Businesses above a certain threshold must measure and report their carbon footprint to maintain sustainable business operations while ensuring regulatory compliance.
This article details exactly what a company carbon footprint is, with a detailed overview of Scope 1, Scope 2 and Scope 3 emissions. It highlights the vast importance of carbon footprint calculation, and delves into identification, data collection, emission factors, emission calculation, verification, to cover the process of calculation.
Moreover, we cover one of the foremost carbon reporting frameworks in the UK—SECR (Streamlined Energy and Carbon Reporting), discussing its objectives, applicability, reporting requirements, exemptions, and further key insights.
What is a Company’s Carbon Footprint?
A company’s carbon footprint is a total measurement of the greenhouse gas emissions released by all areas of the business. Not a flat figure but an ongoing measurement; emissions are released across all parts of the company, generally requiring robust carbon software for the ongoing capture of this.
The carbon footprint can be calculated by three emission scopes, as defined by the Greenhouse Gas (GHG) Protocol.
Scope 1 includes direct emissions from sources owned or controlled by a company. These emissions, often stemming from fossil fuel combustion, are generally easier to identify, measure, and manage, making them prime targets for reduction or offsetting efforts.
In contrast, Scope 2 emissions encompass the indirect emissions let off by generating a business area’s electricity, steam, heating or cooling. Instead of direct control over the source, this tends to lie in the hands of the providers, who can make smart changes to the greener operators as a way to lower emissions.
Scope 3 encompasses all other indirect emissions that occur in a company’s value chain, both upstream (e.g., raw material extraction) and downstream (e.g., product use and disposal).
Upstream emissions occur before a service or product reaches the company (such as the mining of metals for architecture) and downstream emissions occur after the product or service leaves the company (such as the emissions from a product’s use or disposal by the end consumer).
Accurate business carbon footprint calculations that account for Scope 3 emissions, including factors like business travel and waste disposal, are essential for businesses looking to reduce emissions and lessen their reliance on fossil fuels. By using tools like Data X, companies can track their environmental impact more precisely, and aid in combatting the climate crisis.
The Importance of Calculating the Carbon Footprint of a Company
With carbon being the leading driver of climate change, businesses have a critical responsibility to acknowledge and address their impact. One person can make a positive environmental impact by reducing CO₂ emissions, but the scale at which businesses operate holds immense potential to significantly help preserve the planet’s atmosphere. They contribute to greenhouse gases in the atmosphere, trapping heat and raising the planet’s surface temperature, causing extreme weather events, rising sea levels, droughts, biodiversity loss and ocean acidification.
‘Large’ companies in the UK (with over 250 employees, £36 million in turnover, or £18 million in balance sheet total), must meet carbon accounting standards by law, under the SECR (Streamlined Energy and Carbon Reporting) framework.
Beyond this, carbon accounting crucially prevents green-washing and other misleading claims regarding environmental responsibility. It combines reduction processes with effective reporting tools for corporate transparency, enhancing brand reputation by demonstrating environmental responsibility to customers, investors, and stakeholders. Businesses future-proof their operations against increasingly stringent environmental regulations and keep up with consumers increasingly seeking eco-friendly brands.
Calculating the Carbon Footprint of a Company
Identify Sources of Carbon Emissions
This is the first step of calculating a company’s carbon footprint, which follows the GHG Protocol. Emissions are organised into 3 categories: Scope 1 (direct emissions), Scope 2 (indirect emissions from purchased energy), and Scope 3 (other indirect emissions).
This could involve energy consumption tracking, supply chain assessments, waste management monitoring, and transportation and logistics analysis, amongst a range of ways to capture and identify sources.
Collect Data
After all and any sources have been identified, data collection measures must be put in place. This captures the starting point of the reduction process and puts systems in order to monitor and reduce the overall emission contributions over time. This ensures targets are being met, and problematic areas are being attended to.
This could look like fleet telematics systems, utility bills, employee surveys, IoT sensors or smart metres, waste tracking logs, or a range of other automated and manual data collection tools tailored to each emission source.
Choose Emission Factors
After sources are identified and data is collected, the next step is choosing emission factors. This involves selecting numerical values that convert activity data into quantifiable emissions. Emission factors indicate the average emissions produced per unit of activity, enabling more accurate measurement, streamlined compliance, scope relevance, and consistent reporting.
For instance, with electricity usage in the UK, using the DEFRA emission factor specific to the national grid yields a more accurate calculation than a generic global factor, as it reflects the UK’s unique energy mix.
