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“There have never been so many practice management solutions available in the Australian and New Zealand markets as there are today.”
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In nearly every country, the transition to renewable energy is in full swing. However, it’s not just electricity generators and retailers that are changing their behaviour. Sustainability reporting is moving from progressive trend to mainstream adoption. Companies are increasingly asking the question: how large is our carbon footprint and what can we do about it?
Reducing our carbon footprint for the good of the planet is a big call, but the first step is knowing what carbon emissions your organisation creates. There’s software that helps to maintain compliance through keeping track of emissions, collecting data and reporting sustainability.
Carbon footprint management
TECH GUIDE
The shoehorn approach
“I'm really excited about being able to do forecasting. At the moment, it's all in spreadsheets and a bit static. We need to get it on dashboards in everyone's face all the time”
Dozens of carbon management software tools have sprung up around the world in response. Most of them are built on a baseline assumption: the easiest way to track your carbon footprint is to deduce it from your expenditure. Carbon management software calculates emissions by categorising bank transactions and assigning an average emissions profile by category.
A third trend is that mid-size and larger firms, frustrated at the pace of development, are cobbling together their own workarounds. They see this as the best way to get the accuracy of reporting and lift in productivity that the software can’t deliver off the shelf.
Acuity Special Edition December/January 2023
See full issue
Acuity Special Edition December/January 2023
See full issue
Sholto Macpherson is an award-winning journalist and editor of DigitalFirst.com, a blog on the latest in accounting technology for accounting firms and SMEs
Story Sholto Macpherson
For example, if you buy a Dell laptop from Officeworks, it will show up as a $2000 transaction and be coded in the general ledger as ‘office equipment’. Carbon management software will determine that this is a laptop purchase based on the dollar amount, the supplier, the account code and potentially from information in the transaction description. (Laptops on average produce 338.6kg CO2 from production and while in use during a four-year lifespan.)
338.6kg
The advantage of calculating emissions from transactions is that it is relatively quick and easy. A small business can use transaction analysis to get a good idea of its contribution to carbon emissions.
And it is important that the first step in measuring emissions is easy because two out of three small and medium businesses don’t know where to start, says Cogo chief executive officer Julie Lindenberg, citing a survey of 600 Australian and New Zealand businesses.
The downside of transaction analysis is that it’s not particularly accurate. Some carbon management apps use global averages to determine emissions rather than local averages. This can skew results for categories such as emissions in electricity consumption. The electricity grid in China supplies businesses with a much higher percentage of renewable energy than the grid in the US.
Another drawback is that counting by averages doesn’t reward companies that decide to support greener suppliers. In the laptop example above, an Apple MacBook produces less than half the greenhouse emissions of a Dell laptop over a four year lifespan. However, recording the emissions for an average laptop obscures the positive actions of a company that decides to buy Apple laptops instead of Dell equivalents. This can cause problems with shareholders who can’t see the impact on total carbon emissions of a company’s claimed sustainability agenda.
A genre still in infancy
The downside of transaction analysis is that it’s not particularly accurate. Some carbon management apps use global averages to determine emissions rather than local averages. This can skew results for categories such as emissions in electricity consumption. The electricity grid in China supplies businesses with a much higher percentage of renewable energy than the grid in the US.
Many suppliers haven’t calculated lifetime emissions for their products and services because it is not a simple exercise. It requires assessing the carbon emissions of their own supply chain, which may include varying sources for single components. Once they have created the calculation, the supplier needs to undertake a certification process to confirm that the emissions figure is accurate. If the supplier materially changes the construction of the product, it needs to be reviewed again.
Ultimately, companies will eschew estimates based on transaction data for primary data. Carbon emissions calculators such as Ekos, that asks companies to collect and enter energy metrics such as kilowatts, litres of diesel or petrol and cubic metres of wood. Tracking these statistics becomes another bookkeeping task, most likely relegated to a spreadsheet.
