Carbon ReportingOur Carbon Reporting Tools and Reporting Capability
Mandatory Carbon Reporting
Mandatory Carbon Reporting or Mandatory Greenhouse Gas Emission Reporting (GHG) is a legal requirement in over 40 countries including the UK along with many EU member states.
Whether or not all companies should be required to report on their carbon emissions is debatable.
As currently it is only a mandatory and legal obligation for a relatively small selection of organisations to report carbon emissions through the current Streamlined Energy and Carbon Reporting regulations.
However reporting on carbon emissions is definitely a sound business decision that adds value to a company and focuses the attention on improving ones environmental credentials.
Voluntary Carbon Reporting
In contrast, voluntary carbon reporting involves organisations choosing to report their carbon emissions and environmental performance without being legally obligated to do so. These initiatives are driven by various factors, including corporate social responsibility, sustainability goals, market demands, and reputational considerations. Voluntary reporting allows companies to demonstrate their commitment to environmental stewardship.
Both mandatory and voluntary carbon footprint reporting play important roles in addressing climate change and fostering sustainable business practices. Mandatory reporting sets a baseline level of accountability and ensures a certain level of consistency and transparency across industries, while voluntary reporting allows organisations to go beyond regulatory requirements and showcase leadership in environmental sustainability.
Carbon Reporting Process
When we talk about Greenhouse Gas Reporting, GHG Reporting, CO2e Emissions Reporting or Mandatory Carbon Reporting we are actually talking all about the same thing. Yes its confusing that different terminolgy is used to mean the same things, but we are essentially talking about tracking the output of carbon emissions from either the energy we consume or the energy we use.
With the recent introduction of The UK government’s Streamlined Energy and Carbon Reporting (SECR) this has extended the scope of Mandatory Carbon Reporting to many more companies.
With all large unquoted UK companies and large LLPs required to report their greenhouse gas emissions under SECR. The definition of large is the same as it is under the companies Act 2006 which is two or more of the following criteria. Companies with more than 250 employees, combined with an annual turnover greater than £36m or an annual balance sheet total greater than £18m.
New legislation mandates that all large companies and large LLP’s are required to report certain energy usage and carbon emissions under the Streamlined Energy and Carbon Reporting requirements. Companies captured under this scheme need to report their full Scope 1 and Scope 2 emissions.
> Scope 1 Emissions: These are the direct GHG emissions that come from sources owned or controlled on site such as gas consumed on site or transport.
> Scope 2 Emissions: These are the indirect GHG emissions from the consumption of purchased electricity, steam heating or cooling.
For electricity or gas, the emissions can be calculated from using the kWh actually used and billed for by your energy supplier or by collecting onsite consumption data from the meters.
This is usually a laborious task to obtain all the bills and record all of the consumption details, in hope that the supplier has got it right. This is compounded when no data is available or the supplier has credited any charges along the way or if the bill dates overlap the reporting requirements.
For transport, the litres or kilograms of fuel used are required. The UK Government provides factors to calculate the GHG emissions from the energy used.
As award-winning business energy consultants our online energy spend management platform – EaaSi™ allows us to enhance the way your data is collected and analysed. We seamlessly integrate multiple data sources into one platform and provide easy access to large volumes of energy and environmental data through our energy spend management platform.
This enables us to automate reliable carbon emission performance reporting and emissions assessment, whilst giving you detailed information about your energy use and inefficiencies. This captures scope 1 and 2 emissions and supported by our technology partners we capture scope 3 emissions when needed.
How We Calculate Your Carbon Footprint
Calculate Your Business Carbon Footprint – “Complexity means distracted effort. Simplicity means focused effort”.
The late Edward de Bono – author of this quotation – has long been regarded as a leading authority in the field of creative thinking. An expert within business circles, his instruction was sought by some of the world’s leading companies including IBM, Prudential, Bosch and Siemens.
De Bono’s quotation resonates with no less significance in the energy sector for those companies facing the challenges of managing their energy procurement, efficiency, sustainability and compliance whilst remaining focused on their commercial priorities.
