11 November 2022

Boring but vital: the need to reform carbon accounting in the journey to Net Zero

Our research shows that a simple lack of common carbon accounting standards for both corporates and products means we simply cannot track where industry is doing well or badly in cutting emissions.

Person working on helicopter chassis

Manufacturing is one of the biggest emitters of greenhouse gases. Approximately two-fifths of the carbon footprint originates from this energy intensive sector.

That’s obviously a huge challenge for the industry, which generates more than 80 megatons of greenhouse gases each year. This also means, however, that lowering emissions in manufacturing offers one of the great opportunities to meet the government’s commitment to reach net zero by 2050. Moreover, the skills the UK enjoys in advanced manufacturing, from nuclear welding to developing offshore wind technology, means we have the potential to be a world leader in decarbonisation. All that, of course, provides the platform for economic growth.

There is, however, a huge obstacle to this ambition and it is one that sounds almost too basic and dull to be prioritised. Our research shows that a simple lack of common carbon accounting standards for both corporates and products means we simply cannot track where industry is doing well or badly in cutting emissions.

The High Value Manufacturing Catapult links industry and academia to commercialise the sector’s best ideas, working with more than 5,500 companies in 2021/22 alone. This month, our research team released the Embodied Emissions and Net Zero report.

Our experts warn:

“Current reporting is inconsistent and uses varying terminology and reporting formats. This must change to improve comparability and ensure robustness in the accounting approach…

“Without a proper auditing and monitoring system in place, there is no way of knowing where the UK manufacturing industry is in terms of working towards and meeting net zero targets. There must be a centrally coordinated system in place to do this, to ensure consistency and transparency.”

A universal methodology for measuring and reporting emissions must be developed, with government agreement on which metrics should be used. There is a particular problem in tracking what are known as ‘Scope Three’ emissions – indirectly produced carbon, such as that produced by early materials extraction and processing.

This standardisation also removes a bureaucratic burden from businesses. Rather than constantly developing new methodologies as they learn from past audits, they will be able to take them ‘off the peg’ and improvements will be made for them. These standards will also minimise the risk that businesses are accused of ‘greenwashing’ by using accounting rules that investors might suspect have been developed to be opaque or favour their work.

This carbon accounts for between 60% and 90% of emissions. This is why reducing Scope Three is fundamental to achieving our 2050 target to reduce greenhouse gases by 100% of 1990 levels. That Net Zero ambition is legally binding under the Climate Change Act.

Tracking carbon emissions is now considered an integral aspect of a company’s annual audit. Yet, a myriad of different carbon accounting standards and methodologies are used, meaning that the data is rendered almost useless when combined across the manufacturing sector. If we cannot track the journey to net zero, then we have no idea if we can reach our destination.

As the report states:

“The review has highlighted methodological differences between the standards, as well as differences in scope, emissions covered, structure and terminology. Several key challenges have been identified, firstly that cross sector standards allow a high level of flexibility in terms of the scope and boundaries for calculations. However, this flexibility leads to differences of application which hampers the ability to create carbon footprints that are comparable with each other.”

HVM Catapult and our seven research centres, which are geographically spread from Strathclyde to Flintshire, from Sedgefield to Bristol, are well-placed to help the Government establish these new, universal standards. Working with the Treasury, the Department for Business, Energy and Industrial Strategy, and the Department for Environment & Rural Affairs, we believe we can bridge this gap and create a template to be followed around the world. The British Standards Institution would be a natural partner in creating this consistent approach.

It is, of course, all very well introducing standards, but we must make sure that they are implemented. Our experts recommend that this should be overseen by an economy-wide regulator for carbon. The development of the standards might be driven by the manufacturing sector, but they need to be enforced across British business. Much like corporate governance is sector agnostic, so – ultimately – should carbon accounting.

Manufacturing is an incredibly exciting sector. Our work includes smart robotics and revolutionising the rail industry with augmented reality. The word ‘accounting’, therefore, is difficult to utter – it feels very prosaic, like we’re entering the world of bean counting.

But overhauling carbon accounting is vital if we are to create a cleaner world and generate the economic benefits we would enjoy as a result. Without these reforms, our drive to reach Net Zero in less than three decades will be completely undermined.


This article was originally shared by The Engineer as part of Net Zero Week. You can view the original article here. You can also read our Embodied Emissions and Net Zero report here.


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