Recording of primary data will gradually become automated. The latest generation of electricity meters transmit readings to energy retailers every 30 minutes. The energy retailers provide this information to users and businesses via mobile phone apps or web portals. As more devices and vehicles connect to an “internet of things”, they will share usage data more widely.
30
minutes
Local Carbon, a Tasmanian startup (see breakout at bottom of article), currently uses the averages method with transaction data to calculate emissions but is moving to a primary data model. Local Carbon chief executive officer Jessica Richmond envisions accountants will contact a client’s suppliers to collect that data, which will trigger a cascading network of carbon assessments through the supply chain.
“We say to suppliers, ‘Are you measuring emissions? And if you're not, would you like to engage your accountant who can become certified and they can do this assessment for you?’”
Richmond says. “The idea is we're trying to create this world where it's not everyone putting in their own inputs, hoping for the best. We're bringing another level of accuracy to this space by empowering accountants to do this properly.”
of CO2 is produced on average by laptops during a four-year lifespan
The latest generation of electricity meters transmit readings to energy retailers every
Sizing up your – and your clients’ – footprint
The market for carbon accounting apps is very young. Consequently, there are dozens of apps, most of which are built around transaction analysis.
Some attempts to differentiate are a little gimmicky. UK-based Tred analyses transactions and offers an optional debit card made of recycled plastic that “plants trees as you spend”.
Cogo, a New Zealand based company with 120 employees, is one of the larger players. It provides sustainability insights for UK, Kiwi and Australian banks and competes against European apps such as Ecolytiq.
Cogo claims that its estimates are more accurate than the competition because it uses country-specific averages for categories of consumption. This provides a more accurate picture than other apps that use global averages.
Apps are also looking to differentiate themselves beyond reporting. Cogo’s ‘secret sauce’ is its list of recommendations or actions that a business can take to reduce its emissions, says Lindenberg. “It's great to show somebody what their footprint is, but then how do you show them what they can do to make a difference?”
Cogo has partnered with Xero to launch the Cogo Carbon Business Manager app in the Australian Xero App Store. The Cogo Carbon Business Manager app pulls categorised transactional data – such as spend on electricity and fuel – from Xero, assigns a carbon footprint to each transaction and calculates a carbon footprint for the business.
Customers can also access tailored advice to help lower their business’ carbon footprint. The app enables customers to share their progress which can help them retain and attract customers. The app is free, with paid features launching later this year.
Lindenberg says a company’s emission factor will become a big differentiator in purchasing decisions. All things being equal, a consumer will choose the supplier with the lower emissions. “That's what we call carbon literacy. You're not just making a decision on how much money's in the bank account, you're also making a decision based on the impact to the planet.”
Acuity Special Edition December/January 2023
See full issue
What emissions do I need to measure?
SCOPE 1
Includes emissions from sources that you own or control. These could include fuel for company vehicles or ingredients in manufacturing such as chemicals or raw materials.
SCOPE 2
Covers indirect emissions from energy utilities such as electricity and natural gas.
SCOPE 3
Global carbon accounting standards separate emissions into three categories:
Pathzero, headquartered in Sydney, focuses on the corporate and investor market. Its corporate product combines software with consulting that takes corporations through a step-by-step process. It first establishes a base year for carbon emissions and then provides forecasts based on different “temperature scenario glide-paths”.
Pathzero provides training to corporate accountants to run the assessment process internally. It also has certified consultants who can verify that the assessment has included everything within scope, and a ‘mini-audit’ validation service that checks the data has been entered accurately.
The Pathzero software also analyses spend data. But rather than using averages to calculate emissions, it applies a more complex method called environmentally extended input-output analysis.
The software can determine emissions through multiple ways. A company measuring air travel would ideally add a flight itinerary and Pathzero would calculate emissions by distance. A second option would be to mark the flight as short haul or long haul, or finally the company could just enter the total cost of the flights.
If the company had performed a full lifecycle analysis they could enter in the data directly and attach a supporting PDF or other documentation.
