Navigating the Climate Crisis with Carbon Accounting and Management

Welcome to this course on Carbon Accounting and Management with SAP.

This and the following 3 courses will help you to understand the corporate and broad regulatory context for carbon emissions accounting and management.

However, please note, this training does not claim to provide a complete or fully exhaustive scientific treatment of the topic of climate change, nor does it guarantee 100% accuracy or real-time completeness across all aspects of this rapidly evolving field. Climate science, policy frameworks, regulations, technologies, and market practices continue to develop quickly, and some information may become outdated over time.

The purpose of this training is to build practical understanding, decision-making skills, and business-relevant capabilities related to carbon accounting and management with SAP solutions. The content is designed to translate complex climate topics into actionable insights for organizational strategy, operations, and management.

Learners are encouraged to complement this training with up-to-date sources and to treat carbon accounting and management as evolving disciplines. Furthermore, the training will be updated periodically to provide the most current and relevant information available.

Since the industrial era, the emission of enormous amounts of Greenhouse Gases through human activities involving large-scale burning of coal, oil, and gas—primarily for energy, transport and industrial production—as well as land-use change such as deforestation for agriculture have fundamentally altered the Earth’s climate system. As a result of these activities, atmospheric carbon dioxide (CO₂) concentrations have now exceeded 420 parts per million (ppm). 

The concentration of 420 ppm is not just a scientific value—it directly translates into warmer global temperatures, changed weather patterns, more extreme and less predictable weather events, accelerating stress on ecosystems, biodiversity, and wildlife, degrading natural habitats, and altering water and food systems. At the same time, these environmental impacts cascade into direct consequences for people, infrastructure, business and the global economy, affecting how and where we live, work, and operate.

Without rapid and sustained emissions reductions, climate impacts will intensify in ways that are increasingly difficult—and expensive—to manage, and each year of delay compounds future warming and associated costs. 

Climate Change as a Business Risk 

For organizations, climate change manifests primarily as a risk. Risks are defined in two interconnected categories: physical risks and transition risks. 

Physical Risks : Disruption from a changing climate

Physical risks arise from the direct impacts of climate change on assets and operations.

• Acute risks include floods, hurricanes, wildfires, and heatwaves that damage facilities, disrupt logistics, and increase downtime and insurance costs. 
• Chronic risks include rising average temperatures, water scarcity, and sea-level rise, which reduce labor productivity, constrain resources, and increase operating expenses over time.

As global temperatures rise, these risks scale non-linearly—meaning small increases in warming can lead to disproportionately large disruptions.

Transition Risks : The cost of changing the system

Transition risks stem from the global shift toward a low-carbon economy.

• Policy and regulatory changes, such as carbon pricing, emissions caps, and mandatory reporting of emissions according to harmonized standards.
• Market and technology shifts, as customers and partners move toward lower-carbon products and services.
• Reputational pressure, affecting brand value, customer loyalty, and access to capital.

A critical transition risk is stranded assets — assets such as fossil fuel reserves, carbon-intensive infrastructure, or outdated technologies that lose value or become liabilities earlier than expected due to policy, market, or technological change. 

Together, physical and transition risks translate climate change from an environmental concern into a material financial issue that every organization should have a clear interest to manage.

Real-World Business Impacts

Supply Chain Disruption – Panama Canal: In 2023-2024, severe drought caused water levels in the Panama Canal to drop critically low, forcing authorities to reduce daily ship transits by 40%. Companies like Maersk and MSC faced weeks-long delays, forcing costly reroutes around South America. For manufacturers, this meant raw materials arrived late, production lines stopped, and finished goods couldn't reach markets – directly impacting revenue and customer relationships.

Coastal Manufacturing at Risk: Major production facilities located near coastlines face existential threats from sea-level rise and storm surge. In 2022, Hurricane Ian caused over $100 billion in damages, shutting down Florida production facilities for weeks. Agricultural producers face dual threats: coastal flooding of processing plants and inland droughts degrading soil quality and crop yields, resulting in 20-40% harvest losses in affected regions and volatile commodity prices.

The Insurance Crisis: Insurance companies are reassessing climate risk, leading to dramatic premium increases or complete withdrawal from high-risk areas. In California and Florida, major insurers have stopped offering new policies, leaving businesses with assets worth millions either uninsured or facing 300-500% premium increases. This affects financing capabilities, as lenders require adequate insurance coverage, threatening business expansion and even survival. 

Most organizations globally have recognized how climate change impacts their business. And they take action: A record number of companies have set carbon-reduction and net-zero targets, and some companies and even countries or regions have achieved emissions reductions. However, despite these efforts, global CO₂ emissions reached a new record high in 2024: approximately 37.8 gigatons in a single year. 

This paradox highlights a growing gap between ambitions and results, and progress remains uneven. Some companies show significant reductions, while others have recently weakened or withdrawn reduction targets, citing implementation complexity, cost pressures, and a broader backlash against sustainability regulations perceived as a threat to economic competitiveness.

What emerges is a clear lesson: targets alone are not sufficient. Closing the gap between commitments and real-world emissions reductions requires credible, efficient emissions measurement as well as execution and monitoring of reduction initiatives. Carbon accounting and management is a key tool to do exactly that. 

It enables organizations to systematically identify, classify, and quantify greenhouse gas (GHG) emissions across their business activities and value chains. This creates the factual foundation needed to translate carbon as a climate risk from an abstract concept into something that can be actively managed, reduced, and optimized.

Without carbon accounting and management, emissions remain largely invisible and unmanaged – you can not manage what you can not measure. With robust carbon accounting and management, emissions become transparent and manageable—along with their direct implications for cost structures, regulatory exposure, operational risk, and strategic opportunity.