Calculate Emissions
Calculating emissions follows a simple method of multiplying the activity data by the emission factors.
For example, multiplying a total electricity consumption of 10,000 kWh by the DEFRA emission factor (0.193 kg CO₂e/kWh) would result in a carbon footprint of 1,930 kg CO₂e for the building’s electricity usage.
For more complex calculations, such as a fleet of vehicles with a range of fuel types, a range of more specific carbon footprint formulas exist.
Sum Emissions
After calculations, the next step is to sum the data for a total carbon footprint.
All activities, covering travel, fuel, waste, electricity and so forth, combine to form a comprehensive measurement of the business’s carbon footprint.
From here, the baseline is settled, and all future progress can be compared to this starting point. Targets can be set, and progress can be tracked.
Verify Data
When calculations are totalled, data must be verified for reliability and accuracy.
This could include internal audits and reviews, scouring for errors in calculations, validating data sources and double-checking methodology.
Third-party auditors can monitor reports independently, securing credibility and enhancing the quality of the data.
Calculations should be benchmarked against industry standards.
Carbon accounting software should offer automated validation tools, able to notice and flag anomalies or inconsistencies to further enhance data strength.
Calculate the Carbon Footprint
Finally, the carbon footprint can be determined after data across Scope 1, 2, and 3 has been validated.
This is achieved by converting all emissions into CO₂e (carbon dioxide equivalent) or another common unit to streamline measurements across a variety of contexts business-wide.
After this, totals can be compared against previous years and operate as a benchmark from which realistic targets and reduction goals can be set.
Carbon Footprint Calculators
Carbon footprint calculators are available as web-based, free-to-use tools. They allow people to gain an approximate calculation of the carbon footprint of certain activities, such as electricity use, flights, food consumption, waste management or car travel.
Check out WWF’s carbon footprint calculator here to learn your personal emission contributions.
These tools crucially raise awareness about people’s unseen environmental impact, and urge people to make small life swaps to achieve a significant emissions cutdown.
Using Carbon Accountancy Software
Carbon accounting is where a business hires an in-house consultant, develops in-house systems, or—most commonly—uses specialised carbon accounting software like Gaia’s. It allows them to track, measure and report business-wide greenhouse gas (GHG) emissions.
It leads to a widespread shift in business activities; identifying inefficiencies in the supply chain, enacting social responsibility and encouraging net zero. It’s becoming more widespread with enhancing legislation combined with intensifying emphasis on corporate environmental responsibility.
The software allows businesses to understand their carbon footprint and exactly what is contributing to carbon emissions, crucially recognising the strongest contributors and determining key areas to reduce.
Following the GHG protocol, Scope 1 covers direct emissions, Scope 2 covers indirect emissions from energy, and Scope 3 covers other indirect emissions produced across the value chain. This allows for corporate transparency and demonstrates to clientele, audiences, stakeholders and employees that they are socially responsible for their carbon footprint.
Ready to start? At Gaia, we offer one of the strongest AI-powered carbon accounting software solutions for UK businesses.
It’s aligned with the Greenhouse Gas Protocol framework as the leading industry standard, including the annual UK GHG conversion factors provided by DEFRA and DESNZ. This allows you to calculate your carbon emissions while ensuring best practices.
You can generate compliance reports in one click, such as the SECR (Streamlined Energy and Carbon Report). Furthermore, you can forget the admin burden linked to collecting and reporting with our AI-powered data collection features, which offer the easiest way to measure Scope 1, 2 and 3 emissions.
You can integrate seamlessly with your favourite apps with the data-sync feature, or import from a spreadsheet for a streamlined experience. Track and report your reduction progress, with Gaia’s out-of-the-box compliance reports. Pull comprehensive insights from our advanced analytics dashboard to help you make data-driven decisions that boost sustainability efforts.
To learn more, visit here or contact info@gaiacompany.io.
Streamlined Energy and Carbon Reporting (SECR)
Streamlined Energy and Carbon Reporting is a regulatory framework requiring large UK companies to report on their energy use or greenhouse gas emissions annually.
What is SECR?
For UK companies, Streamlined Energy and Carbon Reporting (SECR) is one of the most widely used carbon reporting frameworks, enabling accurate and regulated capture of business energy use and emission levels. The framework is managed under the Companies (Directors’ Report) and Limited Liability Partnerships Regulations 2018.