The level of detail required depends on a company’s business objectives, says Pathzero’s chief executive officer and a chartered accountant from South Africa, Carl Prins. A company wanting to certify under the Australian Government’s Climate Active program couldn’t enter just the amount it spent on electricity. “You would have to use the actual kilowatt hours consumed at a premises in order to get the measurements accurate enough,” Prins says.
“We offer a comprehensive set of models per emission source to help businesses achieve their objective. It's a very sophisticated system.”
In October 2022, Pathzero released a second product called Pathzero Navigator for private market investors that provides a snapshot of their financed emissions. One of the most material Scope three emission sources for superannuation funds is Category 15 investments. “By investing into the equity and debt of companies directly or through an asset manager you are financing the operational emissions of that company,” Prins says.
A bank, super fund or insurance company can use Pathzero Navigator to calculate the emissions they finance with an associated score that indicates the accuracy of the estimate. Ultimately, businesses can establish a basic benchmark using lower-end software and track their efforts to reduce their carbon footprint. Or they can commit the effort and money required to obtain a formal certification via a more complex platform.
Either method will provide validation of a company’s sustainability strategy for employees and shareholders. And it will also give a marketable demonstration of commitment to customers and suppliers.
Carbon accounting is the latest revenue stream for accounting firms
Many pioneers in carbon management are arriving at the same conclusion: the best people to account for greenhouse gas emissions are accountants.
Local Carbon is a software company born from a Tasmanian accounting firm itself founded less than two years ago. Ellis Richmond was set up to provide accounting services to mining companies.
However, the miners didn’t just want their books reconciled, they began asking for emissions assessments.
Within a little over a year the firm had produced 50 assessments and grown to 20 staff.
Ellis Richmond partner Jessica Richmond says they had to make a decision: “Are we going to continue growing into this enormous carbon accounting firm? Or are we going to build the platform that allows every other accounting firm to do this as well?”
Six months ago, Richmond co-founded Local Carbon and has raised A$2 million in funding from venture capital firms Blackbird and Possible Ventures.
Local Carbon has released the first couple of modules in a free online course in carbon accounting that shows how to conform with global standards. Richmond says about 20 firms have started the course.
“They're preparing auditable work papers, doing a carbon accounting assessment for clients and providing that as a service the same way they would tax and compliance,” Richmond says. “We've spent a lot of time asking, what role does the accounting industry have to play in sustainability and advising clients? It seems to be resonating that [accountants] will have a very specific role that absolutely needs to be done right.”
Abigail Murison is a freelance content strategist, editor and writer, who specialises in business, marketing and finance. Her work has appeared on websites and in magazines in the US, Australia, South Africa and New Zealand. She has a keen interest in entrepreneurship, human ingenuity and technology, and how they can transform the way we live and work.
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ABIGAIL MURISON
In nearly every country, the transition to renewable energy is in full swing. However, it’s not just electricity generators and retailers that are changing their behaviour. Sustainability reporting is moving from progressive trend to mainstream adoption. Companies are increasingly asking the question: how large is our carbon footprint and what can we do about it?
In nearly every country, the transition to renewable energy is in full swing. However, it’s not just electricity generators and retailers that are changing their behaviour. Sustainability reporting is moving from progressive trend to mainstream adoption. Companies are increasingly asking the question: how large is our carbon footprint and what can we do about it?
For example, if you buy a Dell laptop from Officeworks, it will show up as a $2000 transaction and be coded in the general ledger as ‘office equipment’. Carbon management software will determine that this is a laptop purchase based on the dollar amount, the supplier, the account code and potentially from information in the transaction description. (Laptops on average produce 338.6kg CO2 from production and while in use during a four-year lifespan.)
The advantage of calculating emissions from transactions is that it is relatively quick and easy. A small business can use transaction analysis to get a good idea of its contribution to carbon emissions.
And it is important that the first step in measuring emissions is easy because two out of three small and medium businesses don’t know where to start, says Cogo chief executive officer Julie Lindenberg, citing a survey of 600 Australian and New Zealand businesses.
