How to Choose the Best Carbon Accounting Software

If you're looking for the best GHG accounting software, it's crucial to prioritise transparency, a pathway towards improved accuracy and compliance with global standards. Accounting firms and consultants may remain technology agnostic, focusing on their clients' needs, but businesses can often struggle to know what they require at the start. Let's step through the key factors to consider when selecting the best carbon accounting software and important questions to ask any potential provider.

Transparency is everything

Transparency is the first step towards meaningful carbon accounting (let alone explaining the findings to your team or clients). The software should allow you to see precisely which emissions factors were applied and where they came from. It should also make any calculations performed transparent, such as CPI or currency conversions.

For example, if you have transactions associated with buying $5,000 on office desks, what emissions factors has the software applied to give you the equivalent amount of carbon associated with that purchase? Without this, you can’t explain to your stakeholders how your footprint was calculated in the first place “the software said this” won’t fly.

This level of transparency ensures that you have full visibility into the calculations and that your carbon accounting can be audited. If the average data is low quality, perhaps it's outdated or from an entirely different jurisdiction, then you want to know that. Armed with this knowledge, you’re in a better position to explain why it’s so important to engage with suppliers who can provide their actual data, rather than the outdated averages hiding in the shadows of your carbon accounting software until the end of time.

Questions to ask your potential provider:

Do you provide a carbon general ledger report (or equivalent) where we can see what emission factors have been applied, including the source of that data?

Can we export that report to excel (to bring more flexibility to your reporting)?

Professional Judgment and Transaction Level Accounting

The ability to apply your own professional judgment is important. If a platform is magically calculating your footprint, automatically allocating thousands of transactions (based on what? that’s a great question you should also ask) and you have no way to adjust that, it means the software is making all the assumptions. At the very least, you need full transparency over what has happened to reach the numbers provided to you.

Choose software that allows you to exercise professional judgment and make informed decisions about how transactions should be coded. This way, you can ensure your carbon accounting reflects the unique characteristics - and activity - of your business and supply chain.

Also consider to what level of detail you can go to in the accounting process. A first pass assessment may be done at the GL or supplier level, but as your internal knowledge builds, your systems and processes improve and your suppliers engage, there’s no doubt you will want the ability to do the carbon accounting at the transaction level. It’s rare that all transactions or associated activity data within one GL account or against one supplier will have the same emission factors.

Just imagine your favourite restaurant is carbon accounting and they've spent $500 at the local supermarket, the difference in emissions between the 3 kgs of steak and the raspberries from the farm down the road are obviously wildly different. And if they want to improve accuracy over time, they're going to want the ability to code that accordingly.

Of course, that level of accounting is rarely available (which is exactly why every company needs to be carbon accounting) but soon, it will be. You want software that is building for the future of carbon accounting, empowering you to benefit from that level of granularity and accuracy as it becomes available, rather than leveraging the lowest quality approach alone. You also want the ability to replace spend data with activity data, without losing your audit trail back to the financials.

If you’re an advisor providing carbon accounting as a service, the ability to go granular and exercise your professional judgement is a must have. Otherwise, you are essentially outsourcing the accounting (that you are best placed to do!) to a carbon calculator, making it very hard to explain to a client what has taken place. This also means it can be difficult to deliver advisory services off the back of a baseline you didn’t prepare or at least thoroughly understand.

Questions to ask your potential provider:

Does my business have the ability to decide how each transaction or relevant activity data can and should be categorised, if we want to?

Can we make changes at the transaction level?

Can we replace spend based transactions with activity data? How do you maintain the audit trail for this?

Primary Data Collection - Supply Chain Support

One of the biggest challenges in GHG accounting is obtaining primary data from your supply chain (see our blog on scope 3 emissions). These emissions can often account for around 90% of your total footprint. A software solution that relies solely on averages with no pathway out, may limit your ability to improve data quality over time.

