Everything you need to know about becoming a carbon neutral accounting firm

Becoming a carbon neutral accounting firm is an involved process, so this article is designed to guide you through the high-level steps that are necessary to achieving carbon neutrality.

First, understand what carbon neutrality actually means

Before fully exploring the carbon neutrality process, it’s important to redefine the concept. 

Carbon neutrality, often also referred to as ‘net-zero’, means the achievement of net-zero carbon dioxide emissions by balancing CO2-equivalent output with offsets and mitigation strategies.

At times, carbon neutral is used to refer to emissions only arising from carbon and not other greenhouse gasses. But in this article, we’ll use the term to refer to all carbon-equivalent emissions, such as methane and nitrous oxide, so it can be used interchangeably with net-zero.

In the context of businesses and corporations, all emissions—ranging from the upstream activities of suppliers to the end use of sold products—must be mitigated by augmenting business practices to become more sustainable, and directly offset with investments into external, carbon-reducing projects. 

With this definition in mind, there are three key components to the process, which when properly executed, enable firms such as yours to achieve carbon neutrality:

1. Carbon footprints

2. Offset projects

3. Mitigation strategies

Carbon footprints

A carbon footprint is the sum of all emissions created by your organization’s activities over a specific period of time, usually a calendar year. 

For the vast majority of businesses, greenhouse gasses will inevitably be emitted as a result of day-to-day operations.

While carbon dioxide is the primary focus when it comes to global warming, your footprint is actually made up of several other environmentally damaging gasses as well, which are converted into CO2 equivalents (commonly referred to as CO2e).

These include:

• Carbon dioxide

• Methane

• Nitrous oxide

• Hydrofluorocarbons

• Perfluorocarbons

• Sulfur hexafluoride

• Nitrogen trifluoride

Calculating carbon footprints 

Given the complicated nature of these emissions, numerous calculation methods have been devised over the years, however, the most commonly known and used technique is the Greenhouse Gas (GHG) Protocol. 

Created in 1997 by the World Resources Institute and the World Business Council for Sustainable Development, the GHG Protocol is an international accounting method built to help government and business leaders understand, quantify, and manage greenhouse gas emissions. 

Currently, it's used by more than 9 out of 10 Fortune 500 companies that share sustainability metrics. 

In order to provide an easily replicable and standardized process, the GHG Protocol has established a mutually exclusive yet collectively exhaustive framework for capturing all organizational CO2e emissions, called 'Scopes':

• Scope 1 emissions: These emissions relate to fuel combustion, as well as the release of certain greenhouse gasses. For services organizations, fuel combustion most often occurs when offices are heated by boilers, or when corporate vehicles are utilized. Highly polluting greenhouse gasses, such as HFCs and PFCs, can be released by fire suppression systems and refrigeration/AC units, and are included within Scope 1. 

• Scope 2 emissions: These emissions occur due to the use of electricity, steam, and purchased heating or cooling. Within the professional services industries such as accounting, the majority of Scope 2 emissions come from the use of purchased electricity in office spaces. 

• Scope 3 emissions: These emissions account for all further emissions associated with an organization’s activities. These can include food reimbursements, business travel, purchased business services, and capital assets among other factors. Scope 3 comprises 15 subcategories in total, and often makes up more than 80% of an organization’s emissions. 

While highly data-intensive and time-consuming, the actual process of calculating your carbon footprint comes down to simple multiplication and addition:

If your office used 401,595 kWh of electricity over the course of 2021 and is located in California, we can multiply this figure by its corresponding CO2e emissions multiplier, 0.653 lbs of CO2e per kWh (sourced from the U.S. Energy Information Administration) and get a final result: 262,241.54 pounds of CO2e, or 118.95 metric tons. 

To learn more about emissions accounting methods, visit the Greenhouse Gas Protocol website.

Once this process has been repeated for all data related to Scopes 1, 2, and 3, and the results have been summed, your carbon footprint will be calculated.

Offsets

As detailed earlier, when any business operates, there is an inevitable amount of carbon dioxide and other greenhouse gasses produced. 

With the present technology available, it is virtually impossible for an organization to operate at carbon neutrality without some type of external input.

Most often, this input takes the form of offsets: investments made in carbon-reducing projects, such as reforestation initiatives or renewable energy development. Offsets are priced so that for each metric ton of CO2e emitted by an organization, a calculated dollar figure can be invested to directly counteract the emissions. 

Types of offsets

With trees serving as nature’s carbon storage units, the global disaster of deforestation is severely minimizing the total amount of carbon the Earth’s atmosphere can safely maintain. 

Forestry-oriented carbon offsets have emerged as a leading solution to this problem and come in two primary forms: 

1. Funding the management and conservation of forests at risk. 

2. Supporting the replanting of forests that have already been cut down.

While forest-related offsets are the most common project type, offset providers offer a variety of different options, including investments into wind and solar projects, as well as the development of biogas digesters, which capture methane emissions from waste and convert them into clean gas for local use.

Take the previous example of your office’s electricity usage: over the course of 2021, it emitted 118.95 metric tons of CO2e. The offset project Cooking with Gas, provided by Cool Effect, costs $9.89 per metric ton of CO2e emitted. If the emissions from electricity are 118.95 metric tons of CO2e, and the offset cost per metric ton is $8.79, you must invest $1,045.57 to counteract your CO2e output.  

Mitigation strategies

While offsets act as an immediate solution to your firm’s emissions, the true key to long-term and holistic sustainable change will come from shifting internal practices to have less of a negative impact on our shared environment. 

Unlike offsets, which counteract a specific amount of CO2e emissions through external measures, mitigation strategies work to reduce your firm’s carbon footprint by altering existing corporate practices. In doing so, greenhouse gas emissions, particularly carbon dioxide, can be significantly lowered, slowing the greenhouse effect. 

Returning once more to the hypothetical example of your office’s electricity usage, effective mitigation will not only reduce your footprint year-over-year but also contribute to driving change at a global level.

Lighting, for instance, makes up approximately 6% of greenhouse gas emissions worldwide. Energy is used to power all lighting in a building, and when lights are left on unnecessarily, it can result in large utility bills and environmental damage. 

Many strategies can mitigate lighting emissions—in this case, we’ll focus on the installation of motion sensors; devices that turn off lights after a certain amount of inactivity.

Motion sensors have been shown to increase energy savings by up to 60% according to an EPA study, and can operate based on the time of day in addition to any detected movement. With this solution identified, your organization could hypothetically implement motion sensors to further reduce electricity consumption and carbon emissions.  

By applying offsetting and mitigation strategies across your organization’s entire carbon footprint, carbon neutrality, or net-zero emissions can be achieved. 

Get started with the right support

The business case for becoming a carbon neutral accounting firm is robust: improved revenues, lower costs, and better stakeholder relationships. All these benefits are rarely achievable with just one decision. 

At a more fundamental level, sustainable action is necessary for our very survival, and goes hand-in-hand with many of the social issues inherent in today’s global society. The carbon neutrality movement is only just beginning, and it needs motivated firms such as yours at the forefront.

While the task may seem daunting, with the right resources and support, becoming a carbon neutral accounting firm can be affordable, straightforward, and highly beneficial. 

RyeStrategy are a specialized group of consultants that work with small to medium-sized businesses to achieve carbon neutrality. We take you through the entire process—including sustainability research, comprehensive carbon footprinting, mitigation strategies, offset portfolio creation, and advice on leveraging the results of neutrality.

Visit our website or email info@ryestrategy.com for more information about working together for a cleaner future.