Understanding Carbon Neutrality: A Guide for Accounting Firms
New corporate commitments to carbon neutrality or achieving net-zero emissions are making headlines every week, but what does that actually mean for accounting firms, large and small?
This guide will help you and your firm to better-navigate the world of carbon neutrality and net-zero, specifically its implications for the accounting industry.
In this guide, the terms ‘carbon neutrality’ and ‘net-zero’ will be clarified, specifically in the context of accounting firms. It also defines key elements of the process, examining where emissions most often come from for such organizations, and exploring why it's important for firms of all sizes to seriously consider pursuing carbon neutrality.
Defining carbon neutral and net-zero
Carbon neutral, or net-zero emissions, refers to balancing CO2-equivalent output from an organization with offsets and mitigation strategies.
For some, ‘carbon neutral’ takes into account emissions arising just from carbon, and not other greenhouse gasses, however, in this guide, we’ll use the term to refer to all carbon-equivalent emissions, making it interchangeable with the term net-zero.
While numerous terms and phrases relating to carbon neutral and net-zero emissions are out there, for the vast majority of organizations who have committed to such initiatives, they are essentially pledging to balance out their corporate emissions (carbon footprint) through year-over-year reduction (mitigation strategies) and external removal (offsets).
With this definition in mind, the carbon neutrality and net-zero emissions journey is made up of three key components:
Carbon footprint: The sum of all emissions created by a firm’s activities over a specific period of time, usually a calendar year.
Offsets: Investments made in carbon-reducing projects, such as reforestation initiatives or cleaner cookstoves for refugees, which counteract a firm’s footprint.
Mitigation strategies: The long-term reduction of a firm’s carbon footprint through the transition of existing corporate practices to more sustainable methods and alternatives.
For a comprehensive understanding of each, read our complimentary resource: Everything you need to know about becoming a carbon neutral accounting firm.
When offset investments and mitigation strategies are executed together across the entirety of a firm’s carbon footprint, carbon neutrality—or net-zero emissions—can be achieved.
Where emissions typically come from for accounting firms
Whether large or small, when any business operates, carbon dioxide and other greenhouse gasses are almost inevitably emitted. Accounting for such factors requires tracking across all operations, ranging from the upstream activities of suppliers, through to the end use of sold products.
Terms such as ‘greenhouse gas emissions’ or ‘global warming’ often bring to mind images of immense manufacturing operations or the burning of coal, but even for professional services organizations, there can be significant emissions just under the surface.
For accounting firms in particular, they typically arise from several key areas:
Electricity and natural gas used in office spaces or when working from home
Flights and other business travel
Employee commuting
Upstream activities associated with purchased goods and services
As a fossil fuel-dependent society, many business-as-usual activities within the accounting industry ultimately create emissions. The ICAEW*, for example, reports that over 42% of their 2021 footprint came from office electricity and steam usage alone.
*Institute of Chartered Accountants in England and Wales
Why it’s important for accounting firms of all sizes to track, mitigate and offset their carbon footprints
While it's clear that emissions can come from a variety of activities for accounting firms, the question remains: why should your firm take action?
Stakeholder implications
In today’s sustainability-oriented business environment, over 80% of consumers expect businesses to do something about climate change, and nearly 50% are willing to shift their purchasing to more mission-centric companies.
Consumers expect environmentally-oriented businesses, and young talent is increasingly chasing opportunities at organizations that act sustainably in their daily operations.
As a result, other connected stakeholders, such as investors and supply chain partners, are starting to demand action.
In addition to anticipating environmental commitment from your firm, clients may start to seek out your assistance in the carbon accounting space to meet the demands of their stakeholders.
Learn more about helping clients become carbon neutral through advisory.
Industry leader implications
Numerous accounting firms have already made—and in some cases, fulfilled—carbon neutral and net-zero emissions commitments. According to a recent survey, over 87% of Americans support mandatory climate disclosures for large organizations, which will likely flow through to businesses of all sizes and industries, as carbon accounting and reporting becomes a standardized expectation, much like current financial accounting requirements.
