Carbon accounting concepts
Carbon accounting is accounting. It has a boundary, a unit of measure, a period, a baseline and a set of rules about what may be claimed — and, like financial accounting, a number you cannot trace to a source is a number you cannot defend.
Nextera Track is built around those rules. This page covers them.
The unit: tonnes of CO₂ equivalent
Section titled “The unit: tonnes of CO₂ equivalent”Greenhouse gases are not all carbon dioxide, and they differ enormously in warming effect. Each gas is converted to a common unit — tonnes of CO₂ equivalent (tCO₂e) — by multiplying by its global warming potential (GWP), the warming it causes relative to CO₂ over a period, conventionally 100 years.
The seven gases covered by the GHG Protocol and the Kyoto basket: carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF₆) and nitrogen trifluoride (NF₃).
Two practical consequences:
- Methane’s GWP is roughly 28 times CO₂ over 100 years. A small methane leak is not a small number.
- GWP values are revised as the science advances (IPCC assessment reports). Which GWP set you use is a stated methodology choice, and changing it changes your history.
Boundaries: what is “yours”
Section titled “Boundaries: what is “yours””Before measuring anything, decide what is inside the inventory. Two boundaries, set in this order.
Organisational boundary — which entities
Section titled “Organisational boundary — which entities”| Approach | What you consolidate |
|---|---|
| Equity share | Your share of emissions in proportion to your equity holding |
| Financial control | 100% of emissions from operations you financially control |
| Operational control | 100% of emissions from operations where you set operating policy |
Operational control is the most commonly chosen, because it aligns with what an organisation can actually change. The choice must be applied consistently and disclosed — and it is worth aligning with the consolidation basis used in your financial statements, because explaining why the two differ is a recurring audit conversation.
Operational boundary — which emissions
Section titled “Operational boundary — which emissions”Within those entities, emissions are classified into three scopes.
The three scopes
Section titled “The three scopes”Scope 1 — direct emissions from sources you own or control: fuel burned in your boilers and furnaces, your vehicle fleet, process emissions, and refrigerant leakage from your air conditioning. Refrigerants are the most frequently forgotten Scope 1 source, and with GWPs in the thousands they are rarely immaterial.
Scope 2 — indirect emissions from purchased energy: electricity, steam, heating and cooling you buy. The emissions happen at the generator, but you caused them by buying the energy.
Scope 2 has two required methods, and reporting both is the expectation:
- Location-based — uses the average emission factor of the grid you are connected to. Answers “what does electricity here actually emit?”
- Market-based — uses the emission factor of the electricity you contractually purchased (renewable energy certificates, power purchase agreements, supplier-specific factors). Answers “what did I choose to buy?”
An organisation that buys renewable certificates reports a lower market-based figure and an unchanged location-based figure. Both are true. Reporting only the market-based number is where accusations of greenwashing usually begin.
Scope 3 — all other indirect emissions in your value chain, across fifteen defined categories, split upstream and downstream:
| Upstream | Downstream |
|---|---|
| 1. Purchased goods and services | 9. Downstream transportation and distribution |
| 2. Capital goods | 10. Processing of sold products |
| 3. Fuel- and energy-related activities | 11. Use of sold products |
| 4. Upstream transportation and distribution | 12. End-of-life treatment of sold products |
| 5. Waste generated in operations | 13. Downstream leased assets |
| 6. Business travel | 14. Franchises |
| 7. Employee commuting | 15. Investments |
| 8. Upstream leased assets |
Scope 3 is usually the majority of the total — frequently 70–90% — and it is the hardest to measure because the data belongs to other organisations. Category 15, investments, is the dominant category for banks and insurers, and it is why financed emissions are the central question in financial-services carbon accounting rather than a footnote about office electricity.
Scope 3 is where the honest answer is “estimated, with a stated method and an improvement plan”, not “unknown”.
How a number is produced
Section titled “How a number is produced”The core calculation is unchanged across every category:
emissions = activity data × emission factorActivity data is what happened, in physical units: litres of diesel, kWh of electricity, kilometres flown, tonnes of waste, kilograms of material purchased.
Emission factors convert that into tCO₂e — published by national inventories, the IEA for grid electricity, DEFRA, the IPCC, and industry bodies. Factors are country- and year-specific: Indonesia’s grid factor is not the UK’s, and neither is what it was five years ago.
