Carbon Accounting for Businesses: How to Get Started

Helena Glover
Mar 12
4 min read

A person writing notes and analysing graphs

Many organisations know they need to measure their greenhouse gas emissions, whether for sustainability reporting, investor expectations, regulatory disclosure, or setting climate targets.

However, the first step can feel technical or difficult to begin.

This guide explains how businesses can start carbon accounting in practice, how businesses can start carbon accounting in practice, including identifying emission sources, collecting data, calculating emissions, and building a carbon inventory.

What Is Carbon Accounting?

Carbon accounting is the process of measuring the greenhouse gas (GHG) emissions associated with an organisation’s activities.

For businesses, carbon accounting provides a structured way to understand where emissions occur across operations and value chains.

Companies measure emissions so they can:

understand their climate impact
identify the largest emission sources
track reductions over time
set credible climate targets such as science-based targets

Emissions are usually reported as carbon dioxide equivalent (CO₂e).

What Is CO₂e?

Different greenhouse gases warm the atmosphere at different intensities.

For example:

methane (CH₄) traps significantly more heat than carbon dioxide
nitrous oxide (N₂O) has an even higher warming potential

To make emissions comparable, they are converted into carbon dioxide equivalent (CO₂e) using global warming potential factors.

This converts the climate impact of different gases into a single common unit, allowing all emissions to be combined into one total footprint.

For example:

methane emissions
nitrous oxide emissions
carbon dioxide emissions

can all be expressed as tonnes of CO₂e and added together.

Step 1: Understand the Three Emissions Scopes

Most carbon accounting for businesses follows the Greenhouse Gas Protocol, the leading international standard.

The protocol divides emissions into three scopes.

Scope 1 – Direct emissions

Scope 1 covers emissions from sources owned or controlled by the organisation.

Common examples include:

fuel combustion in boilers or generators
company vehicles
industrial processes
refrigerant leakage from air conditioning or cooling systems

Refrigerant gases are important because many have very high global warming potential.

Scope 2 – Purchased energy

Scope 2 covers indirect emissions from purchased energy used by the organisation.

This typically includes:

purchased electricity
purchased heat
purchased steam
purchased cooling

These emissions occur at the power generation source, but are counted in a company's footprint because the energy is consumed by the organisation.

Scope 3 – Value chain emissions

Scope 3 includes all other indirect emissions across a company’s value chain.

For many organisations, Scope 3 represents the majority of total emissions.

The Greenhouse Gas Protocol defines 15 Scope 3 categories, covering both upstream and downstream activities.

Upstream categories

Purchased goods and services
Capital goods
Fuel- and energy-related activities (not included in Scope 1 or 2)
Upstream transportation and distribution
Waste generated in operations
Business travel
Employee commuting
Upstream leased assets

Downstream categories

Downstream transportation and distribution
Processing of sold products
Use of sold products
End-of-life treatment of sold products
Downstream leased assets
Franchises
Investments

Not every category will apply to every organisation, but they should all be reviewed to determine which are relevant and material.

Step 2: Identify Relevant Emissions Sources

The first practical step in carbon accounting for businesses is to map your organisation’s activities against these scopes and categories.

This typically involves reviewing areas such as:

energy use in buildings
company vehicles and fuel use
procurement of goods and services
logistics and distribution
business travel
employee commuting
product use and lifecycle impacts

At this stage the goal is not perfect accuracy. The aim is to identify where emissions are likely to occur.

Step 3: Collect Activity Data

Once emission sources are identified, the next step is to collect the data.

Two common approaches are used.

Spend-based data

This method estimates emissions using financial spend data.

For example:

total spend on purchased goods
procurement spend by category
travel expenses

Spend-based estimates are often easier when starting out, particularly for businesses beginning their carbon accounting journey.

Activity-based data

This method uses physical activity data, such as:

kWh of electricity used
litres of fuel consumed
kilometres travelled
tonnes of materials purchased

Activity-based data is generally more accurate and considered best practice, though it may require additional data collection.

Many organisations start with spend-based estimates and gradually move toward activity-based data over time.

Step 4: Convert Data Into Emissions Using Emission Factors

To calculate emissions, activity data is multiplied by emission factors.

An emission factor represents the average greenhouse gas emissions associated with a unit of activity.

Examples include:

kg CO₂e per kWh of electricity
kg CO₂e per litre of diesel
kg CO₂e per tonne of steel
kg CO₂e per £ spent in a product category

The basic calculation is:

Activity data × emission factor = emissions (CO₂e)

Emission factors are usually sourced from recognised datasets such as:

the UK DEFRA emission factor database
lifecycle assessment datasets
carbon accounting tools and platforms

These datasets provide standardised factors used in carbon accounting for businesses and corporate emissions reporting.

Step 5: Build a Carbon Emissions Inventory

Once emissions are calculated, they are compiled into a carbon inventory.

A typical inventory includes:

emissions by Scope 1, Scope 2, and Scope 3
breakdown by emission source
a total organisational footprint for the reporting year

This inventory becomes the organisation’s baseline carbon footprint.

For many organisations, carbon accounting for businesses becomes the foundation for:

identifying emission hotspots
prioritising reduction actions
tracking progress year-to-year
preparing for climate disclosure and target-setting initiatives.

Starting Simple Is Normal

Many organisations assume their first carbon footprint needs to be highly detailed.

In reality, most businesses begin with high-level estimates using available data, then improve data quality and coverage over time.

The most important step is simply starting carbon accounting, because emissions cannot be managed if they are not measured.

Need Help Getting Started?

Setting up carbon accounting systems, particularly when assessing Scope 3 emissions, can be challenging for organisations doing this for the first time.

I work with companies to: