end traceability and faster close

Because SAP Green Ledger reuses existing financial structures, it supports:

• End-to-end traceability of emissions from source systems and processes through to financial statements and disclosures.
• Faster period-end closes by avoiding reconciliation between separate carbon and finance systems.
• Governance of carbon where decisions happen rather than in disconnected ESG tools.

This is particularly compelling for SAP-centric enterprises that need to integrate carbon management into their existing ERP landscape and prepare for complex regulations like CBAM.

Use cases: Managing carbon like money

Once carbon is embedded in financial systems, it stops being just a reporting metric and starts shaping decisions about compliance, pricing, sourcing, and investment. The report describes a range of use cases that illustrate how organizations at different maturity levels can manage carbon like money.

Early‑journey use cases

• Reduce the regulatory burden: Integrated carbon and financial accounting can streamline the preparation of regulatory reports and audits, reducing manual effort and cost. Primary benefit: faster preparation and lower cost of regulatory compliance.
• Provide the business with access to carbon data: Role‑based dashboards give internal stakeholders tailored access to carbon data, aligned with their responsibilities. Primary benefit: better decision‑making through simplified, role‑specific access to sustainability data.
• Gain energy consumption insights: Hot‑spot analysis helps organizations identify opportunities to switch to renewable energy or improve efficiency. CDP Worldwide reports companies often discover a 7–10% emissions reduction in the second year after reporting carbon data. Primary benefit: data‑driven actions that accelerate decarbonization.

Use cases for more mature organizations

• Forecast emissions and carbon cost trade‑offs: Integrated solutions help CFOs simulate whether to pay for carbon (for example under the EU Emissions Trading System or CBAM) or invest in reducing emissions. Primary benefit: greater insight and control over carbon‑related financial exposure.
• Gain carbon data intelligence: When all carbon data resides in a single ERP‑centric solution on a unified data model, assessing the sustainability impact of business choices becomes faster and more accurate. Primary benefit: more sustainable choices informed by closed‑loop emissions data.
• Improve product design and differentiation: Product‑level carbon transparency supports design decisions and helps companies differentiate in the market. Some small businesses already display carbon information on price tags and service menus to stand out and even secure funding more easily. Primary benefit: increased sales and stronger consumer engagement through transparency.

As these use cases show, carbon accounting technology can unlock improved product‑level transparency, better steering using carbon intelligence, lower emissions, higher data quality, and greater economic resilience.

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