Transparency is paramount in today's business world.
Governance, risk & compliance software is evolving in multiple directions, one of the most important being the increased focus on environmental, social, and governance (ESG).
As a result, we created the Environmental, Social, and Governance (ESG) Reporting category in 2023, and we recently launched a new category for Carbon Accounting.
This article describes this type of software, as well as who should use it and how.
What is carbon accounting software?
As the name implies, this type of software monitors greenhouse gas emissions generated by business activities. It's important to mention that households also create emissions, but in smaller quantities, so tools for individual use are not classified as carbon accounting software.
While companies in industries such as manufacturing and logistics generate the most carbon emissions, other sectors, such as agriculture, electric power, and information technology, are significant contributors.
Data center power usage is estimated to increase sixfold in the next ten years, and power generation creates a lot of emissions, with the electric power industry accounting for 31% of emissions in the US in 2022.
The state of sustainability software on G2
When it comes to software, some solutions focus on ESG or sustainability and include features for carbon accounting or dedicated products specifically created for various types of business needs. The graph below describes the overlap between these solutions.
Carbon accounting overlaps the most with sustainability management, with 61 products in common, while only 15 products are listed in all three categories.
Despite the overlap described above, there are specific features that differentiate carbon accounting from ESG and sustainability management.
How does carbon accounting software work?
As the name suggests, this type of software focuses on measuring (or accounting for) emissions, and many solutions also provide functionality to reduce emissions (also known as decarbonization).
This can be achieved in several ways:
- Reduce the business activities that generate emissions, such as manufacturing or logistics.
- Improve equipment and operations to reduce emissions without limiting operations.
- Use carbon credits, which allow companies to acquire the right to contribute to emissions.
An ideal carbon accounting software should include all the features mentioned above, but there are point solutions that only focus on tracking emissions. Some providers also created tools specialized in specific industries, such as supply chain or transportation.
How to choose the right carbon accounting software for your company
The first and most important step is to determine the software's business case. If the goal is to track and report on emissions, a simple measuring tool would suffice. If the focus is exclusively on reporting, ESG reporting is recommended.
However, these tools won't be enough to tackle decarbonization. To reduce emissions, companies need features to identify what generates them and plan actions to achieve net zero objectives. This can be done through industry-specific scenarios and recommendations for decarbonization and then by estimating their impact.
Finally, remember that some vendors may provide environmental health and safety (EHS) or enterprise risk management (ERM) software that includes carbon accounting and decarbonization features. However, their features may only sometimes be the best on the market, so buying separate tools for carbon accounting may make sense.
Learn more about ESG reporting and transforming data for a brighter tomorrow.
Edited by Jigmee Bhutia
by Gabriel Gheorghiu
