Should small businesses become carbon neutral?

Whilst larger companies are legally required to produce carbon reporting, in the UK SMEs fall though the gap.

You might think this makes sense – after all, how much difference can a single company make to the UK’s climate impact? However the picture becomes more complicated when you consider that 99.9% of UK enterprises are SMEs, and SMEs contribute almost half of the UK’s total emissions.

What’s more, aside from environmental issues, there is a valid business case for reducing your emissions…


Carbon Emissions in a nutshell

Carbon emissions come from the burning of fossil fuels such as coal, oil and gas. Fossil fuels make up 53.8% of the UK’s energy mix, with the bulk of this coming from natural gas. Fossil fuels are used to generate electricity, meaning that a reduction in energy usage will lead to a reduction in greenhouse gases. Transportation and certain industrial activities also release harmful emissions.

What climate change targets does the Government have?

The Climate Change Act (2008) committed the Government to slashing greenhouse gas emissions by 80% of 1990 levels by 2050.  Additionally, the UK is signed up to the Paris Accord which aims to limit global temperature rises to below 2 degrees. The UK claims that the Climate Change Act allows them to meet these targets without drastic policy changes, however concerns of a shortfall have been raised, and the Paris accord certainly increases the pressure.

What existing climate policies are there?

After the Climate Change Act the UK adopted five year carbon budgets which set out how much carbon could be used in an allotted period. The government has a variety of ways of meeting these budgets, including investing in low carbon energy sources, energy efficiency measures and public education. Business regulations have also been introduced – since 2013 quoted companies have been required by law to report on their greenhouse gas emissions. The Department for Environment, Food and Rural Affairs has estimated that this measure alone will reduce emissions by 4 million tons by 2021.

In addition, carbon pricing is used to make fossil fuels less attractive. The EU requires power plants and factories to buy permits for CO2 emissions.  The UK’s carbon price floor adds to this by putting a minimum price on emission costs.

Charges for some energy policies are passed onto consumers through their energy bills. These charges cover a variety of policies, including the smart meter roll out, the feed in tariff (for people and businesses who generate their own low carbon energy) and the renewables obligation. Environmental costs make up 6% of a consumer gas bill and 11% of a consumer energy bill. Businesses energy bills include a climate change levy (CCL) which is designed to be an incentive for businesses to be more energy efficient. It is charged on a per-unit basis. If you use a lot of renewable power, you will be exempt from the CCL.

What is carbon management?

Carbon management involves running your business in such a way that you minimise your impact on the environment. You can do this in a number of ways – from introducing energy efficiency measures to using low carbon energy sources to purchasing carbon offsets.

The first two options are preferred by many to carbon offsets, which have proven to be controversial. Carbon offsetting involves investing in projects that essentially ‘balance out’ a company’s emissions. Examples involve planting trees or investing in projects that will reduce future emissions – such as the distribution of energy efficient cooking equipment in developing countries. However some people believe that carbon offsetting offers an ineffective way of ‘buying your way out’ of bad behaviour. The argument being that a carbon management program that doesn’t address behaviour change is ultimately futile. These claims are disputed by others, who claim that the majority of businesses that use carbon offsetting also take other steps to reduce their emissions. Additionally, many carbon offsetting projects have additional benefits to the communities in which they are located.

What is the difference between carbon management and becoming carbon neutral?

If a business is carbon neutral its net emissions are zero. Many carbon management programs have carbon neutrality as their aim. Whilst this is a common goal, it is not essential that all businesses who manage and report on  emissions aim to become carbon neutral. There is also nothing to stop you from reducing your carbon emissions in a more informal way – you don’t need to have official targets to make a difference. The Government has produced some really helpful guidance here and some energy saving advice here. In most cases, carbon management and carbon neutrality are formal undertakings that follow a set procedure, however that doesn’t mean that they’re out of bounds for smaller businesses.

Why reduce your carbon?

It’s not only eco-conscious businesses who choose to go carbon neutral, there are a host of benefits that encourage businesses of all sizes to take control of their carbon footprint:

1. The environment

The environment may not be the only reason to start a carbon neutral program, but it’s certainly important. With the legally binding ratification of the Paris Accord last year, the pressure is on for the Government to reach steep emissions targets by 2030. Larger businesses are currently legally obliged to report on their emissions, whilst smaller businesses escape regulation, despite contributing 50% of the UK’s emissions.

2. The Supply Chain

If a big business is taking carbon management seriously, they’ll be looking at the carbon footprints of those in their supply chain. That means that introducing carbon management targets can help win new business – carbon reporting is increasingly specified in the procurement process. Apple’s supply chain in China is now 100% carbon neutral.

