Carbon Accounting: The Basics and Beyond

As more nations adopt regulations to reduce greenhouse gas emissions from the transportation sector, shippers striving for supply chain sustainability must identify and track emissions and find ways to reduce them. Because this task has so many moving parts, companies use carbon accounting to track emissions along the global supply chain. Carbon accounting, which is essentially the practice of adopting procedures to measure and report GHG emissions, enables companies to show regulators, clients, and customers via data-informed narratives the achievements they’ve made in reducing carbon emissions. Carbon accounting also allows companies to gauge how successful their efforts are to meet internal sustainability targets. This article provides a foundational understanding of carbon accounting, including its methods and future in supply chain sustainability efforts. Shippers, beneficial cargo owners, and forwarders can use this information to bolster and strengthen their carbon accounting programs.

What is Carbon Accounting?

Carbon accounting is simply the process of measuring, tracking, and managing GHG emissions. As we’ve explained previously, carbon accounting consists of multiple elements: understanding emissions sources, both within an organization and throughout the supply chain, reducing carbon footprints, and ensuring regulatory compliance. Carbon accounting, an integral part of achieving supply chain sustainability, enables organizations to reach an in-depth understanding of the different types of emissions they might produce. There are different levels of carbon accounting to track the various types of emissions that result from a company’s operations. They include:

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  Scope 1 – Direct emissions a company has control over.
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  Scope 2 – Indirect emissions, like those coming from a power plant that sources a company’s electricity.
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  Scope 3 – Value chain emissions, such as those emitted by freight transport when delivering finished goods.

Check out our article to learn why it’s so important to reduce Scope 3 emissions.

Carbon Accounting for Effective Supply Chain Sustainability

Carbon accounting is an effective way to ensure that companies reduce GHG emissions. It enables businesses to show regulators and customers how well they are working on reducing emissions and complying with supply chain sustainability regulations. When done accurately, carbon accounting can improve an organization’s operational efficiency, reduce costs, and enhance brand reputation. Indeed, the list of regulators worldwide that have implemented or are considering GHG reporting regulations is growing. For instance, the European Union’s emissions trading system (EU ETS), as we’ve previously written about, has been expanded to include the maritime sector, meaning that ocean carriers must reduce GHG emissions to meet the EU’s overarching goal of slashing GHG emissions by 55% by 2030 and becoming climate neutral by 2050. Meanwhile, regulators have mulled the prospects of employing a carbon pricing regime consisting of carbon taxes or a regimen akin to the EU ETS.

Effective Carbon Accounting Requires a Methodology First Approach

We’ve discussed the “why” of carbon accounting and the “how” in a previous post. The “how” consists of three metrics that organizations should consider when building their own supply chain sustainability and carbon accounting programs. Now, let’s look at the components of a robust carbon accounting regimen. The first component is emissions factors. Companies use emissions factors to calculate GHG emissions based on energy use and fuel consumption. The U.S. Environmental Protection Agency defines an emissions factor as “a representative value that attempts to relate the quantity of a pollutant released to the atmosphere with an activity associated with the release of that pollutant. These factors are usually expressed as the weight of pollutant divided by a unit weight, volume, distance, or duration of the activity emitting the pollutant (e.g., kilograms of particulate emitted per megagram of coal burned).” Another component is the data collection of factors such as energy consumption, transportation, and waste. Multiple methods are available for organizations to consider when seeking to establish a data collection practice that contributes to supply chain sustainability efforts. “Before you act, you need to know where you are starting from. Only some carriers provide carbon emission data, and they have their own methodology and different approaches,” Marco Hahn told Searoutes recently. Hahn works for BASF’s global liner shipping department and is involved in ocean freight services procurement. “If you want to be able to compare carriers, you need to find a unified approach, and this is where Searoutes comes in. Searoutes is able to produce vessel or service-specific emission figures on a TEU basis that can be easily added to our bidding sheets.” A third component is carbon footprint calculators. These calculators consist of tools and software that automate and streamline carbon accounting processes. As previously explained, carbon calculators can offer insights into fuel consumption, pollution levels, environmental impact, and long-term shipping logistics — all critical factors in a supply chain sustainability program. They can also help companies ensure they meet their customers’ needs and address their concerns. A fourth component is reporting standards. Common reporting standards, e.g., GHG Protocol, and ISO 14064, serve as frameworks used in carbon accounting. That standardization enables all parties, from freight providers to shippers to regulators, to have fruitful discussions about the improvements made and how to further drive down emissions reductions and achieve supply chain sustainability.

