GHG emissions are any heat-trapping gas emitted from a company's operations. For ex. carbon dioxide from the burning of fossil fuels or methane and nitrous oxide from agriculture and waste, etc. In addition to these, greenhouse gases include sulfur hexafluoride, nitrogen trifluoride, hydrofluorocarbons, and perfluorocarbons.

Carbon accounting quantifies the amount of GHGs produced by organizations to better understand how much carbon they are emitting. Carbon accounting also measures which component of their operations is responsible for total emissions and to what extent. 

Business benefits 

• Measuring environmental performance and taking steps to improve it has direct financial implications. For ex. optimizing energy usage can cut down costs significantly.
• Savings can also result from reduced energy bills or lower purchasing costs as the requirement for raw materials decreases due to increased efficiency or the use of recycled goods.
• GHG accounting information is essential for organizations to disclose their climate impact and communicate their broader ESG/decarbonization strategy.

Standards and Scopes

Carbon emissions accounting is an extremely dynamic field with new standards, policies, and regulations being rapidly developed to ensure organizations remain accountable.

The most recognized and utilized standard is the GHG Protocol (GHGP). It is considered the gold standard framework for measuring and reducing emissions worldwide.

GHGP provides guidelines for organizations to develop inventories for GHG emissions. It is designed to simplify, improve consistency, and provide businesses with the tools to report and manage their emissions. Under the GHGP, all emissions are broken down into three scopes. Scope 1 and 2 are required to be measured by GHGP, whereas Scope 3 is optional.

Scope 1 refers to the direct emissions from an organization's operations. Examples of scope 1 sources include the fuel consumption of company-owned vehicles or the onsite energy use in buildings. Other examples include boilers, furnaces and emissions from machinery and equipment.

Scope 2 encompasses indirect emissions. Examples include purchased electricity,steam, heating, cooling or gas for use within the company's operations. Although scope 2 emissions physically occur at the facility where they are generated, they are accounted for in an organization's GHG inventory because they are a result of the organization's energy use.

Scope 3 comprises all other indirect emissions that exist in a company's value chain, such as the usage of a sold product, employee commuting, and outsourcing activities. Scope 3 is much more complex and difficult to measure.

• Under the GHGP, scope 3 includes 15 categories, including purchased goods and services, waste generated, transportation and distribution, investments and employee commuting.
• Each category has a specific methodology to measure emissions, and organisations have to decide which of them are relevant to their operations, what should be measured, and which calculation type is best suited to their data (ex. spend vs. fuel-based).

Methodologies have grown around some of the scope 3 categories to give more granular guidance where the GHGP was lacking. The Partnership for Carbon Accounting Financials (PCAF) is one example. It was explicitly designed to build upon the GHGP�s scope 3 categories.