Summary
Carbon accounting matters because rules, customers and investors now ask for emissions data, and you cannot cut what you have not measured. A reliable footprint lets you meet disclosure rules, answer supplier questionnaires, find cost and risk hotspots, and set targets you can defend. Without it, climate plans rest on guesswork.
Why is carbon accounting important for businesses?
Carbon accounting is important because it turns climate pressure into data you can act on. It shows where your emissions come from, so you can comply, report and reduce with evidence.
If you are new to the topic, our carbon accounting overview explains what it is and how it works. This post covers why it matters.
The reasons fall into five groups.
| Reason | What drives it | What carbon accounting gives you |
| Regulation | Mandatory climate disclosure in the EU, Australia, California and other markets | Scope 1, 2 and 3 data that can pass assurance |
| Customers | Large buyers asking suppliers for emissions data and targets | Answers to supplier questionnaires and tenders |
| Investors and lenders | Climate risk in investment and lending decisions | Comparable, transparent disclosure |
| Cost and risk | Energy prices, carbon pricing, supply chain disruption | Hotspots where emissions, cost and risk overlap |
| Targets | Net zero and science-based target commitments | A baseline you can set targets against and track |
Which regulations require carbon accounting?
A growing number of jurisdictions now require large companies to disclose their emissions. Most of these rules are based on the ISSB's IFRS S2 standard or the GHG Protocol.
Examples include:
- Australia: AASB S2 climate reporting applies to the largest entities (Group 1) for financial years starting on or after 1 January 2025. See our guide to Australia's mandatory climate reporting.
- California: SB 253 requires large companies doing business in the state to report Scope 1 and 2 emissions from 2026 and Scope 3 from 2027.
- European Union: The CSRD requires climate disclosure under ESRS E1, including Scope 1, 2 and 3. Its scope and timing have been changed by the EU's 2025 simplification package, so check the current thresholds.
- EU CBAM: Importers of goods such as steel, aluminium and cement must report embedded emissions. See our CBAM guide.
Our overview of sustainability reporting rules tracks which rules apply where.
How does carbon accounting help with customers and investors?
Carbon accounting lets you answer the emissions questions buyers and investors now ask as standard. Large companies need their suppliers' data to report their own Scope 3.
That means suppliers without a footprint risk losing tenders, and companies with good data can show they are a lower-risk partner. For investors, a transparent, assured inventory makes your climate disclosure comparable with peers.
How does carbon accounting reduce costs and risks?
Carbon accounting shows where emissions, energy use and supply chain exposure cluster. Those hotspots are often where the biggest cost and risk savings sit too.
Energy and fuel are both an emissions source and a cost line. Carbon pricing turns emissions into a direct cost in many markets; see where carbon is taxed. Mapping Scope 3 also shows which suppliers, materials and regions you depend on most, which helps you plan for disruption.
BCG found that companies that measure all three scopes comprehensively are 1.6 times more likely to report significant benefits from decarbonisation (BCG and CO2 AI, Carbon Measurement Survey, September 2024).
Why do you need carbon accounting to set targets?
You cannot set or track a credible target without a baseline. Carbon accounting gives you a base-year footprint, by scope and source, to measure progress against.
Frameworks such as the Science Based Targets initiative (SBTi) need a complete inventory, including Scope 3, before validating a target. Our post on SBTi's Corporate Net-Zero Standard V2 explains the latest requirements, and our decarbonisation steps guide covers what comes after the baseline.
What stops companies from doing carbon accounting well?
The main barriers are Scope 3 data, manual processes and teams working in silos. Most companies measure their own operations but not their value chain.
In a 2024 survey of nearly 2,000 companies, BCG found that only 9% comprehensively reported their Scope 1, 2 and 3 emissions (BCG and CO2 AI, September 2024). Scope 3 is usually the largest share. CDP and BCG found supply chain emissions averaged 26 times operational emissions among companies disclosing to CDP (CDP, June 2024).
Other common barriers:
- Data spread across ERP, procurement, energy and logistics systems. See data integration in carbon accounting.
- Spreadsheets that are hard to audit and update.
- Little in-house expertise in emission factors and methods.
What does good carbon accounting look like in practice?
Dyno Nobel used Terrascope to complete its first global Scope 1 and 2 audit a year ahead of Australia's mandatory reporting rules. Its Scope 1 and 2 footprint of 1.6 million tCO2e was externally assured.
For Scope 3, Princes found that its top five activities made up more than 60% of its emissions, which told the team where to focus first. Read the Princes case study.
How Terrascope helps businesses get carbon accounting right
Terrascope's corporate carbon footprint platform gives you one auditable inventory across Scopes 1, 2 and 3.
- Faster data collection. Take in ERP, spend, energy and supplier data, and map it to emission factors.
- Scope 3 hotspots first. See which categories and suppliers drive your footprint, then improve data where it matters.
- Ready for disclosure. Use the same inventory for climate reporting under IFRS S2, AASB S2, SB 253 and CSRD.
- From baseline to action. Model reduction options with AI-led decarbonisation planning.
Building the business case? Use the carbon accounting ROI calculator to estimate the time and cost of moving from spreadsheets to a platform.
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Frequently asked questions
Why is carbon accounting important? It gives you the emissions data that regulators, customers and investors ask for, and the baseline you need to set targets and cut emissions. Without it, you cannot show progress or find your largest sources.
Is carbon accounting mandatory? For large companies in a growing number of markets, yes. Australia, California and the EU all have mandatory rules, mostly based on IFRS S2 or the GHG Protocol. Many smaller companies also need it because their customers ask for it.
What are the benefits of carbon accounting? Compliance with disclosure rules, answers for customer and investor requests, lower energy and carbon costs, better view of supply chain risk, and a baseline for credible targets.
What is the biggest challenge in carbon accounting? Scope 3. It is usually the largest share of a company's emissions, and it depends on data from suppliers and customers that is often incomplete or unavailable.
How do businesses start carbon accounting? Set your boundaries, collect Scope 1 and 2 data from fuel and energy records, screen Scope 3 with spend data, then improve data for your largest sources. Our guide to calculating GHG emissions shows the steps.
