Every business today is tackling sustainability as an ever growing priority. One of the most critical aspects of corporate sustainability is carbon emission reporting. But what exactly is it?
Carbon emission reporting is the process of measuring and disclosing the greenhouse gas (GHG) emissions associated with an organisation’s operations. This practice helps businesses comply with regulatory mandates, build stakeholder trust, and contribute to global climate goals.
As climate change concerns intensify, governments worldwide are implementing stringent carbon emissions reporting requirements. Companies that proactively manage their carbon footprint not only meet legal obligations but also strengthen their market position while improving operational efficiencies.
Why carbon emission reporting is essential
Regulatory compliance
Governments and regulatory bodies worldwide are enforcing stringent emission reporting rules. Some key regulations include the Streamlined Energy and Carbon Reporting (SECR) framework in the UK, which requires large organisations to disclose their energy use and carbon emissions in annual reports. Meanwhile, the Corporate Sustainability Reporting Directive (CSRD) in the EU expands sustainability reporting obligations, ensuring companies provide comprehensive and transparent disclosures about their environmental impact.
Another significant framework is the Task Force on Climate-related Financial Disclosures (TCFD), which has been incorporated into the International Sustainability Standards Board (ISSB) standards. These regulations make carbon emissions reporting an essential requirement rather than an optional practice.
Investor and stakeholder expectations
Institutional investors, consumers, and other stakeholders are increasingly demanding transparency in sustainability efforts. Companies with robust carbon emissions reporting practices attract more investment, improve brand credibility, and align with ESG (Environmental, Social, and Governance) goals. Sustainability performance now plays a role in securing finance, with many investors assessing companies based on their ability to manage climate risks.
Competitive advantage and brand reputation
Beyond compliance, effective carbon emission reporting can differentiate a business from its competitors. Organisations that actively measure, reduce, and report their emissions can showcase their commitment to sustainability. This not only appeals to environmentally conscious consumers but also helps in attracting top talent who prefer to work for responsible businesses. Companies that fail to report emissions effectively may face reputational risks and decreased trust among stakeholders.
Understanding scope 1, 2, and 3 emissions reporting requirements
Scope 1: Direct emissions
Direct emissions originate from sources that are owned or controlled by a business. This includes emissions from fuel combustion in company-owned vehicles, industrial processes, and on-site facilities. Because these emissions are under direct control, businesses have a responsibility to measure and mitigate them effectively.
Scope 2: Indirect energy emissions
Scope 2 emissions result from purchased electricity, heating, and cooling. While these emissions are generated externally, businesses are accountable for their consumption and reduction strategies. The use of renewable energy sources and energy efficiency measures can significantly reduce these emissions.
Scope 3: Indirect supply chain and lifecycle emissions
Scope 3 emissions reporting is often the most complex. These emissions arise from activities within a company’s value chain, including purchased goods and services, transportation and logistics, business travel, and even end-of-life product disposal. As scope 3 emissions often represent the largest portion of a company’s carbon footprint, businesses must engage their supply chains to track and reduce these emissions effectively.
Key carbon reporting standards and frameworks
Greenhouse Gas (GHG) Protocol
The GHG emissions reporting protocol is the most widely used framework for measuring and managing GHG emissions. It provides clear guidelines for calculating emissions across all three scopes, ensuring companies have a standardised approach to tracking and reporting their emissions.
Science Based Targets Initiative (SBTi)
The SBTi helps organisations set ambitious, science-backed emissions reduction targets aligned with the Paris Agreement’s 1.5°C goal. By committing to these targets, businesses demonstrate their dedication to long-term sustainability.
Task Force on Climate-related Financial Disclosures (TCFD)
The TCFD framework helps companies assess and disclose climate-related risks, enabling stakeholders to make informed investment and operational decisions. It is now being integrated into IFRS through the ISSB framework, making it a crucial aspect of financial and sustainability reporting.
Corporate Sustainability Reporting Directive (CSRD)
The CSRD expands ESG reporting requirements for EU companies, mandating detailed disclosures on sustainability efforts and emissions reduction progress. Businesses operating in the EU must align with these standards to ensure compliance.
How to measure and report carbon emissions
1. Data collection and calculation
Accurate carbon emissions reporting begins with comprehensive data collection. Businesses must gather information on fuel and electricity consumption, business travel, supply chain activities, industrial emissions, and waste management. Utilising advanced data tracking methodologies helps ensure precision in reporting.
2. Utilising carbon accounting software
Advanced carbon accounting tools, such as IBM Envizi, streamline emissions tracking and reporting. These platforms automate data collection, calculate emissions based on standardised methodologies, and generate an annual emissions report for compliance and strategic decision-making.
3. Common challenges and solutions
Businesses often encounter obstacles in emissions tracking, including data gaps, scope 3 complexity, and regulatory changes. Addressing these challenges involves implementing centralised data management systems, engaging suppliers for accurate data collection, and staying informed on evolving carbon emission reporting standards.
Strategies for reducing carbon emissions
1. Renewable energy adoption
Switching to renewable energy sources such as solar, wind, or hydropower reduces scope 2 emissions and enhances sustainability. Businesses can invest in on-site renewable energy production or purchase green energy from providers to lower their overall carbon footprint.
2. Supply chain optimisation
Optimising supply chain logistics is a key strategy in reducing emissions. Companies should partner with low-carbon suppliers, enhance transportation efficiency, and explore local sourcing to minimise emissions related to product distribution.
3. Carbon offsetting and sustainable practices
For unavoidable emissions, companies can invest in carbon offsetting projects such as reforestation, renewable energy development, and carbon capture initiatives. Additionally, adopting sustainable business practices, including waste reduction and circular economy models, helps further minimise environmental impact.
Book a free ESG data and reporting workshop
Do you need to define your ESG reporting requirements, and map your ESG data landscape?
Our free workshop will help you engage and educate key stakeholders, and produce a high-level roadmap with prioritised actions.
Conclusion and next steps
The future of carbon reporting
Regulations will continue evolving, making carbon emissions reporting a critical business function. Upcoming trends include mandatory disclosure of financed emissions, enhanced scrutiny on scope 3 emissions reporting, and the integration of AI-driven analytics for real-time emissions management.
How businesses can prepare
To stay ahead, businesses should implement software solutions like IBM Envizi for seamless ESG tracking, align with international carbon emission reporting standards, and partner with ESG advisory service providers like Ikano Insight for expert guidance.
Ikano Insight’s ESG reporting solutions
Ikano Insight simplifies the process of generating a carbon emissions report, providing ESG advisory services, IBM Envizi integration, and advanced analytics tools for comprehensive sustainability strategies. By leveraging these solutions, businesses can ensure compliance, improve transparency, and take meaningful steps toward reducing their carbon footprint.
Written by Peter Jones
Head of Sustainability
Skilled in sustainability analytics, Peter is passionate about steering organisations toward a sustainable future, leveraging strategic vision and extensive experience for global betterment and bottom-line success.
