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Introduction to Carbon Reporting

Understanding carbon emissions and their impact on climate change is becoming increasingly important for businesses and governments worldwide. The Greenhouse Gas (GHG) Protocol is the most commonly used international standard of measuring, categorising and managing emissions. By providing a consistent framework for tracking emissions, the GHG Protocol helps organisations take responsibility for their carbon footprint and to be transparent in their reporting.

This page aims to explore key concepts and terms you will need to confidently navigate the current climate of environmental sustainability reporting.

What are the benefits of Carbon Reporting?

Cost Saving: With identifying areas of excessing energy use, business can make changes that result in cost reductions, especially through increased energy efficiency and switching to renewable energy sources
Improved reputation & Competitiveness: Organisations that report and reduce their emissions are able to enhance their brand reputation, attract environmentally-conscious customers, and gain a competitive edge
Appeal to Investors: Investors increasingly expect companies to disclose their environmental impact and companies that demonstrate a commitment to sustainability are more likely to attract investment
Risk Management & Future Readiness: Reporting carbon emissions allows organisations to identify risks that climate change may impose on their operations, such as regulatory changes, rising energy costs and shifts in consumer behaviour.

Key Terminology

Greenhouse Gas (GHG): Gas that traps heat in the Earth’s atmosphere (Eg, Carbon Dioxide, Methane, Nitrous Oxide)
Carbon Footprint: Total amount of greenhouse gases released by an organisation or individual (Often measured in tCO2e)
Carbon Reporting: Process of measuring and disclosing an organisation’s GHG emissions
Net Zero: reducing GHG emissions to as close to zero as possible, with any remaining emissions balanced through removals and offsets.
Science-Based Targets Initiative (SBTi): An organisation that verifies targets to meet those of the Paris Agreement (specifically to limit global warming to well below 2°C, preferably 1.5°C)

Understanding the Basics of the GHG Protocol

The Greenhouse Gas (GHG) Protocol is the leading international accounting tool for governments, organisations and business to quantify and manage their carbon emissions. The GHG Protocol classifies emissions into three “scopes” to help identify and report all the sources of emissions within an organisation’s operations.

Scope 1: Direct emissions from sources owned or controlled by the company (Eg. On-site fuel combustion, company vehicle emissions)
Scope 2: Indirect emissions associated with a company’s purchased energy (Eg. Purchased electricity, heating and cooling)
Scope 3: All further indirect emissions in the company’s value chain– both upstream and downstream (Eg. Supplier emissions, business travel, employee commuting, waste generated in operations, distribution etc.)
Scope 3 Emissions Categories
1: Purchased Goods & Services
2: Capital Goods
3: Fuel- & Energy-Related Activities
(not included in Scopes 1 or 2)
4: Upstream Transportation & Distribution
5: Waste Generated in Operations
6: Business Travel
7: Employee Commuting
8: Upstream Leased Assets
9: Downstream Transportation & Distribution
10: Processing of Sold Products
11: Use of Sold Products
12: End-of-Life Treatment of Sold Products
13: Downstream Leased Assets
14: Franchises
15: Investments

Determining Organisational Boundaries

To begin with, a company must outline their organisational boundaries to define how to consistently categorise their emissions. The main approaches are threefold:

Operational Control: Practises of which the company controls the operating policies
Financial Control: Practises the company has authority to allocate financial and operating policies.
Equity Share Approach: The company accounts for emissions according to its share of equity in operations.

Introduction to Compliance Reports

In the UK, carbon compliance is crucial for business that either seek public sector contracts or are large enough to meet mandatory reporting criteria. Two key compliance frameworks are PPN 06/21 and SECR and both require businesses to measure, track and report their energy use and carbon emissions. These are designed to help ensure transparency and accountability in the country’s transition to net zero emissions.

