Carbon Accounting Glossary

The reference year against which future emissions reductions are measured. Organisations select a baseline year with complete, representative data to serve as the starting point for tracking progress toward carbon reduction targets. Most frameworks, including the GHG Protocol and SBTi, require a clearly defined baseline year to ensure that reported reductions are meaningful and verifiable.

The total amount of greenhouse gases produced directly and indirectly by an individual, organisation, event, or product, expressed as carbon dioxide equivalent (CO₂e). A carbon footprint encompasses emissions across all scopes and provides a single metric for understanding overall climate impact. Measuring your carbon footprint is typically the first step in any carbon accounting programme and forms the basis for setting reduction targets.

A state achieved when an organisation's net carbon emissions equal zero, typically by reducing emissions as far as possible and compensating for residual emissions through carbon offsets. Carbon neutrality differs from net zero in that it does not necessarily require deep absolute reductions across all emission sources. Under the EU Green Claims Directive, organisations making carbon neutrality claims will need to substantiate them with verified evidence.

A verified reduction or removal of greenhouse gas emissions used to compensate for emissions occurring elsewhere. Offsets are measured in tonnes of CO₂ equivalent and can include projects such as reforestation, renewable energy development, or methane capture from landfill sites. While offsets play a role in climate strategy, most frameworks now emphasise that they should only be used for genuinely hard-to-abate residual emissions after all feasible reductions have been made.

A global non-profit organisation that runs the world's leading environmental disclosure system. CDP enables companies, cities, and governments to measure, manage, and disclose their environmental impacts through annual questionnaires scored from A to D minus. With over 23,000 companies disclosing through CDP, the scores are widely used by investors, customers, and procurement teams to assess an organisation's environmental performance and climate risk management.

A European Union directive that mandates detailed sustainability reporting for a broad range of companies operating in the EU. The CSRD replaces the earlier Non-Financial Reporting Directive (NFRD) and requires reporting against the European Sustainability Reporting Standards (ESRS), with independent assurance. The directive applies in phases from 2024 to 2028, progressively bringing large companies, listed SMEs, and non-EU companies with significant EU operations into scope.

The process of reducing or eliminating carbon dioxide and other greenhouse gas emissions from an organisation's operations and value chain. Decarbonisation strategies typically involve transitioning to renewable energy, improving energy efficiency, electrifying transport fleets, and redesigning processes to minimise fossil fuel dependence. A structured decarbonisation plan is increasingly expected by investors, regulators, and customers as part of credible climate commitments.

An assessment approach required by the CSRD that considers both how sustainability issues affect the organisation financially (financial materiality) and how the organisation's activities impact the environment and society (impact materiality). This dual perspective ensures companies report on risks and opportunities in both directions. A thorough double materiality assessment determines which ESRS topics require full disclosure in the sustainability report.

A coefficient that quantifies the greenhouse gas emissions produced per unit of activity. For example, an emission factor for electricity might express kilograms of CO₂ per kilowatt-hour consumed, while a factor for road freight might express kilograms of CO₂ per tonne-kilometre. Emission factors are published by government bodies such as BEIS (now DESNZ) in the UK and the EPA in the United States, and they are essential for converting raw activity data into emissions figures.

A mandatory UK energy assessment scheme for large organisations. ESOS requires qualifying companies to conduct comprehensive energy audits every four years and identify cost-effective energy efficiency measures across buildings, transport, and industrial processes. The scheme helps organisations understand where energy is consumed and how to reduce it, and compliance is overseen by the Environment Agency.

A framework used by investors and organisations to evaluate corporate behaviour across three pillars: environmental stewardship, social responsibility, and governance practices. ESG performance increasingly influences investment decisions, credit ratings, supply chain procurement, and stakeholder trust. Strong ESG credentials can improve access to capital, reduce risk premiums, and enhance brand reputation in competitive markets.

The most widely used international standard for measuring and managing greenhouse gas emissions. Developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), the GHG Protocol provides the foundational frameworks for Scope 1, 2, and 3 emissions accounting. It underpins virtually all major reporting frameworks including CDP, CSRD, TCFD, and SBTi, making it the de facto global standard for corporate carbon accounting.

A proposed EU directive aimed at preventing greenwashing by requiring companies to substantiate environmental claims with robust scientific evidence before using them in marketing or product labelling. The directive mandates that green claims be independently verified and based on recognised methodologies. It covers claims such as "carbon neutral", "eco-friendly", and "climate positive", and non-compliance could result in significant penalties.

