It became widely known through a British Petroleum campaign in 2005, quickly becoming the standard method for businesses to measure their ecological impact.In 2012, the UK government introduced mandatory carbon reporting, requiring approximately 1,100 of the largest listed companies in the UK to report their annual greenhouse gas emissions.

1. What is Carbon Accounting?

Carbon Accounting, also known as Greenhouse Gas Accounting, is a process of identifying and reporting the greenhouse gas (GHG) emissions of a project, business activity, enterprise, or even a nation.

GRI 305 Standard from the "GRI Consolidated Sustainability Reporting Standards" guides the measurement of total greenhouse gas emissions in enterprises across three scopes, including:

• Direct emissions (Scope 1)
• Indirect emissions from purchased energy (Scope 2)
• Indirect emissions from other activities in the value chain (Scope 3)

Carbon accounting includes identifying and measuring all GHG emission sources within these three scopes.

Climate change is a global urgent issue, threatening human life and development. Every country and individual has the responsibility to reduce greenhouse gas emissions, contributing to climate change response.

In the race to reduce global carbon, Carbon Accounting helps us know whether the current emissions from business activities meet government requirements. It is also one of the first important steps towards achieving the Net-zero 2050 goal.

2. Who should care about Carbon Accounting?

Governments, businesses, and individuals can use Carbon Accounting to measure the greenhouse gases they emit. The carbon footprint is the amount of greenhouse gases emitted by humans during living, producing, and consuming.

It includes both direct emissions, created by humans themselves, and indirect emissions, caused by human impact on the production and consumption processes of others. Implementing Carbon Accounting will help:

Government:

• Monitor the progress of climate change commitments of the country and businesses.
• Identify major GHG emission sources and establish policies, taxes, fees, and emission reduction measures.

Businesses:

• Improve energy and resource efficiency.
• Reduce operating costs.
• Enhance competitive advantage.
• Minimize legal risks and associated costs.

Individuals:

• Better understand the impact of GHG on the environment.
• Find ways to reduce GHG emissions.

3. Why is Carbon Accounting important?

Through Carbon Accounting, businesses can:

• Understand environmental impact: Carbon accounting provides an overall view of an organization’s total GHG emissions, helping them understand the current situation and set reduction goals and strategies.
• Set emission reduction goals: Carbon accounting is the foundation for establishing scientifically-based emission reduction goals, aligned with the Paris Agreement on climate change signed in 2015.
• Track and evaluate progress: Through carbon accounting, businesses can track and evaluate progress towards emission reduction goals, adjusting strategies as necessary.
• Enhance transparency, accountability, and responsibility: Carbon accounting promotes transparency by providing information on environmental performance, building trust among stakeholders such as shareholders, banks, and the government.
• Minimize financial and legal risks: Carbon accounting helps businesses minimize financial risks related to climate change, including carbon pricing and regulatory changes. Having an emission reduction plan benefits businesses by reducing costs, taxes, and environmental protection regulations that are constantly changing.
• Benefit from investors, banks, customers, and stakeholders: Recent scientific studies indicate that environmentally friendly businesses will gain more benefits from stakeholders, such as lower borrowing costs from green bonds, easier capital mobilization from shareholders, and increased revenue from customers who are increasingly concerned about the environment.

4. When should businesses start reporting emissions?

At the 2021 United Nations Climate Change Conference (COP 26), Vietnam committed to achieving carbon neutrality (Net-zero) by 2050. This ambitious commitment requires the efforts of the entire society, from the government, businesses to citizens.

In addition, Decision No. 01/2022/QD-TTg issued on 18/01/2022 mandates the list of sectors and facilities that must implement GHG emissions inventory. On 15/11/2022, the Ministry of Natural Resources and Environment issued Circular No. 17/2022/TT-BTNMT regulating technical measurement, reporting, verification, and inventory of GHG emissions in the waste management sector.