Climate Crisis Through Three Lenses: Planetary, Economic, and Corporate Urgency

Planetary Urgency :

The 1.5°C global warming threshold is widely recognized as the limit for avoiding the most severe and irreversible climate impacts. Exceeding it significantly increases the likelihood of extreme heat, flooding, droughts, ecosystem collapse, and cascading systemic risks. 

The remaining global carbon budget consistent with 1.5°C is rapidly shrinking. Every year, continued high emissions consume this budget and locks in higher future costs for adaptation, mitigation, and recovery. 

For organizations, this matters because physical climate risks scale directly with cumulative emissions, and transitional risks increase as politics try to act facing mounting climate challenges.

Accurate carbon accounting and management helps companies understand their contribution to global emissions and align their actions with collective efforts to limit planetary risk. 

Economic Urgency :

Climate change is already affecting the global economy at scale, and the financial impact is staggering and accelerating.

• Climate disasters: Floods, hurricanes, and wildfires now cause over $300 billion in annual economic losses globally. 
• Stranded assets: The transition away from fossil fuels could leave up to $1 trillion in assets worthless by 2050. (Carbon Tracker, 2022)
• Health impacts: Air pollution and heat-related illnesses reduce global labor productivity, with the International Labor Organization projecting losses equivalent to 80 million full-time jobs by 2030. 
• Mass migration: The World Bank estimates up to 216 million people could be displaced by climate impacts by 2050, disrupting labor markets and supply chains.

To curb these impacts, governments are introducing carbon measuring and reporting obligations, emissions caps, emissions trading systems, and carbon taxes on trade. As a result, emissions increasingly need to be reported like finance, and increasingly carry a direct financial cost. 

Without carbon accounting and management, organizations cannot properly report emissions, forecast their costs or manage their exposure. With robust carbon accounting and management, they can report accurately, reduce liabilities and optimize investments.

Corporate Urgency:

Despite growing awareness, corporate action remains insufficient: while a growing share of large companies have set net-zero targets covering Scopes 1, 2, and 3 (41% of the largest 2,000 companies) across their value chains, only about 16% are currently on track to achieve net zero by 2050 (Accenture, Destination Net Zero, 2025).

Note

According to the Science Based Targets initiative (SBTi), net zero requires at least 90% real emissions reductions, with offsets limited to no more than 10% of hard-to-abate emissions. 

For businesses, carbon performance now directly affects the following.

• The bottom line: Increased operational costs from resource scarcity, energy price volatility, physical asset damage, and rising insurance premiums impact net profits
• The top line: Shifting consumer preferences, loss of market access, supply chain disruptions, and difficulty attracting investment impact total revenues
• Long-term viability: Regulatory penalties, stranded assets, reputational damage, loss of competitiveness, and ultimately, business failure.

Measuring emissions - especially Scope 3 - remains a critical challenge. Despite the fact that around 41 % of the world’s largest 2,000 companies have net-zero targets covering Scopes 1–3 (Accenture, 2025), actual Scope 3 disclosure still lags far behind, with only approximately 25–30% of companies reporting Scope 3 emissions globally (EcoVadis/BCG 2025; ISS 2025). This gap between ambition and measurement - often relying on partial data and estimates with 30–40% or more of uncertainty - continues to undermine decision-making, comparability, and credibility of corporate climate claims. 

Robust carbon accounting and management establishes accurate emissions measurement, identifies cost-effective reduction opportunities, and tracks progress over time.  

It enables the following.

• Regulatory compliance and audit readiness 
• Ability to manage and reduce exposure to carbon pricing and transition risk 
• Protection of margins and market access 
• Increased investor trust and transparency 
• Alignment with credible net-zero pathways 

Ultimately, the planetary, economic, and corporate dimensions of the climate crisis converge into pressure from three stakeholder groups: 

• Regulators enforcing accountability through reporting and carbon pricing 
• Investors and insurers demanding carbon performance and climate risk disclosure 
• Business partners seeking to improve their own transparency and minimize their own risk, and customers choosing sustainable solutions to reflect personal preferences

Carbon accounting and management is the critical link that connects climate science to business strategy—and turns urgency into informed, actionable decision-making.

The climate crisis presents immediate, measurable risks to business operations, supply chains, and financial performance. With only a minor share of companies measuring emissions comprehensively and 84% projected to miss net-zero targets, the gap between urgency and action is stark.

Three imperatives define the path forward:

• Measure everything, accurately and transparently. You can not manage what you do not measure. Calculate all emissions, not just the convenient ones – even if Scope 3 is hard. Use the best available data, improve accuracy over time, and clearly label estimates. Be explicit about assumptions, boundaries, and uncertainty. Treat carbon accounting as a living system that improves over time, not a one-off report.
• Reduce as much as you can, systematically and radically. Aim for science-based targets requiring approximately 90% cuts by 2050 latest. Prioritize absolute reductions, not just intensity metrics. Start with operational efficiency, then move to structural changes (energy, materials, suppliers, product design, logistics). 
• Offset or remove what cannot (yet) be reduced. Offsets and removals are the last step and not a shortcut. In line with science-based targets, by 2050, this should not be more than approximately 10% of the hard-to-abate emissions that remain after best reduction effort. For offsetting or removal, prioritize high-integrity credits that are additional, permanent (or long-duration), verified and conservative, and socially and ecologically responsible.

Organizations that establish credible carbon accounting and management capabilities will better navigate regulatory requirements, manage costs, maintain stakeholder trust, and secure financing. Those who delay face compounding physical, transition, and reputational risks.