Accurate carbon accounting is essential for businesses to maintain credible sustainability reports. However, errors in data entry, classification, and supplier engagement can lead to miscalculations of greenhouse gas (GHG) emissions. From misclassifying primary and secondary data to inconsistent emission factors, ESG FinTech company Position Green has outlined six common mistakes companies should avoid for better compliance and transparency.
Primary and secondary data misclassification
One of the biggest mistakes in carbon accounting is the misclassification of primary and secondary data, which directly affects emissions accuracy, particularly in Scope 3 reporting, Position Green explained.
Primary data originates from a company’s direct operations or suppliers, such as on-site fuel logs or electricity invoices. In contrast, secondary data is derived from government reports or industry databases like DEFRA and Ecoinvent.
Incorrectly using secondary data for emissions calculations can lead to misrepresentation. To mitigate this, businesses should prioritise primary data where possible, disclose the percentage of secondary data used, and maintain clear documentation of data sources.
Overestimating data
Another frequent error, highlighted by Position Green, is overestimating data precision. Many companies assume that their emissions data is highly accurate, but this is rarely the case, especially when using secondary data.
Industry averages often conceal variations—for example, factories in different countries with distinct energy mixes will have widely different emissions. Scope 3 emissions can also be misleading when based on global averages that fail to capture supplier-specific sustainability efforts.
To improve precision, businesses should seek supplier-specific data, clearly state limitations in disclosures, and implement quality checks to validate anomalies.
Lack of engagement with suppliers
Failing to engage suppliers for Scope 3 emissions is another major issue. These emissions constitute a significant portion of a company’s carbon footprint, but they are challenging to quantify due to reliance on supplier data.
Without direct engagement, businesses risk inaccurate or incomplete reporting. Companies can address this by establishing supplier engagement initiatives, using standardised reporting templates, and adopting automated tools for real-time data collection.
inconsistent emission factors
Using inconsistent emission factors also leads to discrepancies in carbon accounting. Various organisations, including the IPCC, DEFRA, and the US EPA, maintain different databases, each with unique methodologies.
Inconsistencies arise when businesses mix global and regional emission factors or use outdated data. To ensure accuracy, companies should standardise emission factors, use the latest datasets, and prioritise supplier or region-specific emission data. Proper documentation of data sources in sustainability reports enhances transparency.
Ignoring location vs market-based Scope 2 reporting
Many companies also make errors in Scope 2 reporting by failing to differentiate between location-based and market-based emissions. Location-based reporting uses grid-average emissions, while market-based reporting considers supplier-specific energy contracts.
Omitting one of these methods can lead to discrepancies, particularly for businesses purchasing renewable electricity. To remain compliant, companies should report both location-based and market-based emissions as outlined by the GHG Protocol.
Not validating data regularly
Regular data validation is crucial but often overlooked. Even with automated reporting systems, manual checks are necessary to prevent errors.
Common pitfalls include relying on a single data source without verification, ignoring audit trails, and failing to update methodologies in line with evolving standards. Companies should conduct quarterly data reviews, seek third-party verification for key emissions metrics, and integrate automated data consistency checks into their reporting software.
Position Green concluded that avoiding these common mistakes strengthens the credibility and audit-readiness of corporate sustainability reports. Companies should prioritise primary data for high-impact emissions, engage suppliers for transparency, and ensure consistent validation and standardisation of data sources.
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