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Carbon accounting is the process of measuring the climate-changing emissions that an organisation is responsible for. Efforts to go climate neutral or net-zero requires carbon accounting so that emissions can be monitored and progress tracked.

Business Researcher, Green Growth Platform, University of Brighton

Currently, only large publicly traded companies are obliged to provide energy use and emissions information, alongside their company accounts. There are no immediate plans to extend these requirements to the remaining 99% of enterprises, which accounts for businesses with less than 250 employees. However, there is a good case that these businesses would benefit from producing carbon accounts.

There is pressure on small and medium sized enterprises (SMEs) to undertake carbon accounting from three areas - these are pressure from:

the Government and Local Authorities

larger companies wanting to understand their supply chains

the public who look more favourably on companies who are addressing climate change.

The UK Government has established increasingly tight targets for reducing UK carbon emissions compared to the situation in 1990. The current targets are for a 68% reduction in emissions by 2030 and a 78% reduction by 2035. This is followed by an ambition for the country to have net-zero emissions by 2050. The UK has already achieved a reduction of 47% by 2020. However, these new targets will not be reached simply by decarbonising the UK’s electricity supply or even with the addition of ending the use of fossil fuels for transport and heating.

To achieve these targets SMEs (currently 99.87% of UK enterprises) are responsible for 60.71% of employment and 52.23% of UK turnover and will undoubtedly be asked to make at least parallel reductions in emissions.

This means that there will be policy pressure to ensure that SMEs are measuring and reducing their emissions. One method the Government is adopting is making a clear and credible carbon reduction plan a prerequisite for business with Government. Currently this only applies to tenders of over £5 million but this is likely to change. Many Local Authorities have declared climate emergencies and set even more ambitious local targets than the Government. For instance, Brighton and Hove City Council have set a target of being climate neutral by 2030 and although they have fewer levers to encourage compliance, they will be seeking more ambitious action from local companies than national Government.

Larger companies are examining the emissions contribution their suppliers are placing on them via products and services. This means that they are increasingly asking their suppliers to show the carbon content of their products and show that they have undertaken a review of their emissions. This usually requires a carbon accounting process.

The public is increasingly concerned with extreme weather events as well as reports of rising global temperatures, sea levels and melting ice-caps. This is translating into behaviour changes and changes in the patterns of purchases of products and services. In turn, this means that people are looking more favourably at companies that can demonstrate that they are addressing climate change by measuring and planning to reduce their emissions in line with targets.

These three sets of pressures are likely to converge on demands for carbon accounting and climate action across the board. The basic principles of carbon accounting are relatively simple and most of the information required is likely to already be in a company’s account and expenses systems as well as contained in utility bills.

There is a growing body of people and organisations capable and willing to assist companies, sometimes for free. Keep your eyes open for forthcoming announcements.

The University of Brighton’s Green Growth Platform is the South East Hub of Clean Growth UK. Our mission is to connect climate-conscious businesses with the resources they need to innovate and grow. Find out more at clean-growth.uk/south-