It was introduced in 2019 and it must be used by large companies above a threshold of 250 employees, £36 million in turnover, or £18 million in assets. Emission calculations must include intensity ratios, such as emissions per £1M revenue, and full reports are incorporated into annual financial reports.
Objective
Streamlined Energy and Carbon Reporting is the successor to the CRC Energy Efficient Scheme, also known as the Carbon Reduction Commitment. With criticism of being costly, comprehensive, and a burden to businesses, the framework was re-modelled (and re-named) with a streamlined approach.
The objective of SECR, then, is to make something as exhaustive as reporting granular emissions business-wide into something organised, sleek and straightforward. This is to make the process accessible and manageable for all UK businesses, and enable meaningful sustainability commitments on a large scale.
Applicability
Out of all UK companies, those applicable for the SECR framework are quoted companies, large unquoted companies, LLPs, parent companies and group members.
Quoted companies are those listed on the London Stock Exchange or any equivalent major exchanges. This is due to factors such as their public accountability or market influence.
A Large Limited Liability Partnerships (LLP) is a business structure combining corporation and partnership, and they are applicable if they have either two of 250 employees, a £36 million turnover, or a £18 million balance sheet.
Finally, parent companies and group members are applicable for SECR compliance, for their own companies as well as any UK subsidiaries.
Reporting Requirements
SECR outlines a variety of reporting requirements.
Quoted companies must report on global Scope 1 and 2 GHG emissions and underlying global energy use, as well as GHG and energy data from previous years.
They must provide at least one intensity ratio (e.g., emissions per £1M of revenue) and report on energy efficiency actions taken, the methodology used for calculations, and the proportion of total emissions and energy use that relate specifically to the UK.
Large unquoted companies and LLPs are required to report greenhouse gas emissions related to UK-based energy use, specifically covering activities such as transport, gas, and electricity. This can be done by monitoring consumption data from utility bills, transport mileage, or fuel invoices.
They must also report at least one emissions intensity ratio, provide a narrative on energy efficiency measures, and include data on purchased electricity for their own use.
Exemptions
Primary exemptions to the SECR framework include foreign companies and small companies—quoted and unquoted companies and LLPs that do not meet at least 2 of the ‘large company’ criteria.
Companies that consume 40,000 kWh of energy or less per year are also exempt as their energy impact is considered minimal.
Any subsidiaries that are covered within a report of a parent company are exempt, and importantly, not-for-profit organisations and charities are generally exempt because of their lower environmental impact as well as different financial priorities.
Setting Carbon Targets
Businesses in the UK set targets based on compliance, brand image, investor demand, and risk management, amongst a range of other factors.
Another common target is to achieve 100% renewable energy, meaning that 100% of the company’s electricity is sourced from renewables. This can be met by switching to green tariff providers and potentially generating energy on-site, such as wind turbines.
Reducing Carbon Footprint
With a reduced carbon footprint, businesses better comply with regulations such as Net Zero targets and SECR. This is more enticing to consumers, especially those younger, who are increasingly seeking to support brands with transparent sustainable practices. Conscious carbon accounting can make it more likely to secure long-term customer loyalty.
Companies reduce carbon footprints, and finally achieve carbon neutrality, after various reduction strategies. When this happens they are granted immense branding opportunities. PAS 2060 or Carbon Trust Standard are primary examples—allowing the brand to add their logos, highlight this in sustainability reports, or showcase the certifications within client pitches.
They are widely recognised by the public as granted to companies who have made immense climate efforts, such as through extensive, thoughtful carbon accounting.
Net Zero
Net Zero is the government’s legally binding target to meet net zero GHG emissions by the year 2050. That gives them 25 years to strike a balance between the amount of emissions produced by the whole of the UK and the amount of emissions removed from the atmosphere.
This target aligns with the Paris Agreement goal of lowering global warming to 1.5 C, if not well below 2 C (the planet’s surface temperature is about 1.2°C warmer than it was in the late 1800s, with the last 10 years continuously marking the warmest recorded temperature).
Enhancing carbon accounting regulations drives companies to be transparent, accountable, and proactive in reducing their impact, supporting the UK’s commitment to reaching net zero and contributing meaningfully to global climate targets.
More information
https://www.sseenergysolutions.co.uk/small-business-sustainability/carbon-footprint-calculator
https://www.epa.ie/take-action/in-the-home/climate-change/carbon-footprint-calculators
https://www.sseenergysolutions.co.uk/small-business-sustainability/carbon-footprint-calculator