Carbon Accounting for Small Businesses: How Accountants Can Help Everyone Be Greener

David York, Head of Auditing Practice, ACCA | September 24, 2014

The Association of Chartered Certified Accountants (ACCA) has issued guidance for accountants advising small- and medium-sized entities (SMEs) about establishing and operating carbon accounting (that is, greenhouse gas accounting).

The guidance provides working tools to measure and report the carbon emissions of a small business so that targets can be set and reductions achieved in its environmental impacts.

While there is growing recognition that taking steps to protect the environment also brings business growth and cost savings, as explained in “The Sustainability Imperative for Small Business, accepted standards and requirements are aimed at larger businesses and are simply too complex for small businesses.

The guidance introduces a simple form of carbon accounting that is potentially accessible to all, so that businesses are not deterred by either the amount of time it will take to complete the carbon accounts or the complexity of the process. The guidance has been developed in conjunction with Green Accountancy, an ACCA registered practice that successfully provides this service in the UK.

The simplification comes primarily from narrowing down the scope of reporting to concentrate on common businesses activities that have significant measurable emissions, typically energy use and transport. The guidance explains the form of reporting, provides a methodology, and sets out “conversion factors”—the means to convert physical measures, such as electricity used, into a carbon equivalent. The guidance also includes knowledge gained from practical experience of overcoming reporting problems.

The methodology involves nine decisions/stages.

  1. Set the relevant business objectives.
  2. Determine whether the whole business or just parts of it will be included.
  3. Identify the business activities that are responsible for greenhouse gas emissions and, after preliminary investigation, those to be accounted for.
  4. Decide on the start and periodicity of data acquisition.
  5. Set up appropriate systems for data capture, processing, and reporting.
  6. Collect primary data for the base period and convert it to its carbon dioxide equivalents
  7. Evaluate the outcome and decide future emissions reduction targets.
  8. Take steps to achieve the targets.
  9. Monitor progress by evaluating later outcomes against the base period.

The guidance deals with professional responsibilities and marketing and also provides an introduction to comprehensive carbon accounting and the “wider picture” of environmental reporting, sustainability reporting, and integrated reporting.

The guidance is “interim” because a two-year consultation period has been put in place, during which users are encouraged to provide feedback for improvement. An appendix explains this process and asks questions to direct feedback to specific matters.

The guidance relies on governments (or another credible source) for the carbon conversion factors used in calculations. These are readily available in the UK, which is the target for the initial release. Other jurisdictions may have equivalent data; if not, the UK figures could be used as an approximation.

Crucially, ACCA has released this guidance as free to use for all, meaning that copyright is waived and the material is fully in the public domain. Translation and localization are encouraged. It is hoped that other accountancy bodies will promote the service to their members and that as a result the profession globally will help reduce greenhouse gas emissions of small businesses.

Please share below your thoughts as to how this guidance can best be localized.

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