The downside of transaction analysis is that it’s not particularly accurate. Some carbon management apps use global averages to determine emissions rather than local averages. This can skew results for categories such as emissions in electricity consumption. The electricity grid in China supplies businesses with a much higher percentage of renewable energy than the grid in the US.
Another drawback is that counting by averages doesn’t reward companies that decide to support greener suppliers. In the laptop example above, an Apple MacBook produces less than half the greenhouse emissions of a Dell laptop over a four year lifespan. However, recording the emissions for an average laptop obscures the positive actions of a company that decides to buy Apple laptops instead of Dell equivalents. This can cause problems with shareholders who can’t see the impact on total carbon emissions of a company’s claimed sustainability agenda.
The downside of transaction analysis is that it’s not particularly accurate. Some carbon management apps use global averages to determine emissions rather than local averages. This can skew results for categories such as emissions in electricity consumption. The electricity grid in China supplies businesses with a much higher percentage of renewable energy than the grid in the US.
The downside of transaction analysis is that it’s not particularly accurate. Some carbon management apps use global averages to determine emissions rather than local averages. This can skew results for categories such as emissions in electricity consumption. The electricity grid in China supplies businesses with a much higher percentage of renewable energy than the grid in the US.
Ultimately, companies will eschew estimates based on transaction data for primary data. Carbon emissions calculators such as Ekos, that asks companies to collect and enter energy metrics such as kilowatts, litres of diesel or petrol and cubic metres of wood. Tracking these statistics becomes another bookkeeping task, most likely relegated to a spreadsheet.
Recording of primary data will gradually become automated. The latest generation of electricity meters transmit readings to energy retailers every 30 minutes. The energy retailers provide this information to users and businesses via mobile phone apps or web portals. As more devices and vehicles connect to an “internet of things”, they will share usage data more widely.
A genre still in infancy
Local Carbon, a Tasmanian startup (see breakout at bottom of article), currently uses the averages method with transaction data to calculate emissions but is moving to a primary data model. Local Carbon chief executive officer Jessica Richmond envisions accountants will contact a client’s suppliers to collect that data, which will trigger a cascading network of carbon assessments through the supply chain.
“We say to suppliers, ‘Are you measuring emissions? And if you're not, would you like to engage your accountant who can become certified and they can do this assessment for you?’”
Richmond says. “The idea is we're trying to create this world where it's not everyone putting in their own inputs, hoping for the best. We're bringing another level of accuracy to this space by empowering accountants to do this properly.”
The market for carbon accounting apps is very young. Consequently, there are dozens of apps, most of which are built around transaction analysis.
Some attempts to differentiate are a little gimmicky. UK-based Tred analyses transactions and offers an optional debit card made of recycled plastic that “plants trees as you spend”.
Cogo, a New Zealand based company with 120 employees, is one of the larger players. It provides sustainability insights for UK, Kiwi and Australian banks and competes against European apps such as Ecolytiq.
Cogo claims that its estimates are more accurate than the competition because it uses country-specific averages for categories of consumption. This provides a more accurate picture than other apps that use global averages.
Cogo claims that its estimates are more accurate than the competition because it uses country-specific averages for categories of consumption. This provides a more accurate picture than other apps that use global averages.
Apps are also looking to differentiate themselves beyond reporting. Cogo’s ‘secret sauce’ is its list of recommendations or actions that a business can take to reduce its emissions, says Lindenberg. “It's great to show somebody what their footprint is, but then how do you show them what they can do to make a difference?”
Customers can also access tailored advice to help lower their business’ carbon footprint. The app enables customers to share their progress which can help them retain and attract customers. The app is free, with paid features launching later this year.
Sizing up your – and your clients’ – footprint
SCOPE 1
SCOPE 3
Includes emissions from sources that you own or control. These could include fuel for company vehicles or ingredients in manufacturing such as chemicals or raw materials.
SCOPE 2
Covers indirect emissions from energy utilities such as electricity and natural gas.
