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What is carbon reporting and is it mandatory?
In the ever-growing landscape of environmental awareness, the concept of carbon reporting has become a crucial element in understanding and mitigating the impact of human activities on the planet.
In the UK, environmental sustainability has become a national focus. Government policies and corporate responsibility requirements have put a spotlight on organisations to report their environmental contributions and improvements.
As a result, organisations are asking themselves; ‘Is carbon reporting mandatory?’
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Carbon reporting is now a well know term for measuring and understanding our impact on the planet.
At its core, carbon reporting is the systematic process of quantifying and disclosing the amount of greenhouse gas emissions generated by an entity, be it an individual, business or even a nation. In this article, we will consider carbon reporting from a business perspective.
Carbon reporting primarily involves thorough data collection and analysis of emissions sources. Categorised into direct (scope 1), indirect (scope 2) and other indirect (scope 3) emissions. The identification of all scopes and sources of emissions provides a detailed overview of a business’ carbon landscape. Once identified, the data can be translated into standardised metrics through conversion factors and then reported for voluntary or compliance reasons.
The primary goal of carbon reporting is to assess and communicate the impact of a business’ activities on the environment. Carbon reporting is a crucial tool for organisations to understand, manage and reduce their carbon footprint with measurable targets and tools. Aside from this, the key purposes of carbon reporting include:
Carbon reporting is not mandatory for all businesses in the United Kingdom but an ever-growing section of businesses in the UK are being required to report their carbon emissions.
For example, companies quoted on the London Stock Exchange, or large unquoted companies and LLPs who have an annual turnover of £36M+, balance sheet totalling £18M+ or employing 250+ employees, are required to report their carbon emissions through the Streamlined Energy and Carbon Reporting (SECR) framework. The primary goal of the SECR is to improve transparency and encourage businesses to disclose their energy use and carbon emissions.
Large organisations with more than 250 employees, an annual turnover of over £50 million or those holding an annual balance sheet total exceeding £43 million are also required to report their carbon emissions to the Energy Savings Opportunity Scheme (ESOS). The ESOS is a separate framework to the SECR which also operates in the UK and aims to promote greater energy efficiency and identify energy-saving opportunities.
While ESOS and SECR seem similar on paper, there are some differences. ESOS mainly focuses on energy efficiency assessments, while SECR is broader and encompasses energy use, GHG emissions reporting and is applicable to a wider range of organisations. Often though, larger businesses fall under both ESOS and SECR requirements.
Aside from mandatory carbon reporting schemes, businesses are not required by law to report their carbon emissions. However, it can often be a widely beneficial practice.
If you would like to find out how ISO 14001 can help your business in 10 steps read our implementation article.
Voluntary carbon reporting offers several benefits for businesses that go beyond regulatory benefits. Voluntary reporting shows a commitment to transparency, efficiency, and alignment with global goals for a sustainable future. Some of the key benefits include:
By voluntarily reporting carbon emissions, organisations’ can enhance their transparency, boost employee morale, gain a competitive advantage and identify improvements and cost savings to be made. Businesses that choose to voluntarily report their carbon emissions can also take part in frameworks such as ESOS and SECR which can help their reporting, like the Task force on Climate-related Financial Disclosures (TCFD).
The TCFD provides a framework for companies to disclose information about their climate-related financial risks and opportunities voluntarily. The TCFD can help businesses by offering guidelines and recommendations for voluntary disclosure in four key areas: governance, strategy, risk management, metrics and targets. Voluntary disclosure can help investors understand how climate related considerations impact and often assist company performance, leading to greater awareness and improvements in these areas.
The TCFD does also require, large UK-registered companies, asset managers, and financial institutes to report on their climate-related risks and opportunities.
Calculating carbon emissions, whether voluntarily or as part of a mandatory obligation, involves several steps to accurately assess the environmental impact of business operations.
Regardless of the nature of the reporting, calculating the emissions always starts in the same place; identifying all the sources of GHG emissions in a business. This can include energy consumption, transportation, waste management, and more.
Following the identification of emission sources, a business should determine if each emission source is direct (scope 1), indirect (scope 2) or otherwise indirect (scope 3). This sets up the business to accurately collect and categorise relevant data from each source and use conversion factors to convert the activities into standardised CO2 equivalent emissions.
After gathering data and converting the data into standardised units, a business can consider offsets and removals, and set measurable reduction targets. These findings, targets and other intricacies can then be communicated voluntarily as part of a business growth opportunity, compliance requirement or purely for transparency.
Carbon reporting stands as a crucial tool in the landscape of environmental sustainability, both as a mandatory reporting tool and as a voluntary effort. While not currently mandatory for all businesses, the requirements under schemes like SECR and ESOS highlight the need for transparency and accountability when it comes to the environment. Accentuating the benefits of voluntary reporting in terms of transparency, stakeholder engagement and employee morale. Carbon reporting is not just about compliance, it’s an opportunity to make a positive impact on our planet whilst driving innovation in the global market.
Elisabeth is an Associate Consultant and Associate Tutor of the British Standards Institute (BSI), a BSI qualified Lead Auditor and member of the Standard Committee responsible for the publication of the BS 10008 Standard.
Elisabeth can help you decide if ISO 14001 is for you and support you through its implementation, all the way to certification.