Although carbon accounting as we know it today has been around for the past two decades, emerging regulations and a push toward a more sustainable future by non-government stakeholders have driven an increasing number of carbon-related requests from limited partners (LPs), regulators, and large corporates over the past five years. Thus, many organizations view carbon accounting as a compliance burden – a box to check, a report to file, a dataset to warehouse. However, focusing on disclosure obligations alone fails to recognize the potential value of the data that is being collected. What could be a powerful tool for operational and financial improvement is too often reduced to a backward-looking compliance focused report leaving real value creation opportunities untapped.
Carbon Accounting Context
Before we get into definitions and how to operationalize carbon accounting to create value, we need to begin with a very important question. Is carbon accounting worth it? Many of our private equity clients have been inundated by their LPs over the past couple of years with a full suite of carbon reporting requests. These requests range from Scope 1, 2, and even Scope 3 emissions tracking to setting net-zero SBTi (Science Based Targets Initiative) based goals, and many of these requests are inclusive of every investment in the fund.
Setting longer term net-zero timelines against typical PE investment hold periods aside for the moment (read our previous Insight on Decarbonization in Private Equity), let’s talk strategy. Specifically, investment strategy. If a general partner’s (GP’s) investment strategy, either holistically or for a specific fund, includes industrials, manufacturing, or even distribution/logistics then the answer to the earlier “Is it worth it?” question is a resounding yes! Conversely, if the firm’s investment strategy includes more service-based companies (financial, healthcare, and non-data center technology), we work with our GP clients to position a tailored approach with their investors to address their full range of carbon requests while prioritizing what is material. If there is limited opportunity to drive operational/financial improvement, then what is the value in the carbon accounting exercise? If the GP cannot take action on the reporting, then what value is it for the LP?
Alternatively, rather than carbon accounting, these non-industrial sectors often benefit more from a Physical Climate Risk Assessment. This demonstrates to LPs that while your portfolios might not be direct contributors to a changing climate, they can certainly be impacted by it (read further “You’re Doing Due Diligence, But Are You Being Diligent?”).
Definitions & Opportunity
Carbon Accounting – also known as carbon footprinting or greenhouse gas (GHG) accounting – captures emissions from fuels, electricity, refrigerants, and other sources. This data is meticulously organized to comply with standards like the IFRS Sustainability Disclosure Standards, the ESG Data Convergence Initiative (EDCI), and the Carbon Disclosure Project (CDP). But if the process ends there, the exercise becomes little more than sustainability bookkeeping. Facilities in most industries consume far more energy than they actually need – sometimes 30% or more. Each ton of carbon reported often represents wasted expense as well as environmental impact.
To quantify this let’s do some accounting. Assume $1M electricity spend at a location annually. Bridge House’s experience shows that a 20-30% reduction in energy spend is achievable through low-cost/no-cost changes to processes in core functions like Operations & Maintenance (O&M) or Continuous Improvement (CI). How does that amount of reduction in electricity spend translate to amount reduced in carbon emissions? Over 600 metric tons.1, 2 For real-world perspective, one metric ton of carbon dioxide equivalent (CO2-e) is produced driving a gasoline-powered passenger vehicle from Pittsburgh to Los Angeles.3
Comparing energy use across facilities relative to production output or square footage is one of the simplest and most powerful applications of carbon input data. By plotting energy consumption against production volume or facility size, companies can quickly identify which locations are leading and which are lagging. If underperforming facilities simply moved to the portfolio average, the savings could be substantial – often hundreds of thousands or even millions of dollars annually. The emissions reductions come as an environmental bonus, and the analysis requires nothing more sophisticated than a scatter plot and a willingness to act.
If more granular data was available (e.g., monthly), then regression analysis can be used to understand what is really driving energy performance in a facility, identify variability in performance over time, and serve as an early warning system for underperforming equipment. Gradual increases in energy and emissions intensity over time often point to worn motors, inefficient boilers, or leaking compressed air and refrigerants. By surfacing these issues, carbon input data can help prioritize preventative maintenance schedules, recalibrate equipment, and make smarter capex decisions. This transforms carbon accounting into more insight and proactive energy performance monitoring. The result: reduced downtime, longer equipment lifespans, and lower costs – all drivers of higher exit valuations.
Taking the Right Action
Carbon accounting doesn’t need to be just another disclosure burden. When reframed as a tool to surface operational and financial insight, it becomes a driver for value creation. For investors, emissions data can highlight inefficiencies that, once addressed, translate directly into increased EBITDA. For portfolio companies, it reframes sustainability from a reporting obligation into a means of competitive advantage.
At Bridge House Advisors, we’ve seen firsthand how clients unlock meaningful value by going beyond “traditional” footprinting. Our Carbon Diagnostic Tool, offered as an add-on to traditional carbon footprinting, translates emissions data into actionable insights by benchmarking energy performance across facility portfolios, flagging outliers, and estimating savings potential. Reporting tells you where you are; diagnostics tell you where you can go.
This does not require an overhaul from the general ledger to obtain the value from carbon accounting. Our experience has shown that in most cases, the data is there already. It just needs to be assembled and diagnosed to uncover insights and set the course for action. As noted, this information can be readily introduced into core operating functions at the facility level. This translates to standard business practices instead of another draconian, compliance report.
So, back to the original question: If carbon accounting doesn’t include money, can it really be called accounting? The answer is no. Accounting without financial relevance is just reporting. And reporting, without action, leaves too much value on the table.
Contact Us to Learn More about putting dollars into your carbon accounting efforts.
1 US Environmental Protection Agency – eGRID Detailed Data – Released June 2025: eGRID Data
2 Electrical Power Average U.S. Consumer Costs – June 2025: Electric Power Monthly – U.S. Energy Information Administration (EIA)