Should your carbon accounting be based on estimates or actual figures?
It’s a key question when it comes to carbon accounting and CO₂ reporting. The method your company chooses has a significant impact both on how data is collected and processed and on the final product you end up with – not to mention the impact it can have on your bottom line, your company’s reputation and investor confidence.
Actual numbers ensure accuracy
At comundo, we always base our carbon accounting on actual consumption and emissions – not estimates. We’ve developed this method because it gives you the most accurate picture and helps your work in areas such as:
Baselines and benchmarks
Without knowing exactly where you start, it gets very difficult to know if you’re heading in the right direction – or end up where you wanted to end up. Accurate data means you’re able to pinpoint your starting point – your midway point, your endpoint and anywhere-in-between point.
Ongoing monitoring and optimisation
Actual data means that you can act on information on an ongoing basis and analyse the outcome. It also enables you to analyse results from work on energy efficiency optimisation effectively. Did you want to decrease energy consumption in your building portfolio by 15%? With accurate data, you’ll know – without a doubt.
Servicing third parties
Use actual data rather than estimates. You don't have to worry about how your carbon accounting can be used in other contexts or be validated by accountants – your non-financial KPIs can become just as accurate as your financial ones. At the same time, you avoid supplier dependency, where you’ve based your setup on certain hardware or software.
Up to 92% discrepancy between estimated and actual consumption
To find out just how much discrepancy there could be between estimated consumption and actual consumption, we analysed the CO₂ emissions of more than 1,000 buildings across 50 Danish municipalities. First, we looked at estimated consumption in energy label reports and then the actual consumption.What we saw is that in one case actual CO₂ emissions differed by a whopping 92% compared to the estimated CO₂ emissions stated in the energy label report. Not only does this mean that any baseline or benchmark data is meaningless, but it also means that any optimisation work carried out can’t be measured accurately. Here’s how the numbers break down*:
Business implications of using estimates
For some companies (currently large and listed companies) within the EU, it’s a legal requirement to monitor and report carbon emissions. On top of that, there’s also growing consumer and investor pressure for companies to reduce their environmental impact in a meaningful and demonstrable manner. Inaccurate data can very easily lead to inaccurate reporting, which can have significant consequences.
Disclaimer of opinion audit report
The audit opinion is a clear statement about a company’s financial status to investors. As such, obtaining a clean report is the ideal opinion – it indicates that the auditor found no issues with the report's integrity. However, using estimated data for carbon emission reporting often leads to a disclaimer of opinion as it leaves the auditor no option but to flag it as unverified. Luckily, comundo’s data can be audited and even reconciled, meaning auditors can go ahead and mark the report as clean.
Investors, current employees and future employees are also increasingly interested in a company's environmental impact. Inaccurate carbon emissions data, together with a disclaimer of opinion audit report, can lead to a decrease in investor confidence, as investors may view inaccurate data as a sign of poor governance and management practices. This can lead to a decrease in the company's stock price and can make it more difficult for the company to secure investment in the future.
In recent years, there has been a growing awareness of the environmental impact of businesses, and consumers are increasingly looking for environmentally responsible companies to support. If a company is found to have inaccurate emissions data and questionable reporting, it can lead to negative publicity and a loss of overall trust. This can, in turn, lead to a decrease in sales and profits.
Inaccurate carbon emissions reporting can also cause a company to miss potential opportunities. For example, many governments and organisations offer incentives for companies that reduce their carbon emissions. If a company reports inaccurate emissions data, it may miss out on these opportunities, which can have a negative impact on the company's bottom line.
Estimates will tick the box, but accurate data makes business sense
Estimates will get you so far, but nothing beats accuracy. From exact baseline measurements and benchmarks to business reputation management and attracting talent and investors, using accurate data will always make business sense.
If you’re using estimates in your carbon accounting but would like to know more about getting started with accurate data, book a commitment-free demo today.
*The building is connected to Haderslev district heating, which reported 3.25 kg of CO₂ per GJ heat to the Danish Energy Agency. The energy label report is from 2017, but there are only district heating measurements for the entire year of 2020, which is why the 2020 figures have been used
**According to the energy label report***District heating****1 MWh = 3.6 GJ; 3.25 kg co2e/GJ is the conversion rate for the heating provider