How carbon accounting empowers the C-suite to drive valuable business outcomes
CFOs, COOs, and CEOs can use carbon accounting to meet business objectives and boost bottom-line profitability.
However, executives can use emissions data to drive business benefits well beyond sustainability and compliance. Here’s how CFOs, COOs, and CEOs can use carbon accounting to achieve valuable business outcomes.
What is carbon accounting?
Carbon accounting is a way of calculating how much greenhouse gas an organization emits.
Like financial accounting, carbon accounting quantifies the impact of an organization’s business activities – though instead of financial impact, it tracks climate impact.
Carbon accounting is essential for businesses to understand their environmental impact, meet reporting requirements, and identify opportunities for carbon reduction. These capabilities lay the foundation for the various business benefits detailed in the next sections.
CFOs can drive compliance, cost-savings, and risk reduction
Many businesses are already required to disclose their carbon emissions – and legislative requirements are continuously increasing. Regulations like the Corporate Sustainability Reporting Directive (CSRD) in the EU and Streamlined Energy and Carbon Reporting (SECR) in the UK mandate emissions reporting for businesses of various sizes and across various sectors. This makes comprehensive carbon accounting a compliance necessity for businesses, and an essential tool for the CFOs who are tasked with ensuring compliance.
However, CFOs – as well as Chief Risk Officers – can use carbon accounting to achieve benefits beyond compliance. Carbon accounting, like financial accounting, is a tool to minimize risk in a business’s planning by eliminating ambiguities in record-keeping and by tracking down problem areas. Thorough and science-backed carbon accounting protects the company from audits, which could reveal non-compliance or unintentional greenwashing.
When businesses use carbon accounting to calculate emissions throughout their value chain, the resulting map of emissions hotspots can be used as a proxy for high energy use, unsophisticated suppliers, and other supply chain risks. These learnings can be translated into cost-saving initiatives like reduced energy bills and better supplier agreements – and addressing these operating expenses can affect profits by as much as 60%, McKinsey has found.
Reducing value chain emissions will also reduce the burden of carbon taxes, like the EU’s Carbon Border Adjustment Mechanism.
Put together, this ability to more-efficiently drive compliance, cost reduction, and risk mitigation will free up resources and time for CFOs to invest in managing their business’s financial strategy.
Learn your carbon reporting requirements
Answer five simple questions to determine the mandatory reporting requirements, voluntary frameworks, and industry-specific guidelines that apply to your business.Go to the Carbon Legislation Tracker
COOs can implement business process improvements
A business’s carbon emissions profile can highlight inefficiencies in operations, leading to targeted process improvements and cost reductions.
Using the granular insights from carbon accounting, businesses can implement measures such as optimizing logistics and transportation, investing in renewable energy for resilient production plants, or selecting lower-risk service providers. This creates a more efficient and resilient value chain.
For example, the services provider Eltel used its emissions data to optimize driving routes for its technicians, which in addition to reducing emissions also minimized the company’s expenditures on fuel.
In addition, business can attract and retain employees by using the sustainability initiatives and messaging unlocked by carbon accounting. 67% of workers report that they are more willing to apply for jobs at sustainable companies; 68% are more willing to accept offers from such companies. By overseeing the deployment of carbon accounting-backed sustainability messaging throughout recruitment and employer branding initiatives, COOs can ensure that their company is as appealing as possible to current and potential talent.
CEOs can increase value for shareholders
As the highest-ranking executive in the organization, the CEO has a critical role in the adoption and deployment of carbon accounting. The CEO’s leadership is vital in aligning carbon accounting with the organization’s overall strategic direction, culture, and operations.
Failure to decarbonize could, on average, risk up to 20% in economic profit for companies by 2030, based on factors including stranded assets, increasing cost of capital, and loss of market share.McKinsey, 2022
CEOs who effectively deploy carbon accounting will empower their businesses to meet climate goals, build brand equity, attract and retain talent, and implement cost savings measures.
This enables CEOs to increase the valuation of their business, and to exceed shareholder and board expectations. The data bears this out: a study from McKinsey found that investors are willing to pay 10% more for a company with a positive ESG record.
The business benefits of carbon accounting
Learn more about how carbon accounting can empower your business to minimize risk, build brand equity, and increase efficiency.Go to the article
- Carbon accounting is a valuable tool for C-suite executives, driving business outcomes and meeting sustainability objectives.
- CFOs can drive compliance, cost savings, and risk reduction.
- COOs can implement business process improvements.
- CEOs can leverage carbon accounting to increase shareholder value.
Use carbon accounting to drive value-creation
Normative’s carbon accounting provides emissions data and insights that can drive value-creation throughout your organization.