Explained: Carbon reporting for small businesses

Small and medium-sized businesses make up the majority of the UK economy and contribute around 18% of the country’s greenhouse gas emissions. So they play a vital role in the transition to Net Zero. While regulations have historically focused on large organisations, a growing number of corporates, financial institutions and government bodies are looking to their suppliers to disclose emissions data and climate targets. For SMEs, this shift presents both a challenge and a commercial opportunity. Those that can demonstrate transparency and action on climate are more likely to win contracts, secure funding, and build stronger customer and stakeholder trust. Below we explore the main regulations affecting SMEs.

Mandatory carbon reporting requirements UK

At present, most UK regulations apply only to large businesses, however, they create ripple effects throughout supply chains that SMEs can’t ignore.

Streamlined Energy and Carbon Reporting (SECR)

The UK’s SECR policy requires large organisations to report on their energy use and carbon emissions. It impacts public companies and LLPs/private companies that meet two of the following criteria: 250 or more employees, turnover in excess of £36 million, or balance sheet in excess of £18 million. ‍

Does this regulation affect SMEs?

SECR encourages companies to manage and report on carbon emissions across their value chains, so companies are looking to their suppliers to provide accurate information on their carbon footprint. . SMEs that can share this data have a competitive edge and may become preferred partners.

International Sustainability Standards Board (ISSB)

The ISSB standards replaced the Task Force on Climate-related Financial Disclosures (TCFD) in 2024. These global standards help companies disclose climate-related risks and opportunities, including both physical and transition risks. Originally aimed at financial institutions, its scope is now industry-wide and applies to all publicly listed companies, banks or insurers with 500+ employees in the UK. Plus, UK-based AIM companies with 500+ employees, and LLPs/non-listed companies with 500+ employees and a turnover of £500m+. 

Does it affect SMEs?

While SMEs don’t legally have to report, their large corporate buyers and finance providers encourage them to provide emissions data, set targets, and plan emissions reductions. So, it's in their best interest to proactively address their footprint and align with the sustainability expectations of their stakeholders.

Voluntary frameworks gaining traction

Even without legal obligations, many SMEs are choosing to report emissions voluntarily. This helps them align with client expectations and show they’re serious about climate action.

Carbon Disclosure Project (CDP) 

The Carbon Disclosure Project is a voluntary reporting framework that companies use to disclose carbon emissions information to their stakeholders. Currently, over 18,700 companies report to CDP. 

Why it matters for SMEs:

More corporates are asking their suppliers to disclose through CDP. Failing to do so could mean missing out on business opportunities.

The Science-Based Targets Initiative (SBTi)

The SBTi is an initiative that helps companies set science-based emissions reduction targets. Over 1000 companies in 50 sectors are working with the SBTi to set targets. 

Why is this important for SMEs?

Thousands of larger organisations are setting value chain targets and looking to report on their annual progress towards those targets. This requires accurate data from their value chains, which creates a demand for emissions data from SMEs. 

How to start reporting your business's carbon emissions

To report your carbon emissions, you first need to measure them. Using carbon accounting, you can measure your business’s carbon footprint from energy use, business travel, purchased goods and services, transport, waste and more. Once measured, you can use your data to report to customers, stakeholders and investors, track your progress toward climate goals and identify emissions hotspots to reduce costs and carbon.

How Cogo can help

At Cogo, we empower businesses to take control of their carbon emissions and prove their impact.

Our Carbon Manager solution makes it easy for banks and corporates to support their SME customers or suppliers with carbon reporting. The tool provides:

• Automated carbon footprints for businesses, calculated using real-time transaction data and aligned with the Greenhouse Gas (GHG) Protocol.
• ‍Clear dashboards showing emissions hotspots, trends, and categories (Scope 1–3).
• ‍Actionable reduction recommendations tailored to business activity and spend.
• ‍Benchmarking tools so businesses can compare their footprint to others in their sector
• ‍Easy reporting exports to support disclosures and track impact over time.

Whether you’re a bank helping SME customers meet sustainability requirements or a corporate engaging suppliers on Scope 3 emissions, Carbon Manager makes it simple to scale carbon reporting and action across your value chain.