Carbon Audit : A Practical Guide for Businesses in 2024

8 January, 2024
Carbon Neutral - decarbonisation

Carbon Audit 101

Today, most of the UK companies and institutions listed on the London Stock Exchange need to publish in-depth reports about the current status of their impact on the environment and plans that intend to achieve the carbon reduction targets. That’s where carbon audit comes into the picture.

A carbon audit is an effective method to calculate the carbon footprint and identify the emissions’ root cause. This guide will cover all the essentials of conducting a foundational carbon audit that can be customized for different operations. It also includes a range of measures to reduce carbon emissions. 

Table of Content

What is a Carbon Audit?

A carbon audit, also known as a carbon footprint assessment, is essentially a systematic examination of the greenhouse gas (GHG) emissions produced by an individual, organization, building, or event. It’s like a financial audit for your environmental impact, giving you a clear picture of where your emissions are coming from and how much you’re generating.

Why is a carbon audit important? 

Businesses and organizations take on many initiatives to employ sustainable sources of energy and methods to improve efficiency and encourage better carbon management. To measure these efforts and compare the impact, incorporating accounting standards for emissions becomes crucial. A carbon audit is a scientific method to quantify carbon emissions and, and impact and can help the company make effective carbon management. 

What are the benefits of carbon audit for the business? 

When the business makes active efforts to reduce carbon emissions, it is not only good for the environment but also paves the way to multiple business and investment opportunities. 

  • Eco-Efficiency: Pinpoint energy waste for cost-effective resource use.
  • Regulatory Assurance: Ensure compliance with environmental standards and regulations.
  • Reputation Boost: Enhance brand image through visible sustainability efforts.
  • Risk Mitigation: Identify and manage climate-related risks for resilience.
  • Cost Savings: Optimize operations, lowering utility expenses and inefficiencies.
  • Employee Engagement: Foster staff pride and engagement in eco-friendly practices.
  • Investor Appeal: Attract socially responsible investors with green initiatives.
  • Innovation Opportunities: Inspire innovation by identifying efficiency improvements.
  • Supply Chain Sustainability: Evaluate and enhance the sustainability of the entire supply chain.
  • Stakeholder Trust: Address environmental concerns transparently, meeting expectations.
  • Long-Term Resilience: Position for success in a market valuing sustainable practices.

What is the scope of the carbon audit? 

The scope of the carbon audit is defined by the activities that are carried out for, and invoiced according to the project actions. Additionally, the emissions from the supply chain are also included. 

Eligible companies must follow the guidelines mentioned by the Department of Environment and Rural Affairs (Defra) for UK organizations and businesses. The qualified companies are those who are complying with the GHG regulations. 

There are three broad groups of emission-related activities

GHG Protocol - scope 1 emissions, scope 2 emissions, scope 3 emissions

Scope 1: Direct source of emissions: Activities that are directly in control of the organization and are released directly into the atmosphere. 

Scope 2: Indirect emissions: These occur at a source that is not directly controlled by the organization. It includes only those activities associated with electricity or energy 

Scope 3: It includes all the other indirect emissions that are not included in Scope 2

How to conduct a carbon audit?

To conduct an efficient carbon audit, this is the recommended process to help for an optimised data collection to implementation:

Preliminary Assessment

Assessing current carbon emissions is the foundation of a successful carbon audit. Understanding the baseline emissions allows businesses to identify areas for improvement and set realistic reduction goals. To achieve this, employ robust data collection methods and tools. Utilize emission inventories, energy bills, and operational records, ensuring accuracy and completeness. The more precise the preliminary assessment, the more effective subsequent mitigation strategies will be.

Boundary Setting

Defining the audit’s boundaries is crucial for accurate and meaningful results. These boundaries may include organizational and operational aspects. By clearly outlining what is included and excluded from the audit, businesses can avoid underestimating or overestimating their carbon footprint. Accurate boundary setting provides a realistic scope, enabling targeted efforts towards emission reduction.

Emission Sources Identification

Identifying and categorizing emission sources is a meticulous process that involves scrutinizing various aspects of operations. From energy consumption to transportation, the goal is to leave no stone unturned. Common emission sources in businesses include energy usage, transportation, and supply chain activities. By comprehensively categorizing sources, businesses can prioritize efforts in high-impact areas.

Measurement and Calculation

Accurate measurement and calculation of carbon emissions require adherence to standardized methodologies. Implementing recognized protocols ensures consistency and comparability of data. Common methodologies include the Greenhouse Gas Protocol and ISO 14064 standards. Standardized emission factors play a vital role in converting raw data into meaningful carbon footprint metrics. This step ensures the reliability of the audit results.

Reporting and Verification

The culmination of a carbon audit is the reporting of findings. Transparently communicating emissions data, reduction strategies, and achievements is essential for accountability. To enhance credibility, consider third-party verification. External auditors provide an unbiased assessment, validating the accuracy and reliability of the carbon audit. This verification reinforces the commitment to transparency and sustainability.

The companies can use DEFRA guidelines and notes alongside quarterly meetings to check if there is good progress and highlight the issues to be resolved. This will create more depth in the carbon audit and make it more efficient. 

Key Terms in Carbon Auditing

Demystifying Carbon Audit Jargon

1. Carbon Footprint:
  • Definition: The total amount of greenhouse gases, primarily carbon dioxide, that are emitted directly or indirectly by an individual, organization, event, or product throughout its lifecycle.
  • Example: Calculating the carbon footprint involves assessing emissions from energy consumption, transportation, and production processes.


