Carbon accounting and ESG
Carbon accounting plays a vital role in ESG work – both in implementing initiatives and in tracking their effectiveness.
ESG is a much-discussed topic for businesses and investors alike. And carbon accounting plays a vital role in ESG.
Here’s what ESG is, what it means for businesses, and how carbon accounting empowers ESG work.
What is ESG?
Environmental, social, and governance (ESG) criteria are meant to assess the impact of a company’s operations on the world around it.
The climate crisis has shed light on the environmental impact of corporate activities, and as a result, businesses are facing increasing pressure to act responsibly.
In addition to making a positive impact on the world, when a business chooses to work with ESG it is also unlocking business benefits and competitive advantages. For example, access to capital: McKinsey research shows that investment managers are willing to pay a 10% premium for a company with a positive ESG track record, with some willing to pay up to a +40% premium.
Why is carbon accounting needed for ESG?
Carbon accounting enables businesses to calculate their greenhouse gas emissions. These emissions are an important component of a business’s impact on the environment – the E in ESG. Therefore, carbon accounting is essential for businesses to report their full environmental impact – especially when it comes to mandatory disclosure requirements – and determine their ESG ratings.
However, carbon accounting’s usefulness goes beyond reporting. If businesses want to improve their ESG ratings, they need to minimize their environmental impact – and to do that, they need to understand that impact in detail. As the management adage says: “you can’t manage what you can’t measure.”
High-quality carbon accounting will enable a business to break down its carbon footprint by its sources, and identify the highest-emitting parts of its operations or value chain. These insights empower the business to implement carbon reduction initiatives.
FAQs
Frequently asked questions
What does ESG stand for?
ESG stands for “Environmental, Social, and Governance.” These are the three factors that businesses are judged on when it comes to ESG ratings.
What is ESG investing?
ESG is an investment strategy that factors in not only a company’s financial outlook, but the impact it has on the world.
How do I know my business’s ESG performance?
To analyze your business’s ESG performance, you will need to score its performance in the three pillars of ESG: environmental, social, and governance impact.
Each of these pillars will have different metrics and, therefore, different sources of data for those metrics. For the environmental impact category – which is what Normative specializes in – an important factor is a business’s greenhouse gas emissions. These emissions should be measured using carbon accounting.
Normative’s carbon accounting powers ESG work & reporting
To meet the E in ESG, businesses need to effectively manage their greenhouse gas emissions. Normative’s carbon accounting engine empowers businesses to calculate, report, and reduce their emissions.
