Many parts of your business operations come with a greenhouse gas price tag. In fact, everything from warehouse electricity through to transportation fuel and even activities within your supply chain can contribute to your carbon footprint.
Particularly as the UK works towards its legally binding net zero target, carbon reporting has become an important part of how many businesses measure and communicate their environmental impact. It’s definitely worth paying attention to, as it’s even mandatory for some organisations under the UK’s Streamlined Energy and Carbon Reporting (SECR) framework!
In this light, let’s take a look at what carbon reporting involves, which businesses must adhere to carbon reporting requirements, and what this might look like practically.
What Is Carbon Reporting?
Your business operations produce a certain amount of greenhouse gases, comprising carbon dioxide (CO₂), methane (CH₄), nitrous oxide (N₂O), and other pollutants. For corporate carbon reporting, these are converted into carbon dioxide equivalent (CO₂e), a common unit for measuring and reporting your climate impact.
Let’s take the example of a bunch of bananas.
First, your farmers plant and tend to the banana tree. Once the tree is grown, you send out harvesters, who pick the bananas. Carriers load the bananas into a truck, take them to a factory, and process them. Freight ships transport the bananas to their target location, where they are placed on a shelf, ready for purchase.
At every stage of that journey, another ‘token’ of greenhouse gas emissions is added to the bananas’ overall footprint. Carbon reporting means adding each ‘token’ up and reporting the total transparently.
UK Carbon Reporting Requirements
One of the main UK sustainability reporting frameworks is Streamlined Energy and Carbon Reporting (SECR). SECR applies to quoted companies and to qualifying large unquoted companies and limited liability partnerships that meet at least two of the following criteria:
- 250+ employees
- £36 million+ turnover
- £18 million+ balance sheet total
Organisations within scope must disclose information about their energy use, greenhouse gas emissions, energy efficient actions, and at least one intensity ratio. An intensity ratio provides context to your emissions by comparing them with a relevant business metric. For instance, tonnes of CO₂e per employee, per unit of production, or per £ million of turnover. You would then include this information within annual reporting.
Which Companies Are Exempt from Carbon Reporting?
Not every business has to report under SECR. Companies that do not meet at least two of the size thresholds above tend to be outside the scope of the requirements.
There is also a low-energy exemption for larger companies. If your business meets the size criteria but consumes 40,000 kWh of energy or less during the reporting period, it qualifies as a low-energy user and does not have to provide the full SECR disclosures. However, you should include a statement in your annual report explaining that the exemption applies.
Why Carbon Reporting Matters for UK Businesses
Though it requires extra administration, carbon reporting comes with a host of benefits, both for your business and the planet. When implemented well, your organisation is better able to:
Support net zero goals
Without reliable emissions data, it is difficult to know where the biggest sources of emissions sit or whether reduction efforts are actually working. Regular reporting can help your business identify emissions hotspots, compare previous years’ figures, and measure progress over time.
Reduce energy bills
When you look closely at electricity, gas, heating, fuel, and other energy usage, you may uncover inefficiencies that might otherwise go unnoticed. Outdated lighting could be using too much electricity, or maybe an ageing heating system is costing more than you realised.
Meet customer expectations
Consumers are paying attention to how businesses approach sustainability. Deloitte’s 2024 Sustainable Consumer Report, for example, found that 45% of UK consumers rely on businesses to offer sustainable products or services as standard. Accurate carbon reporting can help you back up your environmental commitments with clear emissions data. It can also give customers greater transparency around your carbon footprint and the reduction efforts you are making.
A Practical Guide to Carbon Emissions Reporting
The sooner your company sets clear and consistent reporting, the more meaningful year-on-year comparisons will be. Sure, accurate energy and carbon reporting might seem complex, but it is perfectly doable when you break it down into stages.
1. Identify your reporting boundary.
Start by deciding which parts of your organisation you want or need to include in your carbon reporting. This could cover offices, warehouses, manufacturing sites, subsidiaries, vehicles, and your supply chains.
Next, identify the greenhouse gas emissions linked to those activities. The GHG Protocol divides corporate greenhouse gas emissions into three scopes, the same sustainability reporting framework that the UK government uses.
- Scope 1: Direct emissions from sources your organisation owns or controls, such as fuel used in company vehicles, gas burnt in boilers, or emissions from manufacturing processes.
- Scope 2: Indirect energy emissions from purchased electricity, heat, steam, and cooling.
- Scope 3: Indirect emissions across your value chain, including purchased goods and services, employee commuting, business travel, waste, transport, and the use of products you sell.
Scope 3 can be more difficult to calculate because these emissions often occur outside your organisation; note that if there is a data gap, you may need to use estimates.
2. Gather your emissions data.
Next, collect the real-world data behind those emissions. In practical terms, that might mean asking your finance or facilities team for 12 months of electricity and gas bills, pulling fuel purchase records for company vehicles, checking business mileage claims, and getting waste reports from your waste contractor.
For Scope 3 emissions, you may need to go outside your own records, but do not worry if every data point is not available straight away. The UK Government allows businesses to use spend-based estimates where they do not have enough information for an activity-based calculation, as long as they explain the method used.
3. Convert activity into CO₂e.
Once you know how much energy, fuel, or other activity your business has used, you can convert it into carbon dioxide equivalent. You can access greenhouse gas conversion factors every year that your business can use for carbon accounting.
A simple calculation might look like this:
Electricity consumption × relevant emissions factor = associated GHG emissions
Given that conversion factors are updated each year, be sure to use a consistent reporting methodology for more accurate year-on-year comparisons. It is also worth checking the latest guidance for any significant changes before calculating your emissions.
4. Use the data to take action.
Last but not least, take action on the data you have produced! Create a carbon report and submit it to Companies House as part of your annual financial reporting process. Then, look at which activities produce the most emissions and where practical improvements could be made.
That might include upgrading equipment, installing a heat pump, switching to LED lighting, changing transport practices, or generating your own electricity onsite.
Reduce Carbon Footprint With Commercial Solar Panels
If purchased electricity is a major contributor to your carbon footprint, commercial solar panels can make a particularly meaningful difference by helping you generate more of your own renewable electricity.
At Perfect Sense Energy, we help UK businesses reduce their energy costs and carbon footprint through commercial renewable energy solutions. We can assess your premises, energy use, and available roof space to design a commercial solar PV system that works around your business.