The Big Four have committed to achieving net-zero emissions by 2030, with EY already fulfilling its pledge in 2021.
But action is being taken across firms of all sizes.
In October 2021, 14 major accounting bodies, including the Association of International Certified Professional Accountants, committed to guiding more than 2.5 million members towards net-zero emissions as soon as possible.
Firms and organizational bodies who commit to and act on environmental initiatives now such as these, position themselves as sustainable industry leaders for years to come—a title which will become increasingly sought after..
Operations and profit implications
Operationally, by implementing mitigation strategies such as reducing surplus energy use, business travel, and other non-essential activities, your organization can achieve significant cost savings.
As accountant Michelle Bilodeau put it in an interview with RyeStrategy, “[carbon footprinting] really helps see what positive choices our employees are making, but also where we’re emitting and where we could reduce our spending—just like a regular budget.”
Revenue-wise, organizations who pursue carbon neutrality stand to gain. Our clients have reported that carbon neutrality has not only allowed them to positively impact the environment, but also improve their core brand image, helping to regularly win deals and retain clients, ultimately driving annual returns on investment as high as 368%*.
*This percentage was derived by first summing all revenues earned from clients who directly attributed their purchase decision due to a company being carbon neutral, then dividing this total revenue figure by the summed cost of carbon neutrality, factoring in both services fees and offset purchases.
Environmental impacts
While the business case is robust, carbon neutrality addresses a much more pressing issue: without a clean environment, there will be no more “business as usual”.
Greenhouse gas emissions, particularly carbon dioxide, are a primary contributor to the greenhouse effect, which traps solar heat energy within our atmosphere. This causes a variety of environmental changes, most notably, the general heating of our planet, sea rise, glacial melting, and soil depletion. These effects can severely disrupt our ecosystems, food sources, lifestyles, supply chains, and general economic development.
As a result, the Intergovernmental Panel on Climate Change has stated that humans need to cut carbon dioxide emissions by 45% by 2030 to prevent irreversible climate damage.
We can already see its effects today:
According to the most recent IPCC report, around 40% of the world's population is now highly vulnerable to the impacts of climate change.
Corporate carbon neutrality offers an affordable and effective opportunity for organizational sustainability. It directly quantifies emissions and draws down impacts through verified offset projects and mitigation strategies, all the while setting a precedent for immediate action, leaving those who emit the most no choice other than to make the difference necessary for our future.
Your next steps
There is no band-aid solution or quick fix to becoming a carbon neutral accounting firm. Here are some recommended next steps:
Learn more about getting started on your firm’s carbon neutrality journey: Everything you need to know about becoming a carbon neutral accounting firm
Discover how to offer carbon neutrality services to your clients: How to help your clients become carbon neutral through advisory
And if you’re interested in learning more about why carbon neutrality is a selling point for clients: The business case for offering carbon neutrality advisory at your accounting firm
This article was originally written by Cooper Wechkin and posted in partnership with Karbon on Karbon HQ Magazine, a curated library of resources for modern businesses and their leaders, including articles, guides, videos, events, templates and ebooks.
Learn about our affordable carbon footprint solutions for small and medium-sized businesses
Book a free strategy session to discuss your climate goals with a sustainability manager.
About RyeStrategy
Based in Seattle, RyeStrategy is a CDP-accredited, mission-oriented company specialized in carbon accounting, mitigation coaching, and climate disclosure solutions for organizations at any point in their sustainability journey. Learn how RyeStrategy helped Salesforce, Ideascale, and Wazoku achieve their sustainability goals.
From exhaustive carbon footprinting and mitigation coaching, to setting science-based targets and reporting climate data to CDP, SBTi or custom reporting platforms, RyeStrategy acts as a hands-on extension of the team, custom-tailoring services to fulfill climate disclosure requirements easily and accurately.
Meet with a sustainability specialist to learn more about RyeStrategy solutions.
