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Running a business

How to calculate your carbon emissions

A business with strong environmental policies can attract new customers, employees and potential investors. Green company policies not only have a positive impact on the planet, they could also help your business save money by cutting back on energy and other costs.

The UK government wants to reach net zero by 2050. This means first reducing emissions to the extent possible, then taking out at least as much carbon from the atmosphere as we’re emitting. But net zero won’t be achieved without the support and actions of small businesses, which account for around 30% of all UK Greenhouse Gas (GHG) emissions.

The first step any business should take when embarking on their net zero, or carbon reduction journey, is to measure their emissions. This might seem like a daunting task. But there are simple tools available you can use. This guide looks at how a small business can take the first steps.

What’s included in the carbon calculation?

The first step in calculating, and ultimately reducing, your carbon footprint is knowing exactly what greenhouse gas emissions your business is responsible for. Greenhouse gases trap heat in the atmosphere, causing the planet’s temperature to rise. Carbon dioxide, which accounts for around 85% of the UK’s emissions, enters the atmosphere when fossil fuels and solid waste are burnt. Emissions are generally broken down into three categories: Scope 1, 2 and 3.

Scope 1

Emissions from sources directly owned or controlled by your business, including burning fuels on-site or in company vehicles.

Scope 2

Indirect emissions caused when the energy your company buys and uses is produced by your energy suppliers, often electricity.

Scope 3

These are generated by your supply chain and the customers who use your products or services, as well as any other activities necessary to run your business, from travel to waste management. Scope 3 will likely be your biggest area of emissions, it could even be more than 90%

Companies initially tended to focus on Scope 1 and 2 exclusively, but it’s now increasingly recognised that Scope 3 should also be included when calculating your company’s carbon footprint, as this group is typically the greatest driver of total emissions.

What carbon emission calculator tools are available?

There are free tools and resources you can use when calculating emissions, such as the:

Environmental consultancies and software firms will often provide glossaries, tools and advice alongside their paid-for services. And there’s a lot of industry-specific advice available: for example, Tech Zero, a climate action group, has a wealth of information aimed at technology companies. Starling Bank is a founder member of Tech Zero.

What are the first steps in calculating carbon emissions?

First, establish a 12-month time period; if it’s the first time you’re measuring, use your most recent financial year as your baseline. Next, define the boundaries of your business, both legally – what entities do you own/have control over – and physically, for example, the number of sites. Now you can start gathering data.

Scope 1 and 2 may be the most straightforward, as you should hold that information internally: the amount of fuel used in your boiler, furnaces and company cars, how much electricity and gas you use on site, and so on.

Scope 3 involves more work. It depends on how many people you employ, the size of your supply chain, and your customer base.

There will inevitably be gaps, especially in Scope 3. That’s OK – just ensure all gaps are flagged, and put plans in place to improve the following year.

Ways of calculating emissions

The simple way to estimate emissions is to use a ready-built calculator, as listed above. This section looks at the calculations behind the results.

GHG emissions are not measured just by monitoring concentration or flow rate. Much like financial accounting standards, methodologies have been developed that allow companies to measure the climate impact of their business activities.

The most widely accepted ways of measuring GHG have been developed by the Greenhouse Gas Protocol, the internationally accepted standard on emissions.

Emissions are calculated in a mixture of ways. The activity-based method takes the level of activity that results in emissions, often measured in litres of fuel, kWh of electricity, or kg of material purchased, and multiplies it by the emissions factors associated with that activity.

The spend-based method, meanwhile, takes how much you have spent on goods and services and multiplies that by the related emissions factor.

An emissions factor is the amount of emissions produced per financial unit. The Department for Business, Energy & Industrial Strategy has a regularly updated list of emission conversion factors.

A hybrid-model methodology, where both activity and spend-based methods are used, is recommended by the Greenhouse Gas Protocol.

You can also use location-based or market-based calculation methods, especially for Scope 2. The former takes into account the average emissions factor for the grid you take your energy from, while the latter reflects decisions made by your company, for example, whether or not you are on a renewable energy tariff.

Practical actions to reduce your emissions

The UK Business Climate Hub has a useful section on practical steps you can take to reduce your emissions, including points on energy, transport, insulation and lighting. There is a wealth of advice on how to cut emissions, much of it targeted at small businesses specifically, on the Federation of Small Businesses’ Small Business Sustainability Hub.

In terms of emissions from your supply chain, Scope 3, you could look into using suppliers with a low carbon footprint or net zero strategy, or switching from fuel-powered to electric vehicles and machinery.

What’s the next step?

You could share your carbon emissions on your website, and how you plan to reduce them. Remember to flag up any gaps in your data, with how and when you plan to plug them.

Inviting your employees to join the conversation can help get the whole company onboard.

Calculating, measuring and ultimately reducing your greenhouse gas emissions will benefit both your business and the environment. Sustainable businesses can attract new customers and employees and they could also make savings, for example on heating or lighting usage.

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