2. Greenhouse Gas (GHG):
  • Definition: Gases that trap heat in the Earth’s atmosphere, contributing to the greenhouse effect. Common GHGs include carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O).
  • Example: The combustion of fossil fuels releases greenhouse gases into the atmosphere, contributing to climate change.


3. Scope 1, Scope 2, and Scope 3 Emissions:
  • Definition: The three scopes define different categories of greenhouse gas emissions.
    • Scope 1: Direct emissions from owned or controlled sources (e.g., on-site fuel combustion).
    • Scope 2: Indirect emissions from purchased electricity, heating, or cooling.
    • Scope 3: Indirect emissions from the entire value chain, including suppliers, customers, and transportation.
  • Example: An office building’s Scope 1 emissions might be from its on-site gas heating system, while Scope 2 emissions could come from purchased electricity.


4. Carbon Offset:
  • Definition: A reduction in emissions, typically through a project like reforestation or renewable energy, to compensate for emissions produced elsewhere
  • Example: A company may purchase carbon offsets to balance its unavoidable emissions, making its overall impact carbon-neutral.


5. Emission Factor:
  • Definition: A coefficient that quantifies the amount of greenhouse gas emissions produced per unit of activity or output.
  • Example: The emission factor for electricity might be expressed as kilograms of CO2 per kilowatt-hour.


6. Baseline Emissions:
  • Definition: The reference point against which emissions reductions or offsets are measured. It represents the initial level of emissions before implementing sustainability measures.
  • Example: Establishing baseline emissions is crucial for setting reduction targets and evaluating the success of carbon reduction initiatives.


7. Carbon Neutrality:
  • Definition: Achieved when an entity’s net greenhouse gas emissions are equal to zero, typically through a combination of emission reductions, offsets, and sustainable practices.
  • Example: A company can strive for carbon neutrality by minimizing emissions and investing in projects that sequester or reduce emissions.


8. Global Warming Potential (GWP):
  • Definition: A measure of how much heat a greenhouse gas traps in the atmosphere over a specific time period, usually 100 years, compared to carbon dioxide.
  • Example: Methane has a higher GWP than carbon dioxide, meaning it has a more significant warming effect over the same time frame.


9. Carbon Sequestration:
  • Definition: The process of capturing and storing carbon dioxide, preventing it from being released into the atmosphere, often through activities like afforestation or soil management.
  • Example: Forests act as natural carbon sinks, sequestering carbon through photosynthesis and storing it in trees and soil.


10. Lifecycle Assessment (LCA):
  • Definition: A comprehensive analysis of the environmental impact of a product, process, or activity, considering all stages from raw material extraction to disposal.
  • Example: Conducting an LCA for a smartphone involves assessing the environmental impact of mining raw materials, manufacturing, transportation, and eventual disposal.


11. Carbon Intensity:
  • Definition: The amount of carbon dioxide emitted per unit of economic output, often expressed as CO2 emissions per unit of GDP.
  • Example: A decrease in carbon intensity indicates that economic activities are becoming more environmentally sustainable.


12. Renewable Energy Certificates (RECs):
  • Definition: Tradable certificates representing the environmental attributes of electricity generated from renewable sources, allowing organizations to support green energy without physically using it.
  • Example: Purchasing RECs can help companies offset their Scope 2 emissions and support the transition to renewable energy.


13. Carbon Disclosure Project (CDP):
  • Definition: An international platform that encourages companies and cities to disclose their environmental impacts and strategies, providing transparency for investors and stakeholders.
  • Example: Participating in CDP reporting demonstrates a commitment to environmental disclosure and accountability.


14. Carbon Trading:
  • Definition: A market-based approach where companies can buy or sell carbon credits to meet emission reduction targets economically.
  • Example: A company exceeding its emissions allowance may buy credits from another company with lower emissions, promoting overall emissions reduction.


15. Carbon Pricing:
  • Definition: Placing a monetary value on carbon emissions to encourage businesses to reduce their greenhouse gas output.
  • Example: Carbon taxes and cap-and-trade systems are common forms of carbon pricing used to incentivize emission reductions.

What is a carbon audit?

A carbon audit is a detailed examination of an organization’s or individual’s activities to measure and understand the amount of carbon emissions they produce. It helps identify areas where emissions can be reduced, making processes more environmentally friendly.


Why do we do carbon audits?

Carbon audits are done to assess and manage the carbon footprint of an entity. By understanding how much carbon is being emitted, organizations can take steps to reduce their impact on the environment, contribute to sustainability goals, and often save costs through more efficient practices.


What is a GHG audit?

A GHG audit (Greenhouse Gas audit) is similar to a carbon audit but extends its focus beyond carbon to include other greenhouse gases. It provides a comprehensive view of an entity’s impact on climate change, including gases like methane and nitrous oxide.


How to do a carbon audit?

Conducting a carbon audit involves several steps:

  • Data Collection: Gather information on energy use, transportation, and other relevant activities.
  • Emissions Calculation: Calculate emissions using established factors.
  • Identify Opportunities: Find areas for improvement and emission reduction.
  • Implement Changes: Make changes to reduce emissions.
  • Monitor and Review: Continuously assess and adjust strategies.


How is carbon footprint calculated?

Carbon footprint is calculated by considering the total amount of greenhouse gases produced directly and indirectly by an individual, organization, or product. This includes emissions from energy consumption, transportation, and other activities. Calculations are often expressed in terms of CO2 equivalent.

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