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What’s the CO2 challengefor SMEs?
Ambitious targets
Most of us are familiar with theGovernment’s carbon commitment tocut greenhouse gas emission by
80
%by
2050
. While doubts exist about therealistic nature of this target, one thingremains clear - everyone will be taskedwith doing their bit.From the recent switchover to energy-saving light bulbs to increased tax onmotor fuels, we can be certain that thecarbon reduction drive will play anincreasingly dominant role in our lives -both at home and at work.
So where does this leave mybusiness?
UK businesses are under increasingregulatory pressure to report on theircarbon emissions. Examples includethe Emissions Trading Scheme (aninternational ‘cap and trade’ schemefor the abatement of air pollution) andthe Climate Change Levy, set up toencourage business and public sectorsto improve energy efficiency andreduce emissions of greenhouse gasesthrough a price based signal onenergy usage.
1
By April
2010
it isanticipated that a further
20,000
UKbusinesses will be obliged to reportunder the Carbon Reduction
ActivityRecordingMeasurementReportingYesNoInvoice enteredonto purchaseledgerEnter carbonunits consumedInvoice receievedfrom supplierCarbon emissionsupdatedCarbon emissionscalculatedInvoice updatedto nominal ledgerCarbon relatedexpense?
consulting|software|solutions
www.theaccessgroup.com
Accounting for carbon emissions
In February 2008, we launched Accounting for Carbon Emissions (ACE), the first practical tool toincorporate carbon emissions in the finance function. This landmark change enables yourbusiness to easily measure its footprint at low cost with little impact on daily activity. Thisfactsheet explains how ACE is set to meet the carbon emissions challenge; both in the run-up tofuture Governmental legislation and in the wider context of mid-market environmentalresponsibility.
Key benefits
Increase business opportunityDemonstrate thought leadershipCut costsEmpower staff to reduce CO2Prepare for reporting standardsTake advantage of incentives
Incorporating carbon emissions data to eachtransaction is straightforward, adding justseconds to each standard Purchase Ledgertransaction as shown in this workflowcomparison (left).A similar methodology is also applied to theprocessing of travel expenses in order that you can capture the emissions arising fromtrain, car, and air travel. Web-enabledsoftware provides the opportunity for everyemployee to contribute to the carbonfootprint calculation.
 
Commitment programme. By April
2012
, it is likely that the governmentwill make changes to the CompaniesAct to bring yet more companies intothe scope of mandatory CO2 reporting.
So why worry about it now?
The message from UK Government isclear. If your business has systems inplace to meet the reportingchallenges, then you’ll be betterplaced to meet regulatory demands.Furthermore, if you can exhibitproactive management of your carbonemissions, then you’re more likely towin business from environmentally-conscious customers. You can alsoexpect to see improved cost controland raised environmental awarenesswithin your workplace.
How do we know this?
Close monitoring reveals a timeline of significant events, including:•October
2008
- Creation of Department of Energy and ClimateChange – (DECC)•November
2008
- the ClimateChange Bill receives Royal Assent•October
2009
- UK Governmentpublishes clear guidelines as tohow UK businesses should reporton their carbon emissions,featuring a standard template forall UK businesses to adoptFuture developments include:•
1
st December
2010
- Government totable a report on the impact of corporate emissions reporting onfighting climate change•By April
2012
- Government to bemaking changes to the Companiesact to introduce mandatoryreporting, or account to Parliamentwhy it has not been able toproceed.In addition, accounting institutions arealready recognising the need toembrace environmental reporting aspart of their role. In September
2009
,
16
of the world’s leading accountingbodies gave their seal of approval tothe principles of the Prince of Wales’Accounting for Sustainability Forum.In summary, the very real threat of climate change is creating increasingpressure to make changes in businessbehaviours. And this all starts withreporting.
Our reaction
Having anticipated this forthcomingneed to accurately measure andmonitor carbon emissions, we observedthe reporting tools already on themarket and concluded none wereentirely satisfactory. (See table). This ledto the development of our ownmeasurement and reporting tool -Accounting for Carbon Emissions (ACE).
What does it do?
ACE captures all the carbon emissionsdata associated with your commonbusiness activities - such as powerusage, travel and distribution costs.
