Carbon Management Systems and Carbon Mitigation

TLDR

The article proposes a carbon management system (CMS) and discusses its implications for accounting practice and education. The CMS is built on ten elements across governance, operation, tracking/reporting, and engagement/disclosure, emphasizing cross‑functional integration and proactive group accountability, and is evaluated using Carbon Disclosure Project data from large Australian firms. Firms with higher‑quality CMS achieved better carbon mitigation, with risk assessment, reduction targets, robust programs, and strong disclosures being most effective, and the integrated CMS improves managerial decision making.

Abstract

This article proposes a carbon management system (CMS). The system comprises 10 essential elements from four broad perspectives: carbon governance, carbon operation, emission tracking and reporting, and engagement and disclosure. The proposed new approach focuses on cross‐functional integration, enforcement of proactive strategies and group rather than individual accountability. We then use Carbon Disclosure Project reports to examine empirically the implementation of systems by large Australian firms. Overall, we find that firms with higher quality CMS have achieved better carbon mitigation. Further, adequate assessment of carbon risk and opportunity, the presence of reduction targets, the strength of carbon programs and enhanced external disclosures appear to be the most effective elements in our sample firms. We present evidence that, by combining governance, internal process, carbon dioxide‐footprint tracking and communication activities, a CMS helps managers improve decision making. We discuss the implications of the findings for accounting practice and education.