What is carbon accounting? 6 of your biggest questions answered

The eagle-eyed among you will have noticed that Sage bought carbon accounting software company Spherics back in October 2022.

On 1 December 2022, Spherics officially rebranded to Sage Earth.

So there’s no better time to dig a little deeper into carbon accounting and how it can help small and medium-sized businesses (SMBs) reach their climate goals—and that’s what we’ll do in this article.

Here’s what we cover:

1. So, what is carbon accounting?

Carbon accounting is a type of carbon footprint measurement that is predominantly based on existing accounting data.

The process that sits behind carbon accounting is known as spend-based methodology and is recognised by the Greenhouse Gas Protocol.

In a nutshell, spend-based methodology involves taking the financial value of a product or service and multiplying it by an emission factor.

The final number gives you an estimate of the emissions produced by that product or service.

2. What does carbon accounting allow you to do?

Carbon accounting allows you to measure the amount of greenhouse gas (GHG) your business is emitting into the atmosphere.

Not only that—it helps you set goals based on the resulting data to reduce your business’s environmental impact.

Remember: if you can measure it, you can master it.

3. Why is carbon accounting software useful for SMBs?

All businesses have accounting data—it is reconciled, audited and offers a very good reflection of your full business activity.

So, using it as the foundation for a carbon footprint saves you from having to find that data elsewhere. 

4. Are there other ways to measure your carbon footprint?

Yes. Carbon accounting uses a predominantly spend-based model, but there are other ways to calculate your emissions.

Activity-based methodology is another popular one, although that tends to be far more manual. Sage Earth actually uses a hybrid model, but we try to automate as much as possible.

5. Is there any legislation forcing SMBs to adopt carbon accounting?

Right now, there isn’t any formal legislation requiring SMBs to report their carbon emissions.

Experts at Sage Earth do expect that to change in the coming years as legislation for enterprise businesses expands downward to smaller businesses.

SMBs are more likely to see carbon accounting being mandated by their larger enterprise customers, who already have to report their emissions (which include those of their suppliers).

Hundreds of larger businesses have already started to request carbon data from their SMB suppliers.

6. Where does Sage Earth fit in to all of this?

Today, UK Sage Business Cloud Accounting users can use Sage Earth to automate their carbon accounting needs.

And from early 2023, Sage 50 will also be integrated.

Sage Earth integrates with your Sage accounting software, pulls out key data, maps that data to conversion factors and generates a carbon footprint for your business.