2
©Access
2009
. E&OE.
Carbon transaction window: capturingcarbon values is quick and easy. Transactiontypes set to ‘account for carbon’ draw oninformation held within the nominal ledger,pre-populating the majority of fields such as‘classification’ and ‘emission group.’
OptionDrawbacks
Website calculation toolsDesigned for the individual; do not accommodate thefull needs of businessThird-party moduleLabour-intensive data reconciliationTraining overheads while users become familiar withnew softwareMay be aimed solely at large enterprises involved inconforming to carbon emissions trading (i.e. EUEuropean Trading Standards)Bespoke systemConsiderable IT resource and costExcel spreadsheetData has to be re-keyed from one system to another,compromising the accuracy of data input and anysubsequent reports.
Other CO2 emissions measurement tools and their drawbacks. All involve the creation of newbusiness processes and duplication of data entry.
 
Unlike other tools, it extends from theprocessing of daily accountstransactions, so there’s not need tomodify your daily routine in order tocapture carbon emissions data. Itautomatically calculates emissionsfalling under both Scope
1
and
2
of theGreenhouse Gas Protocol and hasoptions to ‘journal in’ additionalemissions from Scope
3
How does it work?
The system utilises a standard methodfor calculating carbon emissions andturns it into a corresponding carbontonnage value. For example, whenrecording a utility bill, you simply addin the number of units used and thesystem calculates the rest. From youraccountant’s perspective, it really is just a case of entering a couple of extra fields when processing standarditems such as purchase invoices.
So it’s just for accountants?
No. While it makes sense for theaccounts department to record themajority of this information, anyoneentering expenses with corresponding‘carbon counts’ - for example, railtravel - can also enter this informationvia our web-based FocalPointapplication. Furthermore, all this datacan be easily analysed via Excel ortraditional Crystal reports and madeavailable to people across yourbusiness via interactive graphicaldashboards .
Can I be sure ACE will meetfuture reporting standards?
In a changing landscape, absolutecertainty is impossible. However, theUK Government has now providedguidance on the reporting standardsrequired for UK businesses. The latestreport (October
2009
) acknowledgesthe role good software can play inproviding carbon reporting, stating‘ideally, Greenhouse Gas (GHG)reporting should be integrated intoexisting reporting tools and processesof your organisation.’These guidelines also prescribe theuse of Defra tables and sensibly alignemissions reporting periods with thecompany’s financial reporting periods– both of which are already embeddedwithin our ACE solution. Currentintelligence strongly indicates thatcarbon reporting will form part of theYear End audit. As a fully integratedpart of our software, ACEautomatically conforms to the highauditing standards set by the ICAEW.
I’ve captured the data...what next?
With this data in your system, you’refree to analyse the information as youwould any other area within yourbusiness. Real-time or period reportingis available, providing a wealth of statistics that you can analyse by costcentre, department, even down to theindividual (see ‘Feature summary’ foran example of some of the reports).
But what’s this go to dowith being green?
News of workplace carbon reductionschemes hit the headlines almostdaily. Everything from formal opt-in,pay-related reduction targets tocompany-wide environmental pledgesare signs that, despite an absence of formal legislation, companies are keento do their bit. If you’re one of thesebusinesses, consider how much moreeffective your initiatives could be if  you could easily collect CO2 data, setcarbon ‘budgets’ and monitor, analyseand report on this progress. All this isavailable to you as part of yourstandard business system while youprepare yourself for the formalrequirements coming down the line.
Not convinced?
If you’re finding it hard to prioritiseenvironmental issues then you’re notalone. In our recent survey, a huge
84
%of respondents felt the Governmentneeds to do more to prioritise carbonreduction policies in the workplace. Infact, only
5
% felt able to motivatethemselves to put any carbonreduction schemes in place.Yet by adopting a system that’s fullyintegrated into a business andaccounting software package now, youcan prepare for the future in thesimplest and most low-impact waypossible.
3
©Access
2009
. E&OE.
Budgeting & reporting: graphical reportingprovides at-a-glance views of progress,enabling you to see the effect of your carbonreduction policies and to take further actionto reduce your footprint. Allocate budgets atany level you require, from company-widedown to department and individual.
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