Procurement Policy Note (PPN) 06/21

This reporting framework is aimed towards businesses bidding for large UK government contracts (>£5 million per year) demonstrate their commitment to reducing their carbon footprint. These companies must also have a comprehensive Carbon Reduction Plan (CRP) to achieve net zero by at least 2050.

Key Requirements for PPN 06/21 reporting:

Carbon Reduction Plan (CRP): A publicly available outlining the organisation’s current carbon emissions and its strategy to achieve net zero.
Carbon Emissions Reporting: Companies must report their Scope 1, 2 and some Scope 3 emissions.
Annual Reporting: The Carbon Reduction Plan must be updated and published each year to reflect changes in emissions and reduction strategies

Streamlined Energy & Carbon Reporting (SECR)

SECR is a more thorough reporting standard aimed at improving the energy efficiency and reducing the carbon footprint of large corporations. It replaced the Carbon Reduction Commitment (CRC) scheme in 2019 and offers more transparency to commercial energy use and emissions.

Qualifying Criteria

SECR is mandatory reporting framework for large UK companies that meet two of the three following criteria:

Turnover of £36 million or more
Balance sheet total of £18 million or more
250 employees or more

SECR is mandatory reporting framework for large UK companies that meet two of the three following criteria:

Turnover of £36 million or more
Balance sheet total of £18 million or more
250 employees or more

Key Requirements for SECR reporting:

Energy Use Reporting: Companies must report on total energy consumption across the UK. This includes all electricity, gas and transport fuels.
Carbon Emissions Reporting: Organisations are required to disclose their Scope 1 and 2 emissions and are strongly encouraged to report relevant Scope 3 categories.
Energy Efficiency actions: Businesses must outline the measures they have taken during the reporting period to increase energy efficiency.
Intensity Metrics: Companies must include an intensity ratio that expresses emissions relative to business activity (Eg. emissions per unit revenue or per employee)
Public Disclosure: All this information must be included in the company’s annual financial report or director’s report.

Data Quality

Reliable and comprehensive data is the foundation of carbon reporting. High-quality data ensures that a company’s carbon footprint is calculated accurately and allows for meaningful reduction actions to be implemented to meet regulatory requirements. When collecting emissions data, organisations should strive to use the most precise and relevant sources available. This can be achieved by following a data quality hierarchy, which prioritises types of data based on their accuracy:

Supplier Specific Data: Reflects the actual emissions related to the specific activities and operations of the supplier, leading to a more accurate carbon footprint for your own business.
Industry-specific Data: Provides emissions averages based on typical industry activities, giving a more refined estimate than a board government or academic average.
Government Averages: Standardised government data provides default emissions factors based on national or regional statistics.
Academic Research: Offers detailed insights into emissions for specific materials, processes or geographic regions. Although not industry-standard, it can provide a robust alternative for specialised areas of reporting.
Spend-Based Data: Estimates emissions based on the amount of money spent on goods or services, applying general conversion factors.

Reporting Methods & Tools

Accurate and effective carbon reporting relies on robust data collection and management methods. Choosing the right tools and processes can simplify the complexity of tracking emissions across your organisation and ensure the reliability of your reports. Many companies adopt carbon accounting software to automate and simplify the process of collecting, analysing, and reporting emissions data. Advanced software solutions offer various advantages such as:

Automated Data Collection: Software can sync with energy bills, meter readings, fuel logs and other systems to reduce manual data input and the risk of errors
Simplify Data Collection: Software can help streamline the engagement of suppliers and employees to effectively collate tedious carbon data
Handle large data volumes: Track emissions data across multiple sites, vehicles, or departments.
Track Multiple Data Points: Handle the complexity of reporting across all emissions categories, ensuring a compressive carbon footprint assessment
Automate emissions calculations: Automatically apply the correct conversion factors to energy use and other data, ensuring accurate reporting.
Analyse trends: Store historical emissions data to identify trends over time, helping businesses spot areas for improvement or validate the impact of sustainability initiatives.
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