Scope 1 & 2 carbon accounting from scratch: a step-by-step guide for beginners

Thinking about your small business’s carbon footprint but not sure where to start? This guide breaks down carbon accounting into simple, achievable steps.

What is carbon accounting?

A carbon footprint is simply the total amount of greenhouse gases (GHG) released into the atmosphere as a result of your business's activities. Carbon accounting is like an environmental ledger: just as financial accounting tracks income and expenses, carbon accounting tracks your emissions.

For a small business, understanding this footprint is the first step towards more sustainable and efficient operations. Gaining insight into your carbon emissions helps you comply with environmental regulations and attract clients who request transparency in environmental performance. It also serves as a crucial starting point for your sustainability strategy and communications. While carbon footprinting can sometimes seem time-consuming or complex, this article breaks it down into practical, manageable steps.

Step 1: Gather your energy bills

The first step in your scope 1 & 2 GHG measurement journey is to collect data on your energy consumption. This covers your indirect emissions from purchased electricity and gas.

You will need to gather 12 months of utility bills for all your business premises or use an annual consumption report if that is available. Look for the following information:

• Electricity consumption: this is usually listed in kilowatt-hours (kWh). Sum up the kWh from all bills for the entire year to get a single, annual figure.
• Natural gas consumption: this might be listed in cubic metres (m³), therms, or even kWh. Note down the total consumption for the year, ensuring you know the unit of measurement.

Having a full year's worth of data is important because it accounts for seasonal variations in heating and cooling. If you have multiple sites, make sure you collect the bills for each one.

Step 2: Gather vehicle fuel records

The next step is to gather data about your vehicle fuel consumption. There are four different methods to calculate the fuel emissions of your car park. We list them from most accurate to least accurate. 

1. Fuel-Based Method: This is considered the most accurate method. It involves collecting precise data on the type and quantity of fuel consumed (e.g., liters of diesel, kWh for electric vehicles). This fuel data is then multiplied by an emission factor to determine the total CO₂ emissions.
2. Fuel from Spend Method: This method uses a company's fuel expenditure data to estimate the amount of fuel purchased. This estimated fuel volume is then used in the same way as the fuel-based method to calculate emissions. It's less accurate than the fuel-based method because it relies on financial data rather than direct consumption measurements.
3. Distance-Based Method: This approach calculates emissions based on the distance a vehicle has traveled. The distance is multiplied by a vehicle-specific emission factor (e.g., grams of CO₂ per kilometer) to determine the total emissions. This method is less accurate than the fuel-based method because it doesn't account for variations in driving style, load, or fuel efficiency.
4. Spend-Based Method: This is the least accurate method, as it relies on a company's total spending on fuel. The total expenditure is used to estimate fuel consumption and, subsequently, emissions. This method is often used when more specific data is unavailable.

First, you’ll collect data on the fuel used by any vehicles your company owns or operates directly. Emissions from combustion vehicles  are categorised under Mobile Combustion (Scope 1). Electric vehicles emissions are categorised under Purchased Electricity (Scope 2). Emissions from hybrid vehicles are split between Mobile Combustion (Scope 1) for fuel consumption and Purchased Electricity (Scope 2) for electrical consumption.

For the same 12-month period, you need to collect records of all fuel purchases. This data can come from:

• Fuel card statements
• Expense receipts
• Company accounting records

You need to find the total volume of fuel purchased. Make sure to separate it by fuel type, as they have different emission levels. The most common types are:

• Petrol (in litres)
• Diesel (in litres)

When this is done we can continue to the next step. 

Step 3: Find simple emission factors

In this step we are getting closer to the final quantity of CO2 emission of your activities by using “emission factors”. It may sound somewhat technical, but it’s more straightforward than you might think. An 'emission factor' is simply a multiplier that converts your activity data (e.g., kWh of electricity or litres of diesel) into a standard unit of greenhouse gas emissions: kilograms of carbon dioxide equivalent (kg CO2e).

Using CO2e allows you to combine the impact of all different greenhouse gases (like methane and nitrous oxide) into a single, comparable metric.

For a reliable and simple carbon footprint calculation, it’s crucial to use official, up-to-date emission factors. Excellent sources for this include:

• UK government GHG conversion factors for company reporting: a comprehensive and widely used source, updated annually. View UK government factors
• U.S. environmental protection agency (EPA) GHG emission factors hub: the primary source for businesses operating in the United States. Explore EPA factors
• The GHG protocol: this organisation provides the global standardised frameworks to measure and manage GHG emissions and offers various calculation tools. Visit GHG protocol

When you find the right table or database, look for the factors corresponding to your specific activity, like ‘electricity from the grid’ or ‘diesel used in cars’.

Step 4: Do the basic calculation

Now it’s time to put it all together. The core formula for carbon accounting for beginners is beautifully simple:

Activity data x emission factor = emissions (kg CO2e)

Let’s run through an example. Imagine your business used the following over one year:

• Activity data 1: 30.000 kWh of electricity
• Activity data 2: 5.000 litres of diesel

Using the 2023 UK government factors as an example:

• The emission factor for UK grid electricity is 0,20707 kg CO2e per kWh.
• The emission factor for 100% mineral diesel is 2,51863 kg CO2e per litre.

Here is the calculation:

1. Electricity emissions: 30.000 kWh * 0,20707 kg CO2e/kWh = 6.212,1 kg CO2e
2. Diesel emissions: 5.000 litres * 2,51863 kg CO2e/litre = 12.593,15 kg CO2e
3. Total basic carbon footprint: 6.212,1 kg + 12.593,15 kg = 18.805,25 kg CO2e

To make this number easier to manage, you can convert it to tonnes by dividing by 1.000. So, your footprint is approximately 18.8 tonnes of CO2e. You have just completed your first GHG measurement.

Understanding the limitations and planning your next steps

Congratulations! You’ve just performed a basic carbon footprint calculation. This initial estimate of your Scope 1 and 2 emissions is a monumental first step. It gives you a tangible baseline to work from and helps you understand where your biggest impacts are.

However, it's important to recognise the limitations. This calculation does not include Scope 3 emissions, which cover all other indirect impacts from your value chain, such as emissions from the products you buy, waste disposal, and employee commuting. As explained in our guide to Scope 1, 2, and 3 emissions, Scope 3 often represents the largest portion of a company’s footprint.

So, what’s next?

• Set reduction targets: now that you have a baseline, you can set a simple goal, like reducing your electricity consumption by 10% next year.
• Explore your data further: consider choosing a more specific carbon accounting method to improve accuracy. You can explore spend-based vs. activity-based approaches to see what fits your business.
• Engage your team: share the results with your employees and brainstorm ideas for reducing energy and fuel use together.
• Consider a dedicated tool: as you get more serious, manual calculations can become cumbersome. A small business carbon calculator or a dedicated tool like the Hedgehog carbon platform can help you track more accurately, manage Scope 3 emissions, and monitor your progress over time.

You've taken a crucial step on your sustainability journey. This simple calculation empowers you to make informed decisions that are good for your business and better for the planet.

Ready to take control of your carbon footprint? Explore the Hedgehog carbon platform or contact our experts for a consultation to see how we can simplify your sustainability journey.

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