Beyond the Basics: The Elements of Carbon Accounting

While we’ve primarily presented carbon accounting as a means of helping companies describe their successes in reducing GHG emissions through data, the intelligence gleaned from that data can serve as a foundation for establishing robust supply chain sustainability initiatives. Carbon accounting can support supply chain transparency by enabling organizations, regulators, and stakeholders to see where Scope 3 emissions occur throughout the supply chain. Using the insights derived from analyzing the data discovered through carbon accounting, companies develop carbon offset strategies to mitigate their emissions. They might consider using carbon credits or other offset initiatives. Companies can take things a step further, integrating the latest technological developments in data analytics into their carbon accounting regimen and leveraging artificial intelligence and machine learning to bolster accurate and real-time emissions tracking. Companies can use carbon accounting insights as a foundation when defining and measuring key performance indicators driving carbon reduction efforts. The data can help companies measure progress and determine future reduction targets that will ensure supply chain sustainability.

Searoutes: Your Ally for Effective Carbon Accounting

It’s important to have the right tools to establish a solid and dependable carbon accounting regime. Searoutes specializes in helping companies gain visibility into their emissions profile, particularly Scope 3 emissions. Our API tools — CO2 API, Routing API, and Vessel API — help organizations compare different scenarios, routes, and ships so that they can assess what works best for them and their customers.

Advanced Data Analytics

Searoutes employs sophisticated algorithms and a comprehensive database of historical Automatic Identification System (AIS) data to accurately calculate carbon emissions. This approach surpasses standard methodologies, providing precise emissions insights for various transport modes.

Seamless API Integration

We also offer API-first solutions that integrate effortlessly into existing systems used by carriers, freight forwarders, shippers, and solution providers. This integration facilitates precise emissions measurement and efficient reporting, enabling organizations to develop strategies for emission reduction initiatives and supply chain sustainability.

Real-Time Emissions Monitoring

Searoutes provides real-time emissions monitoring across supply chain activities, aiding in accurate measurement and hotspot identification. By using Searoutes’ API tools, organizations can develop strategies for implementing emission reduction initiatives and optimizing operations to minimize carbon footprints while enhancing efficiency.

Building Sustainable Supply Chains Starts With the Right Data

As sustainability becomes a critical focus in global supply chains, carbon accounting plays a pivotal role in helping companies reduce their environmental impact. This process involves measuring, tracking, and managing greenhouse gas (GHG) emissions across direct, indirect, and value chain emissions. Effective carbon accounting is crucial for improving operational efficiency, ensuring regulatory compliance, and enhancing brand reputation. Searoutes helps companies streamline this process by offering advanced data analytics, seamless API integration, and real-time emissions monitoring. By leveraging these tools, businesses can effectively manage their carbon footprint and drive sustainable change. CO2 API provides visibility into carbon emissions for all transport modes, taking into account factors such as feasible distance, emissions factors per trade lanes, cargo characteristics, and fuel types. Vessel API tracks the global fleet wherever it sails, in areas near coasts or beyond coastal regions, with the combination of terrestrial and satellite AIS. Routing API provides users with accurate routes and sea distances that can help inform wise decisions when considering the least carbon-intensive shipping routes. “With the data provided by Searoutes, we are gaining transparency about the emissions produced by our ocean carriers. … This data transparency enables us to incentivize carriers with lower CO2e emissions. It also helps us build an internal, global portfolio of ‘greener’ carriers that emit less than the ones we would have gone along with without the data,” Hahn said. Get started with Searoutes today and get your sustainability program in top shape.