Carbon reporting requirements for small businesses

When the Government introduced the Streamlined Energy and Carbon Reporting (SECR) policy three years ago this month, their objective was twofold.

In the first instance, their aim was to introduce a framework that would go some way towards reducing the complexity of reporting for those c11,000 businesses already required to comply with mandatory disclosure.

But their vision was also far more wide ranging…

Because the SECR was also designed to encourage more small businesses across the UK to invest the time and resource into understanding the impact of their carbon footprint, and to recognise how the right approach to SECR could potentially unlock additional commercial value and cost savings for their organisation.

For those businesses that fall outside any legal threshold to report on their carbon and energy consumption, the decision to introduce more energy efficient measures within their organisation is a reflection of how, in Bob Dylan’s iconic words, times they are a-changing.

Consumers today are far more conscious of the impact their choices have on the environment, and businesses are responding to that pressure by becoming more proactive in how they apply their environmental policies – as well as more transparent in how they advertise their green credentials.

But when it comes to embarking on their journey, what steps should a small business be looking to take? And how can they demonstrate to savvy consumers that they are indeed ‘walking the walk’? The ideal starting blocks are provided by none other than the SERC framework.

Understanding the principles that underpin SERC, following the basic guidelines and adhering to the criteria that larger, regulated businesses are already required to meet allows smaller businesses to engage with consumers in a more progressive and transparent way, adding value to the customer’s perceived outcome that goes beyond that directly offered by the product or service.

Whilst the devil is always in the detail – all of which is readily available in numerous online resources – broadly speaking the SERC reporting framework is broken down into three key areas of ‘scope’, of which the first two are considered mandatory for the UK’s largest companies.

Scope 1 refers to those emissions which are considered to be directly under the control of the business on a day to day basis, such as the fuel used to drive company vehicles, and the combustion of natural gas to heat buildings and operate machinery.

Scope 2, again mandatory for larger UK businesses, refers to indirect emissions, ie. electricity purchased and used for operations.

Finally, Scope 3 is considered optional and relates to emissions not under the direct control of the business, such as the employee’s mileage for work purposes; the off-site logistical requirements of a company in terms of public transport, hotel accommodation, etc; and the associated emissions of services and products purchased by the business.

By applying the same principles and talking the same language as the bigger boys on the playing field, smaller businesses can create greater commercial leverage and render them ‘good to go’ should Government thresholds change.

Compliance with the reporting requirements can be complex and confusing, but businesses struggling to meet the challenge are not alone. There are specialists that can advise businesses on how to help them avoid falling foul of the regulations. But essentially, businesses first need to identify their reporting obligations and determine the boundaries for each scope of emissions.

They also need to set up an accounting and reporting framework, one that can interrogate data sources, processes and controls to obtain relevant information. And they need to generate their annual carbon emissions report using the Government’s formulas, and disclose this information in line with SERC reporting requirements, such as via the annual company accounts.

Beyond that, a smaller business could choose to ethically offset its carbon emissions to become entirely carbon neutral, a prudent decision which might potentially set them apart from their competitors, appeal to environmentally-conscious consumers, and impact their bottom line for the better.

In an uncertain world, what’s a sure thing is that we’re at a defining moment in the UK’s drive towards Net Zero. Just this month, new regulations have come into effect in the UK – the first of their kind within the G20 countries – which require the largest firms to disclose climate-related financial information, ensuring they consider the risks and opportunities they face as a result of climate change. So, this particular drive isn’t going anywhere…

Little wonder then that many small business owners are choosing to stay one step ahead because, for them, the benefits of investing in their environmental credibility is a no-brainer. In fact, it’s as clear to them as blowing in the wind.