GHG emissions accounting is the process of measuring, tracking, calculating, and reporting on the greenhouse gases (GHG) emitted directly or indirectly as a result of an organization’s business operations.
GHG accounting has become an important part of modern recordkeeping, enabling businesses to identify and reduce inefficiencies, manage sustainability risks, reach sustainability goals, comply with regulations, and lower their environmental impact.
In this article, we’ll explain:
- What GHG emissions accounting is
- The three scopes of GHG emissions accounting
- How to calculate GHG emissions
What is GHG emissions accounting?
GHG emissions accounting reports on all the different ways a business contributes to greenhouse gases, whether directly or indirectly. It includes gathering data from a variety of sources, performing calculations to convert that data into a standardized unit, and reporting on the organization’s emissions activities to external entities.
GHG accounting ultimately results in identifying an organization’s total carbon footprint, which measures the overall climate impact of all of their emissions. But because different greenhouse gases have different levels of impact, they have to first be converted to the standardized unit known as a carbon dioxide equivalent (CO2e).
CO2e accounts for the global warming potential (GWP) of each greenhouse gas, which is the amount of energy a ton of emissions from each gas can absorb over time as compared to a ton of carbon dioxide emissions. Once the emissions impact from each gas has been converted into CO2e, they can all be added together to see the overall carbon footprint.
Some of the main greenhouse gases involved in GHG emissions accounting include:
- Carbon dioxide (CO2)
- Hydrofluorocarbons (HFCs)
- Methane (CH4)
- Nitrous oxide (N2O)
- Perfluorocarbons (PFCs)
GHG accounting vs. Carbon accounting
The term “carbon accounting” is frequently used in an equivalent manner to GHG accounting. Because GHG accounting relies on CO2e as the standardized unit for measuring the impact of all greenhouse gases, “carbon” has become a shorthand for referring to the other gases, much like we see with the term “carbon footprint.”
Strictly speaking, carbon accounting could be used to refer to specifically monitoring carbon dioxide emissions, but more often, it’s just another term to refer to GHG emissions accounting as a whole. And context should make the difference clear.
The importance of GHG emissions accounting
Beyond the obvious benefits of helping to reduce carbon footprints and preserve the environment we all inhabit, GHG accounting is of particular importance to the businesses that practice it for a few key reasons:
- Complying with regulations: Most regions and industries are subject to governmental regulations surrounding the environment and sustainability. GHG accounting is essential for organizations to manage their own emissions, provide accurate reporting, and remain compliant.
- Reducing inefficiencies: GHG accounting helps businesses identify areas where they can reduce their greenhouse gas emissions—and those same reductions frequently lower costs as well. Upgrading to a more efficient HVAC system, for example, is not only better for the environment, but is often more cost effective for the organization over time.
- Managing climate risks: Environmental risks like extreme weather, resource shortages, and supply chain disruptions pose serious business threats. GHG accounting helps organizations identify these risks and build resilience against them.
- Appealing to stakeholders: Investors, consumers, and policymakers increasingly expect organizations to take action on sustainability—and they’re making decisions in response. Companies that prioritize GHG accounting gain a competitive edge over those that fall behind.
The three scopes of GHG emissions accounting
GHG accounting categorizes emissions into three scopes, following guidance from the GHG Protocol—the leading framework for measuring and managing greenhouse gas emissions. These scopes help organizations understand how their activities contribute to emissions, providing a structured approach to tracking and reduction.
Scope 1 GHG emissions
Scope 1 emissions come directly from sources owned or controlled by an organization. They include things like fuel combustion from company-owned vehicles, emissions from manufacturing processes like metal or cement production, on-site fuel use in furnaces or generators, and leaks of methane or refrigerants from equipment. Since organizations have direct control over these emissions, they typically have easier access to the necessary data for GHG accounting.
Scope 2 GHG emissions
Scope 2 emissions are indirect emissions that result from an organization’s energy use but are not produced by the organization itself. They come from the generation of purchased electricity, heating, cooling, and steam. While slightly more challenging to track than Scope 1 emissions, they’re still relatively straightforward since organizations control their energy consumption. One of the main challenges lies in collecting, standardizing, and analyzing data from multiple utility providers.
Scope 3 GHG emissions
Scope 3 emissions include all other indirect emissions across an organization’s supply and value chain—both upstream and downstream. These cover a range of activities, from purchased goods and services to transportation, waste, business travel, product use, and end-of-life disposal. Because these emissions come from external sources beyond the organization’s direct control, they’re by far the most challenging to track, report on, and manage.
How to calculate GHG emissions
Calculating GHG emissions requires different approaches and methods for each scope, based on the level of control and data availability. Organizations must determine emissions for each scope separately, then combine the totals to get a complete picture of their overall carbon footprint.
Calculating Scope 1 GHG emissions
Scope 1 emissions are the easiest to calculate since organizations directly control the activities that produce them. Businesses can track fuel consumption, energy production, and other emission sources themselves. From there, they can use a greenhouse gas equivalency calculator—like the one from the U.S. EPA or a tool within sustainability management software like Tango Energy & Sustainability—to convert activity data into carbon equivalents (CO2e).
Calculating Scope 2 GHG emissions
Since organizations don’t directly control their Scope 2 emissions, they must calculate them based on energy consumption rather than direct measurement. The GHG Protocol outlines two methods for performing these calculations, both of which should be reported separately:
- Location-based method: Uses the average emissions intensity of the local electrical grid. Since power grids source energy from different types of power plants, emissions vary by region. Organizations calculate CO2e by multiplying their energy consumption by the grid-average emissions factor for their location.
- Market-based method: Accounts for emissions based on the organization’s chosen energy suppliers. If a business purchases energy from renewable sources, this method allows them to reflect that choice in their GHG accounting. Organizations multiply their energy use per supplier by the supplier’s specific emissions factor or, if unavailable, a residual mix factor based on non-renewable energy sources.
Organizations often source energy from multiple providers, making Scope 2 calculations more complex. By applying both methods, businesses gain a clearer picture of their emissions and the impact of their energy choices.
Calculating Scope 3 GHG emissions
Scope 3 emissions are the most complex to calculate, as they come from sources outside an organization’s direct control. To estimate these emissions, businesses can use a variety of methods, each with trade-offs in accuracy and feasibility:
- Supplier-specific method: Uses emissions data reported directly by suppliers. This method provides the most accurate calculations but requires full cooperation from suppliers, which can be time-consuming and difficult to obtain.
- Spend-based method: Estimates emissions based on the financial value of purchased goods and services. Organizations multiply the amount spent by an emissions factor. While easy to calculate, this method is less precise than others.
- Activity-based method: Measures specific activities—such as distance traveled, waste generated, or energy consumed—and applies emissions factors to each. This approach provides more granular data but requires extensive tracking and calculations.
- Hybrid method: Combines activity-based and spend-based calculations, using activity-based data where available and filling in gaps with spend-based estimates. The GHG Protocol recommends this method for a balanced approach.
Streamline your GHG accounting with Tango
Tracking and managing GHG emissions requires precision, but it doesn’t have to be a complex, manual process. Tango Energy & Sustainability automates GHG accounting from end to end, eliminating guesswork, ensuring data accuracy, and giving you confidence in your reporting.
Tango gives you a centralized, cloud-based platform to visualize and analyze your emissions data in real time. Monitor energy usage across your buildings and facilities, measure the impact of efficiency projects, procure renewable energy, and benchmark your performance against national standards—all in one place.
Want to see what Tango can do for you?
Request a demo today.