A hierarchy of data quality follows directly:
- Supplier-specific / primary data — measured, from the actual source. Best.
- Average data — physical activity data times an industry average factor.
- Spend-based — money spent times an emission factor per unit of currency. Weakest, and the honest starting point for most of Scope 3, because it responds to inflation as if it were emissions.
Improving data quality is itself a programme objective, and worth tracking as such.
Baseline, recalculation, and intensity
Section titled “Baseline, recalculation, and intensity”A base year is the reference point every target and every reduction claim is measured against. It should be a year with reliable data, and it must be stated.
Recalculation is the part that separates a defensible inventory from a marketing figure. When structural change occurs — an acquisition, a divestment, an outsourcing, a methodology change, a corrected error — the base year is recalculated so the comparison stays like for like.
The reason is simple: without recalculation, an organisation can “reduce” emissions by selling a factory, which changes nothing in the atmosphere. Your recalculation policy — including the significance threshold that triggers it — should be set before the first structural change happens, not during it.
Absolute versus intensity. Absolute emissions are the total. Intensity is emissions per unit of activity — per tonne produced, per employee, per million rupiah of revenue. Both are legitimate, and they can move in opposite directions: a growing company can improve intensity while increasing absolute emissions. Only absolute reduction affects the atmosphere. Report both; do not report intensity alone.
Reduction pathways and targets
Section titled “Reduction pathways and targets”A target is a claim about the future, and it needs the same properties as any other:
- A base year and a target year.
- Absolute or intensity, stated.
- Which scopes are included. A target excluding Scope 3 in an organisation where Scope 3 is 85% of emissions is a target over 15% of the problem, and should say so.
- The pathway — the specific interventions expected to deliver it, each with an expected reduction and a cost. A target without a pathway is an aspiration.
Frameworks such as the Science Based Targets initiative exist to align targets with a given warming trajectory, and they impose exactly these disciplines.
The mitigation hierarchy is the order that matters: avoid → reduce → replace → offset. Offsetting is last, not first.
Offsets, and what they can honestly claim
Section titled “Offsets, and what they can honestly claim”An offset is a credit representing a tonne of CO₂e reduced, avoided or removed elsewhere, which you buy to compensate for a tonne you emitted.
The quality criteria are what determine whether the claim is real:
| Criterion | The question |
|---|---|
| Additionality | Would the reduction have happened anyway without the credit revenue? |
| Permanence | Will it stay out of the atmosphere? Forests burn; geological storage does not |
| Leakage | Did the emitting activity simply move somewhere else? |
| Verification | Was it independently verified against a recognised standard? |
| Retirement | Has the credit been permanently retired in a registry so nobody else can claim it? |
Retirement is the one that makes offsetting auditable. An unretired credit is tradeable and therefore claimable twice. Linking retirements to the specific emissions they address — rather than holding a pool of credits and a total — is what makes the claim traceable.
Two distinctions worth keeping straight:
- Avoidance versus removal. An avoidance credit prevented an emission; a removal credit took carbon out of the atmosphere. They are not equivalent, and the market increasingly prices them separately.
- Offsetting is not reduction. Reported emissions should be stated gross, with offsets disclosed separately. Netting them into one figure is the most common carbon-reporting misstatement.
Reporting and disclosure
Section titled “Reporting and disclosure”The same inventory feeds several audiences: the GHG Protocol for methodology, ISSB IFRS S2 / TCFD for investor-facing climate disclosure, GRI for broader sustainability reporting, CDP for questionnaires, and local regulatory requirements.
They differ in framing, not in arithmetic. Building one traceable inventory and deriving each disclosure from it is far cheaper than assembling each separately — and it is the only way the numbers agree across them.
Assurance raises the bar again. An assured inventory requires the same qualities a financial audit requires: a documented methodology, a traceable path from source data to disclosed figure, evidence retained, and a record of judgements and estimates.
How these concepts map to Nextera Track
Section titled “How these concepts map to Nextera Track”| Concept on this page | Nextera Track module |
|---|---|
| Activity data × emission factor across scopes | Carbon measurement |
| Emissions over time by source, site and category | Emissions tracking |
| Base year, pathways and targets against a measured baseline | Reduction planning |
| Offsets and retirements linked to the emissions they address | Offset management |
| Stakeholder and regulatory disclosure from the same data | Reporting & disclosure |
| Personal footprint alongside the organisational inventory | Individual footprint |