Carbon accounting is a method of calculating the amount of greenhouse gases (GHGs) an organisation emits, whether it is directly or indirectly. Through this, companies are better placed to understand the climate impact and establish goals on how they can reduce it. As the number of ESG regulations continues to increase, carbon accounting could become an increasingly vital part of meeting compliance.
Regulations are already starting to come into force that require firms to conduct carbon accounting. The EU’s Corporate Sustainability Reporting Directive (CSRD) launched earlier this year has significantly impacted ESG regulations within financial services. As part of the directive, companies are required to provide detailed information on their greenhouse gas emissions and how they are planning to reduce it. Similar requirements are happening across the world, for instance, the US’ SEC recently issued a new disclosure rule that requires firms to monitor their GHGs.
However, Position Green urges companies to not regard carbon accounting as a task exclusively for compliance. In a statement, Position Green said, “Financial services firms must recognize that carbon accounting is not just about compliance but also about strategic value creation. In many cases they already do – 85% of investors consider ESG factors, including carbon accounting, as important or very important in their investment decisions.
“Accurate carbon data is essential for managing risks, seizing opportunities in green finance, and aligning with global regulatory trends. Financial services firms are increasingly expected to disclose their carbon footprints, and those who do so effectively can enhance their reputation and attract capital.”
It is not just traditional financial institutions that need to ensure they have carbon accounting capabilities. While FinTech companies might not have as many regulatory requirements to balance, they are still subjected to many sustainability-focused regulations, like CSRD.
Miguel Galinha, GHG Emissions Lead here at Greenomy, added, “As FinTech companies grow and mature, particularly those that manage investments or provide financial services at scale, they will be required to incorporate detailed carbon accounting and reporting into their operations.
“Furthermore, FinTech companies are part of the larger financial ecosystem, and they will face pressure from partners and clients who need carbon data to meet their own regulatory requirements and sustainability targets. This makes it essential for FinTech companies to track and disclose their emissions accurately, even if their direct regulatory obligations are less rigorous.”
Galinha explained that financial services, including FinTechs, need to understand that carbon accounting is essential for tracking and reducing their environmental impact. But to be able to accurately track GHG emissions, firms will need to understand what they should be looking for.
GHG emissions are categorised across three different scopes. Scope 1 covers all direct emissions from a firm. This could include things like manufacturing processes or the use of fossil fuels for energy, such as company vehicles or other equipment. Scope 2 is focused on indirect emissions. This could include purchased energy that is used for heating or electricity.
The final category, Scope 3, covers indirect emissions from across the supply chain. Emissions from this can be caused by a number of factors, such as travel, energy, transportation of goods and much more. The scale of Scope 3 emissions is so large, IBM estimated they account for 5.5-times more GHGs emissions than a company’s direct emissions.
To help firms with their carbon accounting processes, Galinha pointed to The Global GHG Accounting and Reporting Standard for the Financial Industry. This was created by the Partnership for Carbon Accounting Financials (PCAF). The standard provides specific guidance to the financial sector on how they can measure and report emissions tied to investments, loans and other financial services. Alternatively, there is the Greenhouse Gas Protocol, which has also established standardised frameworks to measure and manage GHGs.
Galinha added, “In practice, FinTech companies must build the capacity to collect reliable data, integrate carbon metrics into their reporting systems, and stay updated on evolving regulatory requirements. Beyond meeting compliance, robust carbon accounting also enhances a company’s reputation, helps attract sustainability-minded investors, and supports better decision-making on reducing emissions.”
Challenges around carbon accounting
Carbon accounting presents several challenges. For Position Green, the biggest challenge firms face with carbon accounting is not having adequate tools to do it. They said, “Only 25% of companies report having the necessary tools to accurately measure Scope 3 emissions, despite this category of emissions making up 60% of their overall emissions count.
“Gathering accurate data from suppliers and other third parties is often difficult and time-consuming. Moreover, the lack of standardised methodologies and the need for verification and assurance further complicate the process. Firms must invest in technology and expertise to overcome these challenges and ensure reliable carbon accounting.”
Galinha echoed this, stating that the biggest hurdle firms face with carbon accounting is the availability and accuracy of data. To correctly complete carbon accounting processes, a company will need to gather emissions data from various sources, such as energy consumptions, supply chain activities and investments. This can be hard to standardise and verify, especially when dealing with multiple companies across the supply chain, he explained.
“Additionally, there is the challenge of transparency and verification. Stakeholders, including investors and regulators, are starting to demand credible and verifiable carbon data. Companies must be able to provide clear, audit-ready reports that can withstand scrutiny, which further emphasises the need for precise methodologies and reliable data management.”
After firms have an accurate understanding of their GHG emissions, the next challenge is reducing them. This is a complex task and there is no simple answer. Each company will have a unique situation and have plans to reduce their emissions.
Position Green highlighted some of the biggest challenges companies could experience. “These include high upfront costs for implementing low-carbon technologies, potential disruptions to existing business models, and the difficulty of influencing emissions that occur outside direct control (e.g., Scope 3 emissions). Companies need to adopt comprehensive strategies that involve cross-functional teams, continuous monitoring, and innovation to effectively reduce their carbon footprint.”
Galinha also highlighted a number of challenges when trying to reduce emissions. One of the biggest is trying to balance sustainability with business growth. He said, “One key challenge is balancing sustainability goals with business growth, as cutting emissions often requires substantial investment in new technologies like energy-efficient servers, renewable energy, and greener supply chains—changes that can be costly and take time to implement.”
Another notable challenge comes when trying to combat Scope 3 emissions. While these emissions account for the lion share of emissions, they are also the hardest to track and influence. They will require collaboration and pressure on external partners to adopt more sustainable practices. “Additionally, internal resistance to change can slow progress. Shifting to low-carbon operations often involves altering long-standing processes, which can impact profitability and face pushback from employees or stakeholders.”
Galinha concluded, “Overall, cutting emissions requires a blend of strategic planning, financial investment and cultural transformation, along with strong commitment across the entire organisation and its extended network.”
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