What is Carbon Accounting?

Carbon accounting is a company’s measurement and tracking of the greenhouse gas emissions that arise as a result of the company’s operations. It involves quantifying the amount of carbon dioxide (CO2) and other GHGs released into the atmosphere. By understanding and monitoring these emissions, companies can identify opportunities to reduce their carbon footprint and contribute to mitigating climate change.

Who will be impacted by mandatory carbon accounting reporting?

Reporting on carbon emissions will become mandatory for the following companies through a phased approach (some required to report from 1 January 2025 through to all from 1 July 2027):

Size

The entity and its controlled entities satisfy at least two of the following three criteria:

• Consolidated revenue for the financial year of $50 million or more.
• End-of-year consolidated gross assets of $25 million or more.
• End-of-year employees of 100 or more.

National Greenhouse Energy Reporting (NGER) reporters

Required under the National Greenhouse and Energy Reporting Act 2007 (NGER Act)

Asset owners

Both the following criteria are met:

• The entity is a registered scheme, registrable superannuation entity or retail corporate collective investment vehicle (CCIV).
• The value of its assets at the end of the financial year of the entity and the entities it controls is $5 billion or more.

How is Carbon measured?

Carbon is measured and categorised into three scopes:

Scope 1 Emissions

Scope 1 emissions are direct emissions from sources that are owned or controlled by the reporting company. These typically include emissions from combustion of fossil fuels in owned or leased facilities, emissions from company-owned vehicles, and emissions from chemical reactions in industrial processes.

Scope 2 Emissions

Scope 2 emissions are indirect emissions resulting from the generation of purchased electricity, heat, or steam consumed by the reporting company. These emissions occur at the source of electricity generation, such as power plants, and are associated with the company’s energy consumption.

Scope 3 Emissions

Scope 3 emissions are all other indirect emissions that occur in the value chain of the reporting company. These emissions are a consequence of the company’s activities but occur from sources not owned or controlled by the company. Scope 3 emissions can include emissions from purchased goods and services, business travel, employee commuting, and waste disposal.

Why is carbon accounting important?

Carbon accounting is crucial because as it allows companies to assess their environmental impact and take steps to reduce it. By measuring and tracking emissions, they can identify areas for improvement, set reduction targets, and implement strategies to achieve them. Carbon accounting also helps in complying with regulatory requirements, meeting stakeholder expectations, and demonstrating environmental responsibility. For small to medium sized businesses, it could further provide a competitive advantage during tender processes with larger companies who are mandated to provide emissions data around indirect emissions produced by the suppliers they use.