When it comes to compliance, the introduction of the Streamlined Energy and Carbon Reporting (SECR) framework by the UK Government was designed to help businesses by reducing some of the complexity around carbon emissions reporting; the thinking behind this being that those businesses that possess a greater insight into their energy consumption are better placed not only to report on it more accurately, but also – and more importantly – to reduce it.
At the time of its inception in April 2019, it’s estimated that approximately 11,900 of the largest companies in the UK were already required to comply with mandatory disclosure of their carbon and energy consumption, and this figure has continued to grow.
These regulated companies are defined within the SERC reporting guidelines as those that meet two or more of the qualifying criteria: annual turnover (gross income) exceeding £36 million; balance sheet assets greater than £18 million; and having 250 employees or more.
These regulated companies are defined within the SERC reporting guidelines as those that meet two or more of the qualifying criteria:
> annual turnover (gross income) exceeding £36 million;
> balance sheet assets greater than £18 million;
> and having 250 employees or more.
In addition, by introducing this modified ‘user friendly’ reporting framework, it was hoped that more of the UK’s smaller businesses – those falling outside of the legal threshold that requires a company to report on its emissions – would be encouraged to embrace the opportunity of distinguishing themselves from their competitors by voluntarily using the SERC reporting framework as a means of demonstrating their environmental credentials in order to appeal to increasingly “green-savvy” consumers.
Getting the ‘planet friendly’ rubber stamp might be sufficient in itself for a company that recognises the commercial advantages of getting one step ahead of its competition and start carbon reporting.
But what other tangible benefits might be conferred on a company that has invested the time and effort – voluntarily or otherwise – in reporting on its environmental performance? Certainly, according to one DEFRA sponsored study, there was strong evidence that using environmental management systems (EMS) generally delivered cost savings and new business sales for the majority of the study’s SMEs.
But proponents of the principles underpinning SERC could also refer to the benefits that might not be as apparent at first sight.
Such as how a company that understands its carbon footprint will endow its people with greater awareness of the risks of climate change.
Or how it might help a company demonstrate ‘best practice’ within its sector, showing leadership among its peers. Supporters might point to how environmental KPIs recommended in the SERC guidelines help to capture the link between environmental and financial performance; or to the confidence that investors, shareholders and other stakeholders can take from detailed environmental disclosures in annual reports and accounts.
Or they could refer to the wider benefits to the environment around commercial accountability – by putting the onus on suppliers to deliver on their environmental obligations or risk losing out to competitors who do meet these expectations and calculate business carbon footprint already.
Carbon Reporting The Right Way
Meanwhile, displaying a robust commitment to protecting the environment may give some companies a measure of confidence in the face of increasingly radicalised environmental protests, potentially mitigating the damaging impact to both a company’s corporate reputation and its bottom line.
Having covered who the regulations applied to, and the potential benefits conferred to those companies that report on their carbon consumption, the SERC framework goes on to streamline its guidance on how companies should organise their energy and carbon data, and advising on an approach which identified and categorised emissions-releasing activities into three groups, known as scopes.
These are described on the government’s website as:
> Scope 1 (Direct emissions): Emissions from activities owned or controlled by your organisation that release emissions into the atmosphere. They are direct emissions. Examples of scope 1 emissions include emissions from combustion in owned or controlled boilers, furnaces, vehicles; emissions from chemical production in owned or controlled process equipment.
> Scope 2 (Energy indirect): Emissions released into the atmosphere associated with your consumption of purchased electricity, heat, steam and cooling. These are indirect emissions that are a consequence of your organisation’s activities but which occur at sources you do not own or control.
> Scope 3 (Other indirect): Emissions that are a consequence of your actions, which occur at sources which you do not own or control and which are not classed as scope 2 emissions. Examples of scope 3 emissions are business travel by means not owned or controlled by your organisation, waste disposal which is not owned or controlled, or purchased materials or fuels.
Whereas it is mandatory to calculate business carbon footprint for a company to report on Scope 1 and Scope 2 emissions, companies aren’t legally required to report on those emissions covered by Scope 3.
