The Value of Carbon Accounting: Insights from Payhawk ahead of the 2024 Accounting Summit

Carbon accounting is no longer a nice to have; in today’s climate, carbon accounting is a must. And, it’s an opportunity for forward-thinking accountants.

The increasing importance of cybersecurity, European standards for sustainability reporting (ESRS), and ESG present us with new challenges. However, they also offer significant opportunities. Real-time reporting enables informed decision-making, and the integration of sustainability criteria helps us create long-term value and minimize risks. – Accounting Summit 2024

We’ve teamed up with our partners and platinum sponsors of the summit, Payhawk, to delve into the advantages of carbon accounting. And how accountants can use it to accelerate business value while diminishing risk. Payhawk is a leading expense management solution for medium-sized and enterprise companies operating in the USA, UK, and Europe, helping them manage and automate their financial processes while providing transparency and control.

What is carbon accounting?

Carbon accounting is the process of measuring and tracking an organisations greenhouse gas (GHG) emissions. Effectively, quantifying their carbon footprint.

The GHG Protocol is the leading international standard for carbon accounting and reporting. Which is why Lune’s industry leading emission calculations are anchored in this methodology.

So, what’s the benefit of understanding your carbon footprint?

1. Successful compliance

Just like financial statements, EU CSRD reports (which includes emission reporting) will be subject to audit assurance. Companies that fall under it’s scope won’t be able to hide behind poor data.

To comply with the CSRD, companies must report the emissions of their entire value chain, also known as scope 1, 2, and 3. Scope 3 being the most difficult. Scope 3 emissions are defined by the GHG protocol as all other indirect emissions that occur in the value chain of a company but aren’t included in scope 2.

This scope is vast, complex, and fragmented. Which is why accountants are using Payhawk Green to unravel their scope 3 emissions directly in the spend management platform and generate audit-ready emission reports.

Transition risk management

Transition risk refers to the financial and operational risks that arise from the shift towards a more sustainable, low-carbon economy. It encompasses the uncertainties and potential costs associated with changes in policies, technologies, and market conditions aimed at reducing carbon emissions.

Left unchecked, these risks will have significant financial implications. Examples of transition risks include:

• Stranded assets, e.g. investments in fossil-fueled infrastructure
• Regulation compliance risk, e.g. carbon taxes from carbon intensive imports
• Market risk, e.g. failing to capture demand for greener products can result in reduced sales or churn

Tracking emissions helps accountants identify, manage, and mitigate financial risks resulting from the green transition. In turn, ensuring financial sustainability.

Cost savings

Businesses can use carbon accounting to pinpoint emission hotspots. These areas are ripe for decarbonisation. By definition, decarbonisation is about creating efficiencies, efficiencies that reduce emissions. And these efficiencies can result in cost savings.

In fact, 34% of companies expect to benefit from dual savings as a result of ESG compliance in 2025. For example, switching to long-lasting LED light bulbs not only consumes less energy, but it also reduces the amount spent on energy and maintenance costs.

By identifying these wasteful processes using emission reports, accountants can boost their business’ bottom line.

Engage stakeholders

Businesses are making environmental performance a top priority, which means the number of stakeholders interested in ESG reports are growing. Deloitte reports 33% are now tying senior leaders’ compensation to environmental sustainability performance.

As a result of this increased focus on environmental issues, accountants are in a key position to provide valuable insights through carbon accounting. They can better engage stakeholders by using carbon accounting to impress CFOs with cost-savings and direction, instill confidence in investors with accurate emissions reporting, and inform boards with climate risk assessments.

Effortlessly track carbon emission with Payhawk and Lune

Emission reporting may feel like a new frontier for accountants. Using Payhawk, they can effortlessly track carbon emissions and accelerate ESG reporting in the same platform they manage all their business spend. Payhawk uses Lune’s API to transform business spend data into report-ready emission calculations.

Hristo Borisov, CEO and Co-Founder of Payhawk says, "Through speaking with our customers and our own experience pursuing ESG initiatives, we realised that our product puts us in a unique position to help companies when it comes to sustainability efforts associated with company spending, specifically with regards to the management of Scope 3 emissions."

It’s clear why ESG is on the agenda at the EU Accounting Summit 2024. For forward-thinking accountants, both Lune and Payhawk will be there to discuss how they can accelerate business value while diminishing risk with emission reporting.

To book a chat, request a demo.