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NetNada approach to carbon accounting

Measuring business carbon emissions is the foundation for real corporate climate action. Only with good data and insights will companies be able to implement strategies that benefit the people, profit, and planet.

However measurement is not straightforward, and not all approaches are equal. The right measurement should be comprehensive in nature and robust. It should allow companies and stakeholders to trust the numbers to see what the next steps are in their business sustainability journey—whether that is deep-diving into hotspots to better understand where emissions come from, setting a net-zero goal, preparing for an external audit and certification, complying with reporting obligations or purchasing carbon offsets.

NetNada helps Australian businesses and global organisations—like Zip Co, Melbourne Rebels, MyBusiness NSW, Merivale, and URM—measure, report, and act on emissions throughout their supply chains. In this guide, we uncover and explain what companies using NetNada need to know about carbon measurement—from understanding what data is needed to the different frameworks that are followed.

Carbon Accounting Terminology 101

Before we dive in, it is essential that you understand some base concepts and terminology. If you are already proficient in carbon accounting feel free to skip this section but you can always refer to all the terminology used by visiting our Carbon Glossary.

Carbon dioxide equivalent (CO2e) - business activities emit more than just CO2 such as water vapour and methane which is a potent greenhouse gas that contributes to global warming. To include non-CO2 greenhouse gases while still keeping things simple, the term CO2e is used by carbon accountants to combine all emissions into a single metric.

The GHG Protocol Corporate Accounting and Reporting Standard (GHG Protocol) - this protocol provides the requirements and guidance for companies and other organisations preparing a corporate-level GHG emissions inventory. NetNada embeds the standard into its software so you can trust the decisions we make in regard to measuring your emissions.

Emission Scopes - The Greenhouse Gas Protocol categorises emissions by Scope to facilitate how businesses understand how their emissions are generated, reported, and reduced.

  • Scope 1 covers direct emissions from company operations such as fuel used in cars;
  • Scope 2 covers emissions from the purchase of electricity, heat, and cooling;
  • Scope 3 covers your value chain and for most businesses, this is primarily made of goods and services that you purchase.

It is important to note that Scope 3 is where all new reporting frameworks are focusing on and where you should spend your resources—it often represents more than 80% of a company’s total emissions. The best way to tackle Scope 3  measurement is to quickly understand which suppliers are contributing to your emissions and work on improving how they are tackling their own sustainability and carbon emissions. A transparent supply chain is half the journey to a sustainable one.

Emission scope for business carbon emissions

Reporting standards - one of the most challenging parts of carbon accounting or sustainability is knowing how to disclose or report your numbers. Large companies accounting for two-thirds of global public market capitalisation (link) already participate and submit carbon emissions inventories through voluntary disclosure frameworks such as TCFD and CDP. However, far more detailed mandatory reporting standards are emerging on a national/regional basis (AUS, US, EU, UK) under the ISSB. While it might feel like an alphabet soup of acronyms, NetNada carbon experts can guide you in understanding which reporting framework is relevant for you.

Measuring Emissions with a Business Goal in Mind

While measurement can seem simple with NetNada, it is imperative that our team understand what will be the positive business value of completing the measurement of carbon emissions with us. This is something the NetNada sustainability experts help define and together walk towards that goal.

We know that the best approach works for our clients is to work backward from where you are in your sustainability journey. Here are some examples that our clients have defined prior or during their time with us - it is not uncommon want all of following goals!

  • Align your company with 1.5 Science-based targets (SBTis) and set a Net-zero goal
  • Achieve compliance with Australia mandatory climate-related disclosures and other reporting frameworks such as CDP and TCFD
  • Obtain a Climate Active certification
  • Understand your supply chain emissions, analyse, and do work with better suppliers
  • Report business emissions and sustainability to clients or answer tender questions to win work
  • Include Scope 1,2 and 3 emissions in annual financial report and shareholder meetings
  • Understand business emissions hotspot to allocate capital for reduction initiatives (ie. renewables, recycling services, employee engagement)
  • Achieve business carbon neutrality and procure relevant and trustworthy offset projects

There are a hundred more things you can do after having a clear understanding of your emissions from a strategic level and day-to-day business operations. However, there are two major approaches to understanding your business emissions —each of which comes with tradeoffs and serves a complementary purpose.

High-level carbon measurements

High-level or business operations measurement takes the entire company into account to identify emissions hotspots and opportunities. Most business certification and reporting frameworks require organisations to do this.

If you’ve never done a footprint measurement before or have a pre-existing carbon inventory (GHG inventory), you likely want to start with measuring the whole company and align all stakeholders.  Furthermore, if you have used another service that was not aligned with GHG Protocol, ISO, or recognised by a 3rd party certification you should re-calculate your baseline with NetNada.

Granular measurements

If you already know where your hotspots are, drafted a sustainability plan, or hold a strong carbon-neutral certification, you can deep dive into understanding the impacts of certain changes or services you already offer. For example, focusing on the impact of your last mile delivery, the emissions potential of investing in a solution, or switching to a more sustainable supplier.

NetNada has significant experience in granular measurements and helps clients better understand the positive impact of certain changes or services they are procuring such as emissions saving from recycling IT equipment, hosting a sustainable event, or accessing 100% renewable energy from the grid.

Finally, both are not mutually exclusive (e.g. high-level for reporting standards and granular on specific areas.)