Look for software that not only provides average emission factors (you have to start somewhere) but also supports and encourages your supply chain to collect and provide primary data over time. This collaborative approach enables you to enhance the accuracy and reliability of your carbon accounting. Think about what your suppliers needs to be able to engage and provide this data too. It’s unlikely a form will do the trick if they have no real idea where to start. So look for software that can do more than send a questionnaire. True engagement often means working together to up-skill and identify opportunities.

Questions to ask your potential provider:

How do you support our business to collect audit ready primary data from our supply chain over time?

Do you provide education and tools that are fit for purpose for our suppliers too?

Is that support accessible and affordable for our suppliers if they choose to use it?

Affordability

Price is a key factor in ensuring this software will be fit for purpose long term. For advisors, consider whether the software platform you are using or referring to clients leaves room for you to charge your professional fees. Your services are going to be increasingly required in a compliance-driven world, so referring large clients on to expensive carbon accounting platforms may not be the best option long term.

As the industry evolves and carbon literacy improves, six figure carbon accounting tools used to calculate averages based on spend data may no longer be feasible or desirable for most companies.

At the other end of the scale, for small and medium businesses, consider whether lower cost software is actually providing more than a free tool would (like those provided by the SMB Hub). This will largely come down to the considerations above. If you have little to no transparency over the emission factors used, you can’t really understand what’s driving the calculation, so what exactly is the business paying for? You’re unlikely to rely on that platform to make emissions based claims or to share data outside of your organisation.

Choose software that provides value for money, without compromising on transparency and functionality.

Questions to ask your potential provider:

What is the price and what is included? (obviously)

Do you have a monthly subscription option?

Do you offer a free trial?

Education, Resources and Support

Consider whether the software is helping you to build internal knowledge or whether it’s actually   leveraging the fact you don’t know heaps about the nitty gritty of the accounting process (high fees, no transparency on the emission factors and claims like ‘no knowledge required, just a few clicks to complete a carbon footprint’ are all things that may indicate this is the case).

If the platform does provide online courses and educations, ask whether that’s focused on how to use the product (a given) or building your team's skills in carbon accounting, so you can improve systems and processes that support increased accuracy and an internal understanding of carbon across the business.

For advisors, consider whether the education is sufficient for you to confidently provide this as a service to clients, to the standards you would expect. If the platform is promising that you’ll be a carbon accounting wizard following a few webinars, you probably already know that’s unlikely to cut it, unless you have very strong foundational knowledge of the standards, methodologies and key principles in the first place.

Questions to ask your potential provider:

Can the company provide access templates, example reports and online training that’s fit for purpose to build our internal knowledge?

What content does your course cover?

What ongoing accounting support is available?

To sum up

Selecting the best carbon accounting software for your firm or company can feel daunting. It may feel like there’s a lot to consider and given it’s a relatively new proposition, it can be hard to understand what your company actually needs. The key questions above will help you identify whether the GHG accounting software can provide the value you need now and into the future.

It's worth noting that most carbon accounting platforms emerged in a very different era. Carbon accounting was completed to get a rough idea of a business’ footprint, or for simply calculating how many offsets to buy, so the business could make a carbon neutral claim. The space has come a long way in a short time and now, carbon accounting is becoming an extension of financial accounting and reporting. For some companies, it will now be compliance driven and you'll need to disclose your method and uncertainty. For others, third party stakeholders increasingly want to understand a company's emissions and businesses want to forecast carbon return on investment.

The accounting now needs to be done to an audit ready standard. To facilitate that, companies need training, transparent accounting, a solution for genuine engagement with their supply chain and tools that accountants and auditors can use to support robust processes, in line with global standards. At Sumday, we believe that every business should have access to this. And we're on a mission to democratise access to carbon accounting.

To see how Sumday stacks up on some of these key features, check out our high level breakdown here.

You can also start a free trial to explore what works for you, no credit card required.

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