As Malaysia embarks on its journey to implement the National Carbon Market Policy, greater focus will be directed towards carbon accounting as carbon credits will require measurement in order to be traded.
The most widely used framework for carbon accounting is the Greenhouse Gas (GHG) Protocol, which categorizes emissions into three scopes:
- Scope 1 includes direct emissions from owned sources, such as fuel burned in company vehicles or generators.
- Scope 2 covers indirect emissions from purchased electricity and energy.
- Scope 3 includes all other indirect emissions across the value chain, such as supplier activities, employee commuting, and waste disposal.
In practice, Scope 3 is often the most significant category, frequently accounting for 70% of a company’s total emissions in many industries. It is also one of the most difficult to measure, hence organisations often rely on estimates and supplier surveys. Some companies exclude reporting Scope 3 which can significantly understate their true environmental impact.
To sum it up, these three scopes provide a comprehensive view of an organization’s carbon footprint.
Read our publication to understand the 3 scopes in action and the accounting treatment of carbon credits in the financial statements.
Sustainability and Climate Change
Carbon Accounting and Carbon Credits in the Financial Statements
Should your organisation be interested in addressing the complexities of these changes, do reach out us to find out how we can help you tackle challenges and take advantage of new opportunities.
