knowledge

What is carbon accounting?

More and more socially responsible travel businesses realize the benefits of carbon accounting. If you’re not one of them, it’s high time to learn more about this methodology.
Carbon accounting_Unsplash_USGS
Written by Team Oncarbon
Climate footprint data for travel products
March 31, 2022

“Why is the tourism industry so quiet about climate change?” asked Jeremy Smith in 2015 1. Smith is a co-founder of an initiative that supports tourism destinations, businesses and organizations working together to reduce their carbon emissions. He has consistently raised issues around the topic of sustainable tourism and called on the tourism industry to be more transparent about its climate footprint.

As recently as 2015, only a minority of travel companies and airlines reported their greenhouse gas emissions, but that has changed. In 2021, more than 300 travel companies, tourism associations and countries signed the Glasgow Declaration on Climate Action in Tourism 2, and agreed on publicly reporting the progress in reducing their emissions.

Today, nearly every socially responsible travel company understands that consumers want access to information about the environmental costs of travel. And as the pressure mounts, more travel and tourism companies are realizing the benefits of reporting greenhouse gas emissions.

If you are not already one of them, it's time to get familiar with the concept of carbon accounting.

Carbon accounting – definition

Carbon accounting is a methodology for businesses to measure, track and report greenhouse gas (GHG) emissions emitted through their operations. In other words, it’s a process used to measure how much carbon dioxide and other greenhouse gasses your organization emits through its operations.

There are two categories of carbon accounting: physical and financial. Physical carbon accounting refers to measuring direct and indirect GHG emissions (scope 1, 2, and 3).

Financial carbon accounting aims to give the carbon produced and absorbed a financial market value.

How do you calculate GHG emissions?

There is no single standard for calculating greenhouse gas emissions, and different methods may be used depending on the type of business. In the tourism and travel industry, a calculation-based approach is the most common one: when using a calculation-based method, the emissions are not measured directly “at the tailpipe,” but instead, the activity that results in emissions is measured. Then, an estimate of the emissions from that activity is made using relevant coefficients for CO2 and other greenhouse gasses.

A very simplified model for calculating GHG emissions may look as follows:

“GHG emission (CO2e) = activity data x emission factor.”

An emission factor for an activity is often calculated through a life cycle assessment (LCA) that takes into account all emissions that happen during the life of a product or service.

For travel products, the calculation is usually a somewhat complex one. For example, for an effective calculation of a carbon footprint of a flight, we need to consider aircraft models, engine models, the number of seats on the aircraft, an estimate of the amount of cargo on the flight, airport busyness factors, and the distances between the origin and destination, as well as stops along the way.

If you are interested in calculating the greenhouse gas emissions of your travel product, book a call with Oncarbon – we will be happy to help you in making accurate calculations.

How is carbon accounting useful for travel business?

Various studies have shown that the transport component of travel contributes to 60% to 94% of tourism’s emissions globally3. As some parts of those transport components are still today notoriously hard to decarbonize, it doesn’t come as a surprise that travel and tourism sectors are facing significant challenges to develop emissions reduction pathways, especially given the annual growth rate in tourism.

In this context, carbon accounting provides useful information for managing the impacts of climate change. Understanding upstream and downstream emissions improves your company's ability to manage its climate change risk exposure, including public policies and future carbon pricing. Moreover, carbon reporting enables the setting of realistic emission reduction targets.

Carbon reporting is already a standard industry requirement for large organizations in many countries. In 2015, France became the first country to require investors to disclose their greenhouse gas emissions. The EU also requires large companies to report on their environmental impacts (under the Non-Financial Reporting Directive, or Directive 2014/95/EU), although these requirements are limited to large public interest entities, such as banks and insurance companies. Australia, the U.S. and South Africa also require large companies that meet certain emissions thresholds to report their emissions.

It is possible that carbon accounting will be mandatory for the travel and tourism industry in the future. Several tools have been already developed to manage GHG emission in tourism. They include Hotel Carbon Measurement Initiative (HCMI), Airport Carbon and Emissions Reporting Tool (ACERT) or Oncarbon – a toolkit for calculating and communicating carbon footprint for travel products.

The benefits of carbon reporting

You may think that greenhouse gas emissions accounting is a legal requirement and obligation, but in reality it can be of great benefit to your business. Reporting your greenhouse gas emissions has numerous environmental, economic and marketing advantages.

1. Building a carbon strategy

Carbon accounting allows you to track your carbon footprint over time, identify hotspots and build a carbon strategy. By bringing carbon emissions higher up the corporate agenda, you shed the light on areas which have had little scrutiny to date and become more operationally resilient.

2. Cost saving

Measuring greenhouse gas emissions is usually the first step to reducing them and saving money in the long run. These savings can be achieved through lower purchasing costs and energy bills, or through more efficient business operations.

According to a European Commission report4, € 7.6 billion could be saved annually from resource efficiency measures that were no-cost or low-cost to businesses.

3. Competitive advantage

Carbon reporting helps you gain a competitive advantage and stand out from other travel companies. This, in turn, enables you to attract not only new customers, but also investors. Organizations which demonstrate leadership in this area are more likely to have a pipeline of investment in their businesses.

4. PR opportunity

Companies that openly communicate their carbon footprint are seen as more socially responsible and benefit from greater public awareness.

5. Attracting new talents

Today, candidates are looking for socially responsible companies that communicate openly and have trustworthy credentials related to climate action. According to research, nearly 40% of millennials have chosen a job because of company sustainability.

6. Access to green funding and capital

Controlling carbon emissions is expected to massively change the availability of capital for businesses. Investors will penalize polluting companies with higher capital costs and reward greener companies by making it easier for them to access finance.

7. Reducing carbon dioxide in the atmosphere

Last but not least, carbon accounting helps you do the right thing – reduce the concentration of carbon dioxide in the atmosphere, which leads to the ultimate goal – limiting greenhouse gas emissions and stopping global warming.

Conclusion

The Earth is heating up fast. Unless we make drastic GHG emissions reductions within the next two decades, temperatures may rise by more than 1.5˚C above pre-industrial levels. It will mean severe climate disruptions that could exacerbate hunger, conflict and drought worldwide.

The travel industry plays a key role in mitigating global warming, as it is responsible for 8% of global carbon emissions, according to the scientific journal Nature. Half of those emissions come from transportation – and in 2019, 85% of the CO2 emissions of commercial air travel were from passenger travel.

Historically, the travel and tourism industry has lagged behind other sectors in environmental reporting. Today, carbon accounting is mandatory in many industries and countries. Forward-thinking travel companies understand they soon might be required to report their climate footprint and many already use a trusted third party to verify emissions, such as Oncarbon, as part of compliance or to avoid external criticism, including from travelers.

If you are not one of them, book a demo and see for yourself that calculating and communicating your carbon footprint can be easy and transparent with Oncarbon.

Do not stay quiet about climate change – only together do we have a chance to prevent the disaster. Putting carbon accounting on the agenda is the first step towards more sustainable travel and a better future for all of us.

Original cover picture: USGS/Unsplash.


Team Oncarbon
We’re on the mission to show you that we need – and we can – travel more consciously. We bring closer to you the topics of carbon footprint, sustainable travel and aviation, and transparency in emissions reporting.