Encapsulates emissions that your company is responsible for but are generated outside your premises. This includes the emissions for any goods it purchases and all emissions for goods it sells from manufacture through to disposal. Scope 3 is the hardest to calculate, however it represents the largest percentage of emissions for all companies.
Encapsulates emissions that your company is responsible for but are generated outside your premises. This includes the emissions for any goods it purchases and all emissions for goods it sells from manufacture through to disposal. Scope 3 is the hardest to calculate, however it represents the largest percentage of emissions for all companies.
Lindenberg says a company’s emission factor will become a big differentiator in purchasing decisions. All things being equal, a consumer will choose the supplier with the lower emissions. “That's what we call carbon literacy. You're not just making a decision on how much money's in the bank account, you're also making a decision based on the impact to the planet.”
Pathzero, headquartered in Sydney, focuses on the corporate and investor market. Its corporate product combines software with consulting that takes corporations through a step-by-step process. It first establishes a base year for carbon emissions and then provides forecasts based on different “temperature scenario glide-paths”.
Pathzero provides training to corporate accountants to run the assessment process internally. It also has certified consultants who can verify that the assessment has included everything within scope, and a ‘mini-audit’ validation service that checks the data has been entered accurately.
The Pathzero software also analyses spend data. But rather than using averages to calculate emissions, it applies a more complex method called environmentally extended input-output analysis.
The Pathzero software also analyses spend data. But rather than using averages to calculate emissions, it applies a more complex method called environmentally extended input-output analysis.
If the company had performed a full lifecycle analysis they could enter in the data directly and attach a supporting PDF or other documentation.
If the company had performed a full lifecycle analysis they could enter in the data directly and attach a supporting PDF or other documentation.
“We offer a comprehensive set of models per emission source to help businesses achieve their objective. It's a very sophisticated system.”
“We offer a comprehensive set of models per emission source to help businesses achieve their objective. It's a very sophisticated system.”
“We offer a comprehensive set of models per emission source to help businesses achieve their objective. It's a very sophisticated system.”
What emissions do I need to mesaure?
Either method will provide validation of a company’s sustainability strategy for employees and shareholders. And it will also give a marketable demonstration of commitment to customers and suppliers.
Many pioneers in carbon management are arriving at the same conclusion: the best people to account for greenhouse gas emissions are accountants.
Local Carbon is a software company born from a Tasmanian accounting firm itself founded less than two years ago. Ellis Richmond was set up to provide accounting services to mining companies.
However, the miners didn’t just want their books reconciled, they began asking for emissions assessments.
Within a little over a year the firm had produced 50 assessments and grown to 20 staff.
Within a little over a year the firm had produced 50 assessments and grown to 20 staff.
Six months ago, Richmond co-founded Local Carbon and has raised A$2 million in funding from venture capital firms Blackbird and Possible Ventures.
Local Carbon has released the first couple of modules in a free online course in carbon accounting that shows how to conform with global standards. Richmond says about 20 firms have started the course.
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Does it provide multiple models for calculating emissions?
Does it provide cradle-to-grave analysis for products?
Does it record emissions under Scope 3?
Does it record emissions under Scope 1 or Scope 2?
Does it record emissions in entities in other regions or countries?
Does it consolidate emissions from multiple entities?
Does it provide recommendations to reduce emissions?
Can it record data manually?
Does it analyse spend data?
Carbon footprint datasets
Local Carbon accounting software
Climate impact solutions
Business and Personal Carbon Manager
Tred Debit Card
Cogo is a carbon footprint management product. It currently works with 12 banks to integrate carbon tracking into banking apps. Cogo models help banks accurately measure carbon emissions specific to local markets and nudge their customers to make more sustainable choices.