Gases that trap heat in the atmosphere and contribute to global warming. The seven greenhouse gases covered by the Kyoto Protocol include carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulphur hexafluoride (SF₆), and nitrogen trifluoride (NF₃). Carbon dioxide is the most prevalent, but methane and nitrous oxide have significantly higher global warming potentials per molecule.

A target state where the total greenhouse gas emissions produced by an organisation are balanced by an equivalent amount permanently removed from the atmosphere. Unlike carbon neutrality, net zero requires deep absolute reductions across all scopes, typically 90 to 95 percent, and limits the use of carbon offsets to genuinely hard-to-abate residual emissions. The SBTi Corporate Net-Zero Standard provides the leading framework for setting credible net zero targets aligned with climate science.

An international treaty adopted in 2015 under which 196 countries committed to limiting global warming to well below 2 degrees Celsius above pre-industrial levels, with efforts to limit the increase to 1.5 degrees Celsius. The agreement requires nations to submit progressively ambitious climate action plans known as Nationally Determined Contributions (NDCs). The Paris Agreement provides the overarching scientific context for corporate emissions targets, including those validated by the SBTi.

A global initiative that provides a standardised methodology for financial institutions to measure and disclose the greenhouse gas emissions associated with their loans and investments. PCAF enables banks, asset managers, and insurers to assess the carbon intensity of their portfolios and align financing activities with the goals of the Paris Agreement. The methodology covers six asset classes including listed equity, corporate bonds, business loans, commercial real estate, mortgages, and motor vehicle loans.

A partnership between CDP, the United Nations Global Compact, WRI, and WWF that helps companies set emissions reduction targets aligned with climate science. SBTi validates that targets are consistent with the level of decarbonisation required to meet the goals of the Paris Agreement, ensuring they are ambitious enough to contribute to limiting global warming to 1.5 degrees Celsius. Over 4,000 companies globally have committed to or set SBTi-validated targets.

Direct greenhouse gas emissions from sources owned or controlled by the reporting organisation. Examples include emissions from company-owned vehicles, on-site gas boilers and furnaces, manufacturing and industrial processes, and fugitive emissions from refrigeration or air conditioning systems. Scope 1 emissions are typically the most straightforward to measure because the data comes directly from the organisation's own operations and fuel consumption records.

Indirect greenhouse gas emissions from the generation of purchased energy consumed by the reporting organisation. Scope 2 covers electricity, steam, heating, and cooling that is bought from external providers. The GHG Protocol requires organisations to report Scope 2 using both the location-based method, which uses average grid emission factors, and the market-based method, which reflects specific contractual arrangements such as renewable energy certificates.

All other indirect emissions that occur in the reporting organisation's value chain, both upstream and downstream. The GHG Protocol defines 15 categories of Scope 3 emissions, including purchased goods and services, business travel, employee commuting, transportation and distribution, waste generated in operations, and use of sold products. Scope 3 typically represents 70 to 90 percent of an organisation's total carbon footprint, making it the most significant but also the most challenging scope to measure accurately.

A UK government regulation that requires qualifying companies to report their energy use and carbon emissions in their annual directors' report. SECR applies to quoted companies, large unquoted companies, and large limited liability partnerships that meet certain size thresholds. Reports must include total energy consumption in kilowatt-hours, associated greenhouse gas emissions in tonnes of CO₂e, and at least one intensity ratio to allow year-on-year comparison.

The practice of disclosing an organisation's environmental, social, and governance performance to stakeholders in a structured, transparent manner. Modern sustainability reporting is governed by frameworks such as the CSRD, GRI, TCFD, and CDP, and increasingly requires independent assurance to ensure data accuracy and credibility. Effective sustainability reporting goes beyond compliance by helping organisations identify risks, seize opportunities, and build trust with investors, customers, and regulators.

A framework established by the Financial Stability Board that recommends how organisations should disclose climate-related financial risks and opportunities. TCFD is structured around four pillars: governance, strategy, risk management, and metrics and targets. Although the TCFD was formally disbanded in 2024 with its monitoring responsibilities transferred to the IFRS Foundation, its recommendations remain embedded in regulations worldwide including the UK's mandatory climate-related disclosure requirements.

The total greenhouse gas emissions associated with all activities in an organisation's upstream and downstream value chain, encompassing purchased goods and services, transportation and distribution, employee commuting, business travel, use of sold products, and end-of-life treatment. Value chain emissions are reported under Scope 3 of the GHG Protocol and often represent the vast majority of an organisation's total footprint. Collecting accurate value chain data typically requires direct engagement with suppliers and customers.