Will Dodds, Consultant at Rutherford Cross, provides an overview of carbon accounting and the ever-changing governmental standards, and advises on how to future-proof your finance team to cover all of these bases.
It’s no secret that the need to report on carbon emissions for businesses is becoming a necessity, which has inevitably led CFOs to create new positions solely focused on sustainability initiatives. As this is new territory for a lot of companies, we are seeing the board put finance in charge of and being the first to report on this whilst playing a key part in discussions at a senior level.
The full lifecycle of a carbon accountant is yet to be seen in its entirety, as this is a new and evolving area that businesses are starting to pay attention to. Therefore, many businesses are being creative in who they hire to cover carbon accounting.
What is carbon accounting?
Carbon accounting is a way of calculating how much greenhouse gas an organisation emits. Like financial accounting, carbon accounting quantifies the impact of an organisation’s business activities – although instead of financial impact, it tracks climate impact. Also known as ‘greenhouse gas accounting,’ carbon accounting is used to estimate carbon footprints.
As the UK continues its ambitious journey towards a net-zero future, carbon accounting has become an essential tool for businesses, governments, and individuals alike. This practice not only helps to measure and manage carbon emissions but also serves as a foundation for designing effective strategies to reduce these emissions over time.
Why is carbon accounting useful?
Carbon accounting can help organisations pinpoint risks related to climate change and carbon regulation, such as cost shocks, logistical impacts, regulatory burdens, and reputational damage. It also finds opportunities for reduction where companies can calculate their carbon footprint and find opportunities to reduce emissions across their value chain.
Beyond the above, it also allows businesses to set and assess climate targets by giving accurate accounting and reporting, which can be seen as cornerstones of setting and assessing these targets.
Future government changes
At a recent ICAS event discussing the challenges of sustainability within businesses, we also explored the new regulations being implemented by the UK government, as it has established a framework to assess the suitability of IFRS S1 and IFRS S2 for endorsement in the UK. Should this go ahead, it would create the first two UK Sustainability Reporting Standards (SRS) which would be based on IFRS S1 and IFRS S2. This is set to be announced by Q1 2025, which will ultimately form part of the wider Sustainability Disclosure Reporting framework led by HM Treasury.
How can finance teams prepare for these changes?
As carbon accounting becomes more regulated and a part of the business cycle, finance teams need to have the talent in place to work on it. An increasing number of CFOs are beginning to realise that sustainability issues are fundamental to their company’s survival, especially with such issues being called into question by investors, board members and employees – and it falls on the CFO to provide answers.
As we discussed above, the full lifecycle of a carbon accountant is yet to happen, which has led companies to be creative with their hiring strategy. It is often the case that a numerically minded individual with a passion for sustainability and change is the perfect pre-requisite for a long-term hire, as well as someone who is knowledgeable of current (and future) regulations. They should be able to drive conversations internally whilst also playing a pivotal role in actioning key points.
Carbon accounting presents a truly exciting opportunity for someone who would like to gain senior exposure to the C-suite level, as senior leaders want to be kept up to date with the ever-changing landscape. Job titles within this area can include: Carbon Accountant, Carbon Management Accountant, Sustainability Analyst, Environmental and Sustainability Analyst, Head of Sustainability Reporting and Corporate Sustainability Reporting Analyst.
It’s exciting to see finance teams continuing to elevate their position within their businesses and driving strategic involvement from a sustainability perspective. Regulations play a key part in how companies report on standards, so it is imperative to be an early adopter in bringing the right people in to advise on this.
At Rutherford Cross, we are here to advise and support people and organisations to realise their potential, so that together we can impact lives and communities for the better. If you are looking for a new sustainability role, or are keen to understand how to hire the best people, please get in touch with Will Dodds, Consultant at Rutherford Cross – [email protected].