Accounting for Scope 3 emissions is challenging because the data lies with other organisations in the “Value Chain”, and so inevitably there’s a greater degree of estimation when considering the environmental impacts of what’s sometimes referred to as “upstream and downstream” activities.
But understanding Scope 3 is perhaps one of the more effective ways for a company to demonstrate it has a realistic appreciation of its emissions and potential exposure to climate change risks. The SERC provides advice on how a company can identify where it sits in the Value Chain and a likely estimate of relatable emissions.
The SERC guideline also advises on the steps a company should take in reporting its environmental impacts and which KPIs to consider, simplified into 5 key steps together with 7 supporting actions.
According to the government’s website, company owners are advised to work through these following steps:
> Step 1 Determine the boundaries of your organisation, recognising that some have a simple organisational structure in terms of ownership and operations, whilst others have far more complex structures which calls for a different approach.
> Step 2 Determine the period for which you should collect data, ideally covering the same 12 month period corresponding to the company’s financial year for ease in capturing the parallels between financial and environmental performance.
> Step 3 Determine the key environmental impacts for your organisation. These are likely to fall into one or more of six categories: Greenhouse gases, Water, Waste, Materials and resource efficiency, Biodiversity and ecosystem services and Emissions to air, land and water. They may not all be relevant to your organisation, but the SERC requires you to identify which are and explain why they are relevant and how they are defined.
Step 4 Measure
Whereas the SERC accepts that data can be collected and managed any number of ways – for example, by direct entry by operational staff onto secure databases, or on standard spreadsheet templates completed and emailed to a central point for processing – the SERC guidelines recommend companies are consistent and use a single standardised carbon reduction plan format to ensure consistency across their various business units and operations.
The guidelines also advocate for the use of best quality data from the most important sources, and ideally drawing on primary data rather than secondary data such as industry average figures – although this too can be acceptable where full disclosure is given and a systematic process is applied.
Specific advice is available on the Government’s website.
Alternatively, a company might employ an accredited Environmental Management System (EMS) which can help all types and sizes of organisations to meet their environmental and sustainability targets.
Three types of formal environmental management systems are recognised in the UK:
> ISO 14001
> EMAS (EU Eco-Management and Audit Scheme)
> BS 8555.
> Other systems include the Green Dragon Environmental Standard, Steps to EMS (STEM), IEMA’s Acorn Scheme and Eco Campus.
EMS objectives and targets can be used to show a company’s progress against stated plans and goals, including quantitative targets based on outcomes (eg. reduction of emissions); qualitative objectives in terms of inputs (eg. completion of management system initiatives by a planned date); annual progress measured against a commitment to continuous improvement; or case studies providing evidence of programmes planned across a specified period.
Step 5 Report
The SERC guidelines recommend that a company develops and reports at least 3 KPIs associated with its key environmental impacts, and stresses the importance of transparency in producing a credible and balanced report.
The report is expected to deliver against 4 objectives:
It needs to summarise how data has been collected with specific regard given to explaining why it was chosen and the methodology used to collect it.
It’s suggested that the report should calculate a business carbon footprint and then provide progress against targets, including a narrative on whether improvements or set-backs have occurred and how these are being tackled.
And also the report should feature a parallel of the company’s environmental performance to its financial performance, and include examples of environmental expenditures, such as more efficient production processes, or the reclamation of land to a more natural state.
The report must also describe how the company is managing its impacts i.e. EMAS, ISO 14001 and who has responsibility for delivering on this within the business.
It should further identify the risks and opportunities that arise from the company’s impact on the environment and vice versa, ie. the environment’s impact on the company through, for example, climate change. As part of this, a company is required to disclose if it’s been subject to any environmental fines.
And finally, the report should outline the internal processes that the company has put in place to manage and report risk, explaining how the strategy is used in corporate decision making.
The SERC framework also suggests the 7 actions that company owners or boards should consider following in order to help develop the company’s overarching environmental strategy.