Achieving your goal with NetNada’s four-step playbook.

An advantage of software for employees leading the measuring process is that it can bring and organise data from you multiple places into a single place: ERP and accounting systems, travel apps, utility bills, staff surveys, and so on.

  1. Identify. Understand
  2. Gather. NetNada avoids the need for manual entry and the errors that come with gathering large amounts of data by integrating with key software and internal systems as well as keeping track of what has been done.
  3. Process. NetNada structures the data to make it ready for carbon measurements— and with the support of our carbon data analysts, work with you to identify and fill any gaps.
  4. Calculate. NetNada uses a proprietary algorithm to calculate emissions and show you your complete carbon accounts and highest-impact reduction opportunities
  5. Request. NetNada makes it easy to request carbon data from your supplier and command sustainability transparency from the supply chain

Data verification and 3rd party audit readiness

NetNada’s software and our carbon experts detect anomalies and flag expected emissions sources not included in your import data. We regularly works with auditing firms to help our clients carbon account audited and ready for stringent 3rd party certifications such as Climate Active or CDP submissions. Looking ahead to where verification and reporting are going, NetNada allows you to invite auditors and external verifiers to the platform.

Finally, It’s important carbon accounting solutions solve the problem of emissions interpretability and why emissions totals change over time. This can happen not only because of reductions but methodology or macro changes such as grid improvements. We ensure that you’re able to keep incorporating the latest science into your measurements by keeping our databases up to date.

NetNada Carbon Accounting Methodology aligned with the GHG Protocol

Carbon accounting as per The Greenhouse Gas Protocol (and incorporated into NetNada) calculates an organisation’s greenhouse gas (GHG) emissions using a combination of two methodologies: spend-based and activity-based. The hybrid methodology used in NetNada when measuring emissions combines spend-based and activity-based methods.

The carbon footprint of the business is modelled using the proprietary NetNada algorithm which identifies emissions by various categories based on accounting data and a calculator available inside the software.

This approach is based on an environmentally extended input–output method, which combines environmental data with traditional financial flow data from national and regional economic accounts.

Spend-based method

Spend-based method of calculating GHG emissions takes the financial value (of a purchased good or service and multiplies it by an emission factor – the amount of emissions produced per financial unit – resulting in an estimate of the emissions produced.

Spend-based emission factors are typically derived from so-called environmentally extended input-output (EEIO) models that depict the flow of resources between different sectors of the economy. Based on this, one can calculate the average amount of emissions associated with each unit of money paid to a company in some specific industry and region.

There are around 344 categories - all with different emissions factors that spending can be allocated to. Categories have different emission intensities and therefore impact your total footprint based on the allocation of spending. For example, a dollar spent on company car repairs does not equal a dollar spent on legal services.

NetNada system holds ISAPC categories as well as Climate Active categories when it comes to the allocation of spending for carbon accounting purposes.

Since spend-based methods’ emission factors are built on the industry average greenhouse gas emissions levels, spend-based calculations can lack specificity.

For example: if you buy a chair, a spend-based approach would only factor in that you bought a piece of furniture, and wouldn’t account for whether the chair was made of iron or wood.

Activity-based method

The activity-based method uses data to specify how many units of a particular product or material a company has purchased. For example, this could be litres of fuel, kilograms of textile, etc.

If we identify activities in your business such as flying or employee commute, NetNada offers in-built calculators and smart forms to gather and process relevant data. This will ensure that your team can focus more on implementing solutions rather than requesting data from several departments and staff.

NetNada platform facilitates activity-based measurement for flights, waste, employee commutes, and events.

The hybrid methodology combines spend-based and activity-based data

Like the spend-based method, the activity-based method also uses emissions factors to determine an activity’s emissions output. In carbon accounting, activity data it’s not as readily available as spend-based data, and can be time-consuming to gather.

Thus, the hybrid model methodology is recommended by the Greenhouse Gas Protocol, the most widely-used carbon calculation standard that has been incorporated into NetNada

NetNada pragmatic approach involves using a spend-based method to identify relevant hotspots in your business and then improve where it is needed using activity-based data

Understanding why completeness in your carbon inventory matters

As you consider how to calculate your carbon emissions for your whole business and the right balance of approaches to use, ensuring you have all the data is crucial. Traditionally, there were trade offs between capturing every tonne, kilo, and gram of carbon and creating meaningful business climate action. Today, with carbon accounting software like NetNada, it is possible to measure everything to achieve a complete carbon measurement and then spend time improving certain aspects through activity-based methods.

While we advocate for using the best method that meets your goals and internal resources, you will want to ensure that your carbon inventory is:

  • Comprehensive—i.e. you’re not leaving out significant sources of emissions (especially in scope 3) such as consulting services, marketing, and catering. l
  • Actionable—i.e. the journey does not stop on the measurement and you use it to create real action—be that switching energy sources, improving your suppliers and procurement process, or rethinking how your employees work from home
  • Robust—i.e. you can have your carbon inventory audited and ready to be checked for data quality standards of increasingly demanding reporting frameworks

Traditional ways to achieve these results involved a mix of in-house climate teams and consultants - even then the process can take months and lack data interoperability.

Good software is also reinforced with human support—who can help you understand complex legislation, source clean power, and navigate the carbon credits market. NetNada’s teams of climate strategy, carbon data, and policy experts are here to help.

If you have any questions please get in touch.

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