As the Australian financial year is coming to a close, the end of financial year reporting for a lot of companies is underway, ready to be published for stakeholder viewing and tax reduction purposes. Whilst financial reporting is a regular annual practice, carbon reporting is not; however, it should be. This article highlights the relevance and importance of undergoing carbon management practices and carbon reporting around the financial year-end.
Did you know there are many similarities between financial and carbon reporting?
Carbon reporting, whilst not directly related to the financial performance of an organisation, shares similarities to the processes obligatory for financial reports. Like financial reporting, carbon accounting requires the entry of relevant organisational data, which is then computed and populated into reporting modules for interpretation and analysis. What many organisations don't know, is that a great deal of the data collection demanded for a financial report is also required for carbon accounting. For example, invoices for business flights, electricity, company cars, natural gas, IT equipment, stationery, office furniture, printing, and travel data are useful for both reporting forms.
Financial and carbon reports have similar activity data, making the time needed to create an emissions inventory and calculate a carbon footprint significantly less than commonly perceived. From an efficiency and time standpoint, doing both reports around the same period is the most feasible and productive option.
The value of data and information
The breakdown of information
Just like the financial performance of a business can drive change and enhance decision-making capabilities, so can the sustainability performance of a business. Carbon reports unlock the intricacies of an organisation's carbon footprint, giving the business a better understanding of its emissions, emissions sources, and total environmental impact.
Much like financial reports break down the different variations of an organisation's finances into cash flow, revenues, expenses, profits, and capital, carbon reporting also breaks down a total carbon footprint for easier interpretation and understanding. Carbon measurement has three categories; scope 1, scope 2, and scope 3. Each scope identifies a different aspect of an organisation's carbon footprint. A short summary of the different emission scopes are listed below:
- Scope 1: Direct emissions from operations that are owned or controlled by your company, such as fuel combustion from facilities and vehicles that your company owns or controls.
- Scope 2: Indirect emissions from the generation of purchased or acquired electricity, steam, heating or cooling consumed.
- Scope 3: All indirect emissions (not included in scope 2) that occur in the value chain, including both upstream and downstream emissions. Examples include purchased raw goods, employee commuting, and business travel.
By having a carbon footprint split into mutually exclusive categories, an organisation is able to better identify areas for improvement. This information combined with the insights uncovered from financial reports further enhances the ability to discover business opportunities and better enable their decision-making capabilities.
Have one inclusive report
Businesses often choose to showcase their carbon report within their financial report. By publishing a carbon report around the same time, an organisation is able to highlight its environmental performance in a place and at a time when stakeholder and investor interest is particularly high.
Financial success is now not the only thing that stakeholders demand from organisations, and the ability to demonstrate strong financial and environmental performance is an invaluable asset.
Reduce climate-related risks and maximise opportunities
As the importance of addressing the climate crisis is climbing, so is the pressure stakeholders, in particular, investors, are placing on organisations to act upon their climate initiatives and reduce their impact.
It has also been noted that decisions to invest in corporations are now being weighed in by their future climate-related risks. To ensure you meet your stakeholder reporting requirements for climate-related financial risk, Pathzero surfaces the metrics you need to include. These include TCFD, CDP, B-corp, IFRS, GRI, etc.
The future will demand organisations to transparently communicate both the financial and sustainable health of their business. By doing so in unison, the resilience of the business is better perceived and understood, strengthening stakeholder trust.
The Pathzero reporting module provides members with an editable company profile page for easy tracking and recording of climate action. The ability to export it as a pdf makes it easy to publicly display to stakeholders the carbon management initiatives taken.
Carbon reporting provides internal and external benefits which can be leveraged to improve both financial and environmental performance.
The Pathzero carbon management platform has an integrated reporting module that enables organizations to showcase their carbon measurement, reduction initiatives, and their offsets.
To learn more about carbon reporting with Pathzero click here, or book a consultation with one of our registered consultants.
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