3. PR

Whilst marketing shouldn’t be the main driver of a carbon management program, you can get great PR off the back of your ‘green’ credentials. A 2015 study on corporate social responsibility found that 84% of customers seek out environmentally responsible products where possible, whilst 57% of people surveyed would even buy a product of lesser quality if they felt it was greener. Make sure you have the goods to back your claims up though, you don’t want to be accused of ‘greenwashing‘.

4. Money Saving

The money saving case for carbon management has been well documented. In 2014, the then Energy and Climate Change Secretary, Ed Davey, stated that UK businesses were paying £2.8billion for energy that didn’t need to be used. Energy efficiency in particular is a key to cost saving. In fact, according to The Carbon Trust, low effort, low cost energy saving measures can reduce business costs by 10%, with a 20% cut in energy working out to be the same as a 5% increase in profits. With energy prices rising, it’s just good business sense to look at ways to cut your usage.

5. Staff engagement

For the same reasons customers prefer greener brands, staff also like to work for companies that have a cause. A 2013 survey found that 80% of millennials would only work for a company that considered its impact on society.

Getting started and support

If you just want to reduce your energy bills and begin to make a positive contribution to the environment, you may  want to start with some simple energy efficiency measures.

However, if you want to take carbon management seriously, the below advice should help:

Find out what support you can get

There is a wealth of support out there for SMEs. The Carbon Trust is a good place to start: they have numerous guides and free tools as well as a dedicated SME network and information on financing.

Decide what your objective is – do you want to achieve certification or just be able to shout about your carbon management plan?

There are a number of carbon neutral certifications in the UK, including The Carbon Trust,  Carbon Neutral and BSI. There are also carbon management certifications that stop short of full carbon neutrality. If you aren’t bothered about certification but still want a helping hand, there are no shortage of carbon consultancies who will guide you through the process of creating a carbon strategy.

Conduct a carbon audit

You can’t make informed decisions and objectives about your carbon usage, unless you know how much you’re actually using. You may want to use a consultancy to help you with this stage, alternatively this free calculator should give you a ballpark figure. However, this article illustrates how deceptive carbon figures can be if you don’t dig deeper. You ideally want to consider both your direct and indirect emissions. Examples of direct emissions include company vehicles and energy usage in your offices. Indirect emissions include business travel and product transportation. If you have a complex business structure – one that encompasses subsidiaries or franchises – you will have to define the scope of what activities you feel you can realistically control. 

You should also decide on a carbon measurement process – there’s more than one way to measure emissions. The Greenhouse Gas Protocol (GHG) is by far the most commonly used carbon measurement standard and is recommended by the Government.

Set your goals

There are two types of emissions goals: absolute and intensity. Intensity goals measure emissions in related to some other output – e.g. emissions per staff member, whilst absolute targets state an absolute amount of emissions to aim for. If you use an intensity target, overall emissions may actually still rise, for example if the business expands.

As you’d expect, targets should be measurable, quantitative and achievable. You’ll want to define the time period you’ll be reporting on – this is usually 12 months and should ideally be the full financial year. You’ll also need a base year to compare against. The Government has issued some really useful guidance on how to go about measuring emissions.

After setting your goals, and defining processes to reach them, you’ll have to report on them. It’s important that your reporting is clear and transparent. In a bid to standardise carbon reporting, PWC created a sample report which lays out some of the things you’d want to see.

Communicate your success

You won’t realise all the benefits of carbon management if you don’t communicate them effectively. Internal communication will help to get staff buy in, as well as boosting engagement. Your carbon goals can also be part of your marketing and PR strategy. Carbon management is a key part of corporate social responsibility (CSR) which is closely tied to marketing and PR. Again, it’s important that you don’t over exaggerate your green credentials, or you may end up with a branding nightmare! CSR is much wider than just carbon management, but this article gives some great reasons for you to shout about your sustainability efforts.

How much does it cost

How much carbon management costs depends on a number of things:

  • The size and structure of your business
  • How ambitious your targets are
  • Whether you plan on using an external consultancy
  • Whether you plan on purchasing carbon credits.

A US example found that it cost $350 (about £287) to offset the emissions generated by a small office based business with 5 employees. Energy efficiency investments tend to pay for themselves through savings in energy bills. Additionally, increased contacts and customers plus improved staff retention can all make carbon management a cost effective endeavour. 

Inspired? Check out these case studies of low carbon businesses…








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