Carbon Accounting and Corporate Environmental Transparency

Carbon footprint calculations are becoming top of mind for many individuals and organizations. Anticipating future government regulation associated with climate change mitigation, many companies are scrambling to find ways in which to measure not only the greenhouse gas emissions resulting from their internal operations but also those emitted throughout their supply chain.

I've invited Hunter Richards, Accounting Market Analyst at Software Advice, to provide a guest posting on the available accounting software that helps companies do this.

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Greenwash (verb, \ˈgrēn-wȯsh\) - to market a product or service by promoting a deceptive or misleading perception of environmental responsibility.

Companies are launching major ad campaigns to show off their eco-friendly products and services, but many of these claims are questionable. Greenwashing is threatening the credibility of legitimate environmental marketing and turning off would-be green consumers. So how can we know who’s telling the truth about supposedly green products and who’s just greenwashing? We can increase transparency and put an end to greenwashing through standardized adoption of carbon accounting. A new kind of software could speed up this transition.

The increasing scrutiny of green advertising campaigns and business environmental records is similar to the demand for transparent financial reporting. The U.S. is strong in financial accounting, but we need to develop the similar strength in infrastructure for environmental accounting to restore credibility to green businesses. Enterprise Carbon Accounting (ECA) software is becoming the foundation of this new infrastructure. ECA software enables companies to track their carbon emissions and find opportunities to lower costs by reducing unnecessary waste. It’s boosting the potential for corporate environmental transparency. When the transition fully takes hold, greenwashers could fade away entirely.

For ECA software and environmental accounting adoption to really make greenwashing obsolete, though, we need action in five main categories:
• Clear government action on regulations;
• Adoption of carbon accounting principles;
• Expansion of Scope 3 emissions accounting;
• Better green business incentives; and
• Demanding, informed consumers.

Clear Government Action on Regulations
lncreased coverage of existing new policies and decisive action on new legislation could quickly spread carbon accounting as well as the use of ECA software. The EPA’s Mandatory Greenhouse Gas Reporting Rule, which requires companies that emit 25,000 metric tons or more of greenhouse gases annually to disclose emissions to the EPA, can be expanded to include smaller businesses as well. New legislation in the future could also help expand ECA software adoption and end greenwashing.

Adoption of Carbon Accounting Principles
Stricter requirements for disclosure of standardized corporate emissions information, now more feasible than ever before with the emergence of ECA software, would provide a precise way to examine a company’s environmental record. When such a measure exists and becomes widely used, one will only need to refer to these numbers to get an impression of a company’s overall environmental performance. It will be a lot more difficult to conceal a greenwasher’s lack of real environmental initiatives.

Expansion of Scope 3 Emissions Accounting
Mandatory inclusion of suppliers’ emissions and other indirect emissions sources in company environmental reports (Scope 3) would prevent under-reporting of emissions; absolutely all emissions would be measured and reported without room for loopholes. Requiring Scope 3 measurement would also spread more adoption of general carbon accounting throughout the supply chain. When a company must account for Scope 3, it must ask its suppliers to track their carbon footprints as well to produce the required report. A chain reaction could quickly increase the number of companies with comprehensive carbon emissions reports and, in doing so, increase overall environmental business transparency.

Better Economic Incentives For Going Green
Using ECA software to identify eco-friendly savings opportunities can make it cheaper to truly go green, making it unneccessary for businesses to greenwash in the first place. Businesses will often find that shrinking their carbon footprints and minimizing costs can go hand-in-hand. Government incentives can also encourage eco-friendly business practices. ECA software could alert users to new opportunities to take advantage of government incentives as more of them emerge, pushing green sincerity into the best interests of businesses.

Demanding, Informed Consumers
Demanding the hard numbers from standardized carbon accounting reports, while boycotting the proven greenwashers, forces businesses with green marketing campaigns to prove their sincerity or risk failure. After all, fully informed consumers make deception by greenwashing impossible. When standardized carbon accounting is required and ECA software is available, companies won’t have any more excuses to conceal their carbon footprint. The remaining work will be done by informed, rational consumers.

This is a guest post by Hunter Richards. To learn more about his research on ECA software and greenwashing prevention, check out Software to Hold "Greenwashers" Accountable.