Customers can track the carbon footprint of every purchase and offset their footprint every month with one of Tred's verified offsetting plans
Customers who spend on their Tred card fund tree-planting with every transaction
A green neobank, offering a debit card and banking app
Can provide the carbon footprint of the user's entire lifestyle by consolidating spending info from bank accounts, credit and debit cards, and any other spending mechanisms
Reduce emissions recommendations actions are tailored to a user's footprint
Analyses spend data across debit cards, bank accounts and credit cards in multiple currencies
B2B APIs enable retail banks and fintechs to help their customers track and offset carbon emissions
Helps accountants provide cradle-to-grave analysis for their clients
Helps traditional accountants become carbon accountants, so every business client can understand their climate impact with the help of an advisor they trust
Provides credible, authoritative datasets of carbon footprint per dollar in any sector, in any country, so carbon disclosure can easily be integrated into financial accounting and transaction systems
Yes, across debit cards, bank accounts and credit cards. in multiple currencies.
Yes: and actions are tailored to a user's footprint.
Yes. It can provide the carbon footprint of the user's entire lifestyle by consolidating spending info from bank accounts, credit and debit cards, and any other spending mechanisms.
Yes, for certain categories.
It helps accountants do this for their clients.
What you need to know about carbon footprint management software
The table below outlines some key features of carbon footprint apps. The options listed here are by no means exhaustive. A product's inclusion should not be regarded as an endorsement by CA ANZ. Information included here has come from the vendors.
Calculate emissions
Cradle-to-grave product analysis
record scope 3 emissions
Record Scope 1/2 emissions
Record emissions in other regions
Consolidate emissions
recommend reduce emissions
record data manually
Analyse spend data
Provides credible, authoritative datasets of carbon footprint per dollar in any sector, in any country, so carbon disclosure can easily be integrated into financial accounting and transaction systems
Carbon footprint datasets
Carbon footprint datasets
Calculate emissions
n/a
Cradle-to-grave product analysis
record scope 3 emissions
Record Scope 1/2 emissions
Record emissions in other regions
Consolidate emissions
recommend reduce emissions
record data manually
Analyse spend data
Helps accountants provide cradle-to-grave analysis for their clients
Helps traditional accountants become carbon accountants, so every business client can understand their climate impact with the help of an advisor they trust
Accounting Software
Accounting Software
Calculate emissions
Cradle-to-grave product analysis
n/a
record scope 3 emissions
Record Scope 1/2 emissions
Record emissions in other regions
Consolidate emissions
recommend reduce emissions
record data manually
Analyse spend data
Can provide the carbon footprint of the user's entire lifestyle by consolidating spending info from bank accounts, credit and debit cards, and any other spending mechanisms
Reduce emissions recommendations actions are tailored to a user's footprint
Analyses spend data across debit cards, bank accounts and credit cards in multiple currencies
B2B APIs enable retail banks and fintechs to help their customers track and offset carbon emissions
Climate impact solutions
Climate impact solutions
Calculate emissions
Cradle-to-grave product analysis
record scope 3 emissions
Record Scope 1/2 emissions
Record emissions in other regions
Consolidate emissions
recommend reduce emissions
record data manually
Analyse spend data
Customers can track the carbon footprint of every purchase and offset their footprint every month with one of Tred's verified offsetting plans
Customers who spend on their Tred card fund tree-planting with every transaction
A green neobank, offering a debit card and banking app
Tred debit card
Tred debit card
Calculate emissions
Cradle-to-grave product analysis
record scope 3 emissions
Record Scope 1/2 emissions
Record emissions in other regions
Consolidate emissions
recommend reduce emissions
record data manually
Analyse spend data
Cogo is a carbon footprint management product. It currently works with 12 banks to integrate carbon tracking into banking apps. Cogo models help banks accurately measure carbon emissions specific to local markets and nudge their customers to make more sustainable choices.
Business and Personal Carbon Manager
Business and Personal Carbon Manager
Sizing up your – and your clients’ – footprint
The market for carbon accounting apps is very young. Consequently, there are dozens of apps, most of which are built around transaction analysis.
Acuity Special Edition December/January 2023
See full issue
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For tips to manage and use sustainability data to evaluate the sustainability of products, actions, and future strategies and plans go to: How to harness and manage sustainability data using emerging tech