Vietnam's GHG emissions inventory roadmap:

• 2023: Facilities provide information and data to develop GHG emissions inventory plans. Develop facility-level GHG emissions inventory plans.
• 2024: Facility-level GHG emissions inventory. Develop facility-level GHG emissions inventory reports.
• 2025: Complete facility-level GHG emissions inventory reports. Approve the GHG emissions reduction plan for 2026-2030.
• 2026-2030: Implement GHG emissions reduction plans. Exchange carbon credits.

According to these legal documents, at least 3,000 businesses, units, and organizations in Vietnam need to implement Carbon Accounting in their annual GHG emissions inventory reports. This is an urgent task that requires business owners to act immediately to avoid financial and legal risks.

5. Which sectors must implement Carbon Accounting?

According to the law, facilities in the following six sectors must conduct GHG emissions inventory:

Energy:

• Energy production industry
• Energy consumption in industry, commerce, services, and households
• Coal, oil, and natural gas extraction

Transportation:

• Energy consumption in transportation

Construction:

• Energy consumption in the construction sector
• Industrial processes in building materials production

Industrial Processes:

• Chemical production
• Metallurgy
• Electronics industry
• Use of products substituting for ozone-depleting substances
• Production and use of other industrial products

Agriculture, Forestry, Land Use:

• Animal husbandry
• Forestry and land use changes
• Crop production
• Energy consumption in agriculture, forestry, and fisheries
• Other emission sources in agriculture

Waste:

• Solid waste landfill
• Solid waste treatment by biological methods
• Incineration and open burning of waste
• Wastewater treatment and discharge

6. Which businesses must implement Carbon Accounting?

Units with GHG emissions from 3,000 tons of CO2 equivalent or more or in the following cases:

• Power plants and industrial production facilities with annual GHG emissions exceeding 1,000 tons of oil equivalent (TOE).

Examples:

• A 1,000 MW coal-fired power plant emits about 20 million tons of CO2 equivalent annually.
• A transportation company with an annual fuel consumption of 1,000 TOE or more. For instance, a logistics company with a fleet of 100 trucks, each consuming around 100,000 liters of diesel per year, consumes about 10,000 TOE annually.
• Commercial buildings with annual energy consumption of 1,000 TOE or more. For example, a 50,000 m² commercial building consuming about 10 million kWh of electricity annually, equivalent to about 10,000 TOE.
• Solid waste treatment facilities with an annual operational capacity of 65,000 tons or more. For instance, a solid waste treatment facility with an annual capacity of 100,000 tons emits about 1 million tons of CO2 equivalent during processing.

7. Methods of Carbon Accounting

GHG Protocol standards are globally used to measure and report GHG emissions. These standards ensure GHG reports are accurate, fair, and consistent.

Five main methods under GHG Protocol standards:

1. Physical unit method: Calculates GHG emissions based on the number of physical units consumed or used by the business (e.g., kWh of electricity, liters of gasoline).
2. Cost-based method: Calculates GHG emissions based on the financial value of goods or services purchased (e.g., total value in VND paid for IT hardware), then multiplies it with the associated emission factor.
3. Supplier-specific method: Collects cradle-to-gate GHG inventory data (from raw material extraction to when the product reaches the consumer) from the business's suppliers. This is the most accurate method but also the most time and resource-consuming.
4. Average data method: Estimates emissions by collecting data on the volume or other relevant units for the emission category and multiplying it with average emission factors (e.g., average emissions per unit of goods or services).
5. Hybrid method: Uses a combination of different methods, such as the physical unit method and supplier-specific method.

8. Emissions Inventory Reporting with VertZéro

VertZéro aims to report emissions reduction and ESG compliance, adhering to internationally recognized GHG Protocol standards and the latest Vietnamese government regulations. The software collects necessary company data across all relevant emission scopes (Scope 1, 2, and 3) for businesses and combines them with appropriate ratios. The platform then estimates emissions and tracks them over time to visualize progress.

VertZéro not only visualizes current emissions and carbon footprint but also helps businesses set net-zero targets according to the Paris Agreement on climate change.