Most of these fall under ‘common sense’ and include for instance establishing a base year to maintain meaningful and consistent data; setting a target such as improving cost and resource efficiency – effectively, any goal that will drive strategic change within the company; and engaging with suppliers – that is, the upstream supply chain – to get a valuable insight into their environmental impacts and to make better procurement decisions.
The complete list of action points is as follows:
> Action i Intensity ratios
> Action ii Setting a base year
> Action iii Setting a target
> Action iv Verification & assurance
> Action v Your upstream supply chain
> Action vi Downstream impacts
> Action vii Business continuity and environmental risks
Working through these steps enables a company to present a summary of its environmental findings in relation to its activities and what it implemented in order to improve its performance. Again, further details can be found on the Government’s website.
Compliance with the reporting requirements can be complex and confusing, but companies struggling to meet the challenges are not alone.
There are specialists like Catalyst that can advise businesses and calculate your carbon footprint and how to help them avoid falling foul of the regulations. Experts in the field of digital energy compliance that can demystify the processes, shed light on the terminology and answer the questions that some company administrators may even struggle initially to put into words.
Speaking of which… De Bono’s words perfectly articulate the benefits to a company of commissioning a digital energy expert to simplify the complex – so allowing it to stay focused on its own commercial horizons.
And if it’s really that simple, what are you waiting for?
Digital Carbon Reporting
> Our unique approach to carbon reporting is to fully automate the collection every invoice using our energy spend management software.
> These are stored in your digital filing cabinet, validated against actual data and converted to GHG emission reporting.
> Scope 1 and Scope 2 GHG emission are captured and on demand reporting keeps track of the reporting.
> Automate your carbon reporting requirements and target opportunity’s to reduce both you carbon and energy spend.
> Scope 3 emissions can also be included into our reporting process for those that require this level of detail.
> In addition to capturing electricity and gas, we can also capture and store commercial water billing.
Carbon ReportingGreen House Gas Emission Reporting
In summary, carbon reporting offers numerous advantages for businesses of all sizes be that mandatory or voluntary reporting. Firstly, it promotes increased awareness about an organisation’s carbon footprint, fostering a deeper understanding of its environmental impact. Through this awareness, companies can identify areas where carbon emissions are highest, enabling them to prioritise efforts for emissions reduction, leading to cost savings and operational efficiencies.
Additionally, understanding and reporting carbon emissions helps organisations manage risks associated with climate change, such as regulatory changes, carbon pricing, and shifts in consumer preferences.
“It makes strong commercial sense for an organisation to capture and report carbon emissions even if not legally required to do so”
What are the 3 types of scope emissions?
Scope 1 is direct emissions from owned or controlled sources. Scope 2 is indirect emissions from the generation of purchased electricity, steam, heating and cooling. Scope 3 includes all other indirect emissions that occur.
What does SECR stand for?
SECR stands for Streamlined Energy and Carbon Reporting and it is a policy that mandates that qualifying companies capture and report carbon emissions annually.
Is carbon reporting mandatory in the uk
Carbon reporting in the UK is only mandatory for certain organisations. The UK has implemented various regulations and reporting requirements aimed at reducing carbon emissions and promoting sustainability.
How to report carbon emissions
To report carbon emissions, organisations typically gather data on energy use and greenhouse gas emissions, calculate their carbon footprint using established methodologies, and submit the resulting report to relevant authorities or stakeholders in accordance with applicable regulations such as the Streamlined Energy and Carbon Reporting (SECR) framework in the UK.
What is a carbon footprint report?
A carbon footprint report is a document that quantifies the total greenhouse gas emissions produced directly or indirectly by a business over a specified period, typically measured in metric tons of carbon dioxide equivalents (CO2e).
What should be included in a carbon footprint?
A carbon footprint should include direct emissions (Scope 1), indirect emissions from energy use (Scope 2), and emissions from supply chain activities (Scope 3), along with clear documentation of data sources and calculation methodologies. Contextual information and analysis of trends may also be provided to offer insights for emission reduction strategies and informed decision-making.