At Leyton UK, we’re passionate about creating a greener future.
Using entrepreneurism and innovation to create a better world is part of our DNA, which is why we invest in social and environmental initiatives that help to drive sustainable progress. It’s also why we’re committed to reducing our carbon footprint.
We do this by harnessing the benefits of carbon emission reporting, tracking our energy consumption and emissions to help inform ESG decisions that will reduce our impact on the environment.
The reality is that carbon regulations are going to become more intense as we move towards the net zero target of 2050. Instead of seeing this as a burden, it’s best to view the changes as an opportunity. If your business is required to collect data for a regulatory report, why not utilise that data? The information will give you a clear understanding of your emissions, and then most importantly, it will allow you to think about how to reduce those emissions.
While many businesses worry about the complexity and expense of the process, everyone can benefit from learning how to create and leverage a carbon emission report. It’s often the first step towards making operations more efficient and sustainable. Not only will this reduce waste and increase cost savings, it can also have a welcome impact on your brand’s reputation.
In this article, we explain what carbon emission reporting is, why it matters, where to begin with creating a report, and how it can benefit your business’ bottom line.
What is a carbon emission report?
A carbon emission report is a structured document that details a company’s total emissions broken down into scopes 1, 2 and 3. Essentially, scope 1 covers direct emissions, scope 2 covers purchased electricity, and scope 3 covers everything else, like your supply chain, staff transportation, etc.
While it’s a data-driven document, it also looks forward, acting as a tool to help you reduce your carbon footprint. As such, they can include benchmarks, year-on-year comparisons and emission targets. The reports can also highlight your current or planned energy efficiency initiatives.
Why is carbon emission reporting important for businesses today?
Carbon emission reporting helps you diagnose the biggest energy consumers within your operations. So, whether it’s your manufacturing line, heating systems or company vehicles, a report would highlight where energy (and therefore money) is being wasted.
Carbon emission reporting should therefore be seen as a step to optimising these processes. That might mean switching to more efficient machinery or better energy management systems, cutting emissions as well as costs.
There are also wider ESG benefits to consider. For example, investors care a lot about sustainability. In fact, businesses are now expected to have a carbon reduction strategy. Fund managers simply won’t invest in businesses that don’t have a plan to reduce their carbon emissions.
Younger generations increasingly want to work for companies whose values align with their own, and sustainability is a big one. If you’re looking at staff recruitment and retention, you need to showcase your environmental and social responsibility efforts.
Consumers are watching too. Many people are worried about climate change and are therefore much more likely to prefer brands that share those concerns and act upon them.
What are scope 1, 2 and 3 emissions?
The Greenhouse Gas Protocol (GHG Protocol)’s Corporate Standard breaks down emission classifications into scope 1, 2 and 3. It’s the foundation for most reporting we see in every country.
Scope 1 includes your direct emissions (i.e., emissions coming from your premises or from assets you’re in charge of). Examples include fuel burned in your boilers, furnaces, etc.
Scope 2 includes the indirect emissions from the energy you buy and consume, like electricity or gas.
Scope 3 covers everything else, such as supply chain, business travel, employee commutes, waste disposal, and even using your own products.
While scope 1 and 2 are easy to pinpoint, businesses often find measuring scope 3 harder, as it requires gathering extensive data from several, often disparate, sources.
What are the biggest challenges businesses face with carbon emission reporting?
We tend to see three main challenges that businesses experience.
Firstly, resource constraints. For many businesses, especially SMEs, carbon reporting requires time, tools and resources that they don’t have available. As such, gathering data can feel like a burdensome task.
Secondly, there’s an expertise gap. Carbon reporting isn’t straightforward. It involves understanding emission categories (scope 1, 2 and 3), applying the proper methodologies and staying updated with evolving frameworks and regulations. Businesses often don’t have the in-house expertise to manage the reporting process.
Thirdly, carbon reporting is an evolving business practice. It’s only recently that sustainability has become a top priority for a lot of companies, who are now facing increasing pressure from regulators, investors and consumers. Businesses are trying to catch up, but as standards evolve, knowing where to start or what’s good enough can be hard.
What carbon emission reporting regulations does my business need to follow?
The UK has a solid framework to drive greenhouse gas reduction, supporting the country’s Net Zero Target for 2050.
The Streamlined Energy and Carbon Reporting (SECR) requires large
businesses to report on their energy use and their green emissions (scope 1 and scope 2), along with actions to improve their energy usage and efficiency.
There are also a range of measures that push businesses to be moretransparent and proactive in reducing their carbon footprints.
For larger companies, climate-related financial disclosures are becoming more mandatory, covering risks, opportunities and greenhouse gas emissions across all 3 scopes. The UK Emissions Trading Scheme (UK ETS) requires energy intensive industries to track and reduce their direct emissions using a cap and trade system where exceeding those limits means paying for extra allowances. Pre-BREXIT this was called the European Union Emissions Trading Scheme (EU ETS).
Even for smaller businesses, incentives like the Climate Change Levy (CCL) and funding from the Industrial Energy Transformation Fund (IETF) makecutting emissions much moreaffordable.
How can my business start to reduce its carbon footprint?
It’s one of the most common questions that we get asked: where do we start? Obviously, the first thing that needs to be done is data collection, but in terms of turning that data into action points, we recommend beginning with a review of energy efficiency. Poor energy efficiency is one of the easiest problems to diagnose. Once an issue is discovered, making targeted improvements becomes more straightforward.
There are many ways to tackle poor energy efficiency. One of the most common methods is to upgrade machinery used within the business (e.g., installing eco-friendly boilers and furnaces, and more energy-efficient manufacturing equipment).
Businesses can also choose green energy suppliers, or they can go further by adopting renewable energy, like solar panels. Even something as simple as switching to LED lighting can make a difference.
Source 3 emissions can be reduced by looking at areas such as transportation, where shifting to electric vehicles or streamlining supply chains can help to reduce emissions. It’s also often worth starting a conversation with suppliers to discuss optimising logistics processes and look at more sustainable sourcing options.
You can also make a big difference to your employees’ and visitors’ carbon footprint by installing EV charging points in car parks. In fact, a good way to demonstrate your commitment to sustainability to your employees can be to offer green employee benefits like hybrid working, cycle to work and electric vehicle salary sacrifice schemes.
How Leyton can help
If you’d like to learn more about carbon emission reporting or are looking for advice on where to start with your decarbonisation strategy, we’re here to help.
Our friendly energy experts will help you to understand your energy spend and carbon emissions and guide you towards creating a strategy for making your businesses more efficient, sustainable, and profitable.
Get in touch to find out more.
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