Businesses in the UK contribute roughly 18% of greenhouse gas emissions, so they play a vital role in the transition to Net Zero. Recognising this, the government has implemented carbon regulations, such as SECR and TCFD to ensure big players take responsibility and reduce their environmental impact. Currently, these regulations only affect large organisations, but with increasing emphasis on supply chain emissions, SMEs are under increasing pressure to follow suit. Below we explore the main regulations affecting SMEs.
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.
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. Companies are more likely to do business with suppliers who can offer this information, so increasingly it is becoming a competitive advantage for SMEs.
TCFD focuses on the financial risks posed by climate change, covering both transition and physical 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+.
It’s important to note that from 2024, the TCFD reporting name is changing to the International Sustainability Standards Board (ISSB), but the reporting requirements are expected to remain the same.
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.
Many companies are voluntarily taking action to reduce and report their scope 3 emissions to demonstrate their commitment to sustainability and engage with their customers and stakeholders on climate change via the following frameworks:
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.
With the shift towards sustainable supply chains, there's pressure on SMEs to be transparent about emissions and to act responsibly; otherwise, they risk losing potential business.
The SBTi is an initiative that helps companies set science-based emissions reduction targets. More than 1,000 companies in 50 sectors are working with the SBTi to set targets.
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.
To report your carbon emissions, you first need to calculate them. Using carbon accounting, you can measure your business’s carbon footprint and understand where you’re emitting carbon. This, in turn, enables you to report your sustainability impact to governments and stakeholders.
Cogo's Business Carbon Manager delivers a continuously automated carbon footprint to SMEs allowing them to report on real-time progress. Our tool is aligned with GHG Protocol and other major reporting standards.
The Business Carbon Manager is currently available to Australian businesses via Xero, as well as Kiwibank customers in New Zealand. We're alsointroducing our product in the UK on the 5th of September via the Xero marketplace. Sign up to receive information about the upcoming launch!