Carbon measurement, or carbon accounting, is the process of estimating the greenhouse gas (GHG) emissions from business activities by taking an inventory of a company’s operations. The process calculates emissions from greenhouse gasses, measured in metric tonnes of CO2 equivalent (CO2e), to get a holistic picture of emissions from an entire year of operations. 

Why calculate your emissions?

For many companies, measuring and disclosing emissions is a requirement: Mandatory climate-related risk reporting policies may soon impose fines for companies that don’t conduct auditable emission estimates. Regulations—including the European Union’s CSRD, California SB253, and proposed SEC rules—will soon mandate emissions disclosures and climate-related risk disclosures in annual ESG reports. 

Measuring emissions also provides a baseline for setting climate targets and deciding where to start reducing emissions. Repeating the measurement process annually allows you to track and report progress in a clear, transparent way to ensure that stakeholders—regulators, employees, investors, and customers—are informed about your climate action and impact.   

The carbon accounting process

Step 1: Collect Data 

A company’s emissions represent the greenhouse gasses emitted from everyday activities like heating an office space, shipping merchandise, traveling to a conference, or producing a physical product. 

Emissions sources

To calculate your organization’s carbon emissions, you’ll need to collect data from all emissions-generating sources. These sources are divided into three categories, defined by Scopes, according to the GHG Protocol:

• Direct emissions (Scope 1): Produced from owned or controlled sources such as fuel purchased and consumed onsite for operating facilities and vehicles.

• Indirect emissions (Scope 2): Generated from purchased energy such as purchased electricity for powering offices and facilities. 

• Value-chain emissions (Scope 3): Generated from the direct and indirect emissions from upstream and downstream value chains including purchased goods and services, business travel and employee commutes, and investments.

Types of emissions data

For all three emissions categories, there are two broad types of data to collect: activity data and financial spend data: 

• Activity data uses units of measurement associated with the emissions-generating activity. For example, the liters of fuel consumed in a year, or the number of kilowatt-hours of energy used. 

• Financial spend data, usually sourced from accounting teams and software, is used to approximate emissions based on dollars spent. Spend data may use, for example, the amount spent on business travel to get an emissions estimate.

Sourcing both activity data and spend data typically requires the help of a range of stakeholders across an organization. For example, facilities and office managers may provide fuel and electricity bills, while a company’s accountant may provide financial data. 

While both approaches are valid under the GHG Protocol, there can be costs and benefits to the organization associated with different data sources and methodologies. You must weigh these carefully before aligning on an approach. Not all companies have the data infrastructure in place to support activity data across all of the scopes. While spend data is generally more accessible, it may not deliver a complete picture of emissions reductions—for example, if a company’s employees traveled fewer miles this year than last, but spent more on flights, using a spend data approach might result in an overestimate of emissions compared to an activity data approach.

Learn more: Measure your carbon footprint >

Step 2: Calculate your emissions

To start calculating your emissions, you’ll need to determine the emissions factor—the ratio between pollutants emitted and activity conducted or amount spent. For example: Because a gallon of gasoline emits 8.78 kg of CO2 when burned in an engine, the emissions factor would be 8.78 kg CO2 per gallon of gasoline. 

Emissions factors are then multiplied by the associated activity or spend data, and the results are added up to get an estimate of a company’s total emissions. To ensure consistent year-on-year reporting and auditability, the emissions factors used should be carefully documented and aligned with the GHG Protocol.

Step 3: Verify data and report your results 

Once calculations are ready, the final step is to verify your information. Have a second internal team or external expert carefully review data to check for gaps, and ensure that it is categorized correctly by emissions source. This can help avoid errors like double counting and miscategorization. Under some reporting requirements like CSRD, an external audit is required. 

Once data is verified, you can report your findings to internal stakeholders, and disclose it externally if you choose. This information should be presented in a clear, consistent format that includes both emissions data and final calculations broken down by source, as well as links to relevant data to back up your claims. 

Step 4: Take action and track progress

Now that you’ve reported the results, your internal stakeholders will be armed with the data they need to do the most critical next step: Set climate goals and take action. Reporting carbon emissions estimates establishes the climate impact of your business activities, which allows you to set realistic, informed targets. 

From there, you might compare your total emissions with your competitors and identify your top emissions sources. Reports also allow you to discover the most achievable reduction opportunities and consider how to address your harder-to-abate emissions, helping you develop a comprehensive carbon management plan. 

Webinar: Navigate Climate Disclosure Laws >

The carbon accounting process doesn’t stop once you’ve set your plan in motion: Tracking progress requires ongoing emissions measurement to produce annual emissions reports. Action coupled with ongoing carbon measurement is the foundation of an integrated carbon management strategy: It’s what allows you to assess, adapt, and optimize your sustainable transition plan. This gives you the data you need to see and prove your long-term progress, and confidently share your results with customers and investors.