General
How inflation and exchange rates impact carbon accounting — and how to fix it
Misha Cajic
March 6, 2025
/
7
min read
Carbon accounting is already complex, but when you factor in inflation and currency conversions, it becomes even trickier. These variables can significantly impact the accuracy of spend-based emissions calculations, potentially leading to misleading carbon footprints if not handled correctly. Inflation skews emissions estimates when outdated cost data is used without adjustment, while fluctuating exchange rates can cause inconsistencies in multinational reporting. Without transparency in how these values are applied, companies risk errors in reporting, compliance issues, and difficulty tracking progress toward emissions reduction targets.
Fortunately, technology can solve many of these challenges. Avarni’s latest features provide automated inflation adjustments and transparent currency conversions, ensuring greater accuracy and auditability in carbon accounting. Let’s explore why these issues matter and how Avarni helps tackle them.
Inflation affects nearly every financial metric in business, and carbon accounting is no exception. Spend-based emissions factors, which estimate carbon footprints based on monetary value, must account for inflation to remain accurate over time. If a company reports emissions using outdated cost data without adjusting for inflation, it may underreport or overreport its true carbon footprint.
For example, if a business purchased materials in 2020 but uses 2024 emission factors, the difference in price due to inflation must be factored in. If inflation was high over those years, failing to adjust could lead to a significant overestimation of emissions. On the flip side, applying the wrong inflation rate could underestimate emissions figures unnecessarily, skewing sustainability reports. Given that different countries experience different inflation rates, global companies face an added layer of complexity when trying to standardize their calculations.
Avarni’s solution? Automatic inflation rate application. When the year of an activity doesn’t match the emissions factor year, Avarni will now apply the correct inflation rate based on the country assigned to the activity. This ensures consistency and accuracy while reducing manual effort and the risk of human error.
For businesses operating across multiple countries, currency conversion is another major challenge. Spend-based emissions calculations rely on financial data, but exchange rates fluctuate constantly. If companies use inconsistent or outdated conversion rates, their emissions estimates could become unreliable.
Consider a company tracking emissions for supplier purchases made in different currencies. If it applies a single exchange rate across the board or uses an outdated rate, emissions figures may not reflect the true financial value of those transactions. This can lead to discrepancies when consolidating data across regions, making it difficult to compare emissions year over year or align with regulatory requirements.
Avarni simplifies this process by offering transparent currency conversions with three authoritative sources: the US Federal Reserve, the Reserve Bank of Australia, and the International Monetary Fund. Users can select the most appropriate source for their organization, ensuring consistency in their reporting. Additionally, the exchange rates used for calculations are fully visible within the emissions hub and exported data, providing a clear audit trail.
One of the biggest challenges in carbon accounting is ensuring that calculations are traceable and defensible. Companies must be able to explain how they arrived at their emissions figures, especially as regulations tighten and stakeholders demand greater accountability.
Without clear documentation of how inflation and currency conversions were applied, companies may struggle to justify their emissions reports. This lack of transparency can lead to compliance risks, financial penalties, or reputational damage. It can also make it difficult to track emissions reduction efforts accurately, as inconsistencies in historical data can obscure progress over time.
Avarni’s platform addresses this by making all inflation rates, currency conversion rates, and their sources visible throughout the emissions reporting process. Whether users are reviewing data within the emissions hub or exporting reports to Excel, they can see exactly where these values came from and how they were applied. This level of transparency not only improves auditability but also increases confidence in the accuracy of emissions data.
By automating inflation rate application and providing transparent currency conversions, Avarni eliminates two major sources of uncertainty in carbon accounting. Businesses no longer need to manually track inflation adjustments or worry about inconsistent exchange rates, reducing the risk of errors and saving valuable time.
With these features, Avarni ensures that spend-based emissions calculations are:
As carbon reporting requirements become more stringent, organizations must prioritize accuracy and transparency. With Avarni’s automated tools, companies can navigate the complexities of inflation and currency conversions with confidence, ensuring their emissions data is both reliable and defensible.
