How Greenhouse Gas Accounting Can Help Businesses

 
 

            With buzzwords like “carbon accounting” and “green finance” on the rise, companies are increasingly interested in sustainability. A popular way for companies to start their green journey is through greenhouse gas (GHG) accounting. According to The Conference Board, 71% of S&P 500 companies are already reporting their GHG emissions.¹ To find out whether GHG accounting is a worthwhile investment, read on to learn about the potential benefits, such as cost savings and grant opportunities.

1. Cost Savings

            By documenting a businesses’ sources of GHG emissions, GHG accounting can reveal possible inefficiencies in its operations. For instance, if a company’s transportation fleet has high emissions, this could indicate that its vehicles have poor fuel efficiency. In these cases, it is possible that actions to reduce these emissions could also reduce costs.
                           

 
 

Example of a marginal abatement cost curve (source)

 
 


            A marginal abatement cost curve (MACC) can reveal the most economic ways to reduce emissions. The vertical axis indicates the costs needed to cut emissions, while the horizontal axis indicates the amount of emissions reduced. Initiatives with the lowest costs are placed on the left, with the cost increasing as the graph progresses towards the right.² Some bars have ‘negative’ costs, which are risk-free and potentially profitable measures to cut emissions. For those in the logistics industry, possible low-risk measures include improvements to fuel economy, using methods such as eco-driving training.

2. Minimising Climate Risks

            Climate change can pose physical risks to a business, such as damage to assets from natural disasters. However, climate change can also cause transition risks. Changing consumer preferences, updated legislation on carbon disclosures, and investing in new technology are just some of the future trends that businesses will have to deal with.³

            Businesses in all sectors are susceptible to transition risks, but carbon-intensive industries like energy and logistics are especially vulnerable. GHG accounting provides an inventory of a company’s emissions, compiling information on emissions sources and the quantities of GHG released. It increases awareness on which areas provide opportunities and risks when adapting to climate change. With GHG accounting, businesses can access the data needed for future adaptations and growth.

3. Headstart Over Future Regulations and Competitors

            In recent years, more governments have enacted policies to make GHG reporting compulsory, especially in the APAC region. Singapore intends to make climate reporting mandatory for large non-listed companies by financial year 2027.⁴ Other ASEAN states such as Vietnam, Thailand and Indonesia have mandated sustainability reporting for publicly listed companies.⁵ Since 2022, domestic entities in China have been required to disclose information on environmental issues, including carbon emissions.⁶

            Although GHG accounting and reporting is mandatory for some sectors currently, regulations are likely to expand to more industries in the following years. Companies that adopt GHG accounting now will gain a headstart over future regulations that may be implemented in their country of operations. Starting today also gives businesses an advantage over other competitors, who will have to catch up with new policies.

4. Access to Investors and Green Finance

            Investors are increasingly considering businesses’ environmental, social, and corporate governance (ESG) commitments when choosing to invest in them. Based on a 2022 Capital Group study, 89% of investors considered ESG factors when making investment decisions.⁷ Lenders and underwriters are seeking greater data on companies’ sustainability plans, so they can better allocate capital and price risks. GHG accounting is one way to show a company’s planning for future climate risks, making it more attractive for prospective investments.

            With the growing number of green loans and grants that businesses can access, it is easy to fund expenses related to GHG accounting and decarbonisation. For example, the Monetary Authority of Singapore (MAS) launched the Green and Sustainability-Linked Loan Grant Scheme (GSLS) in 2020.⁸ It defrays up to S$100,000 of costs for businesses seeking external sustainability assessments and certifications. Combined with external certifications like Green Freight Asia’s Label, GHG accounting is a good way to demonstrate a company’s sustainability commitments, potentially increasing its eligibility for further green financing.

 
 

Example of a GFA Label Certificate

 
 


5. Corporate Social Responsibility (CSR)

            Demonstrating a company’s commitment to sustainability isn’t just attractive to investors, but also customers. 65% of respondents surveyed by Deloitte in 2021 expected CEOs to address social and climate issues.⁹ In response to changing consumer preferences, logistics companies have begun working with their customers to make their supply chains more sustainable, using innovative methods to reduce waste from packaging.¹⁰ CSR doesn’t just affect businesses’ relations with customers, it also influences transactions between businesses. To meet their sustainability commitments, 78% of MNCs will remove suppliers that undermine their carbon transition plans by 2025.¹¹

            GHG accounting is the first step on a company’s journey to proving its corporate responsibility. By publicly disclosing emissions and making targets to reduce them, customers and other businesses can see a company’s commitment to tackling climate change. It increases consumers’ trust, and improves brand image when compared to competitors.

 
 
 

Interested in taking up GHG accounting today for these benefits? Green Freight Asia offers a Measuring, Reporting and Verification (MRV) Programme which will allow your company to understand its sources of GHG emissions, and find opportunities to mitigate these emissions. Learn more about our programme here.