How to calculate the carbon footprint of your small business

The UK has pledged to cut its greenhouse gas emissions to net zero by 2050 as part of international efforts to limit global warming. Small businesses have an important role to play in reaching this crucial goal, and if you’re keen to create a greener way of working, then calculating the emissions associated with your business - known as its carbon footprint - is a great place to start. Here we look at how to calculate your business’s carbon footprint and explain how reducing it could save you money while helping the planet.

What is a carbon footprint? 

The term ‘carbon footprint’ refers to the amount of carbon dioxide and other greenhouse gases, such as methane and nitrous oxide, that are released into the air as a result of human activity. Activities such as travelling for meetings, shipping goods and using energy generated from fossil fuels all contribute to your business’s carbon footprint.

Why calculate your business’s carbon footprint?

Calculating the carbon footprint of your small business can give you a deeper understanding of how its day-to-day operations impact the environment. This insight could be your first step towards creating a way of working that supports the UK’s emission reduction targets. As well as helping to limit the effects of climate change, calculating your business’s carbon footprint could offer some of the following benefits:

It could save you money

Working out your business’s carbon footprint could help you to identify where you’re using large amounts of energy. By making changes to address these areas, you may be able to reduce both the financial and the environmental costs of running your business. 

It could give you sustainability credentials to share

Customers are increasingly interested in businesses’ sustainability credentials, and this can be an important factor when they’re deciding which brands to engage with. By calculating your business’s carbon footprint and taking action to reduce your environmental impact, you can let your customers know that you’re working towards becoming a greener business.

It could help you prepare for the future

By calculating your business’s carbon footprint and taking steps to create a more sustainable way of working now, you could find yourself better prepared for any future changes in legislation.

How to calculate your business’s carbon footprint

To measure the greenhouse gas emissions connected to your small business, you must first understand what to include in your calculation. The Greenhouse Gas Protocol defines the global standards for calculating emissions and divides them into three ‘scopes’:

• Scope 1 - emissions made by your business directly, such as those from a vehicle owned by the business or a boiler that heats your office.
• Scope 2 - emissions made during the production of the energy your business uses, such as those from a power station that generates your electricity.
• Scope 3 - emissions from sources not owned or controlled by your business, such as those created during an employee’s commute on public transport. Calculating Scope 3 emissions can be more complicated, as it involves data from sources outside your business.

You’ll need to identify all of your business activities that result in emissions within each of these scopes and collate the data relating to them over a 12-month period. You’ll then need to ‘convert’ this data to establish the quantity of emissions associated with each activity and arrive at a total. You can do this using a conversion factor spreadsheet or an online calculator. 

For more details on the calculation process, refer to the government’s guidance on how to measure and report your greenhouse gas emissions.

Four ways to reduce your business’s carbon footprint

Once you understand your carbon footprint, you can create a strategy to reduce it and ensure that your small business remains sustainable. Here are four areas that you might want to tackle first:

Improve your energy efficiency

Reviewing your business’s energy usage carefully could highlight areas to improve its efficiency. For example, if you identify that your heating systems are running while your offices are empty, a small change could quickly reduce energy wastage. You could also consider investing in energy-efficient technology, such as smart meters or LED lighting, or switching to a renewable energy supplier.

Make the most of digital communications

Frequent travel to business meetings and events can severely impact your carbon footprint, so you might want to consider using digital communication options instead. Video calls, messaging tools and webinars can help you stay in touch with colleagues and customers while contributing far less to your business’s total carbon emissions.

Purchase pre-loved items

Aside from the financial savings, buying second-hand items can carry a lower carbon cost than investing in new ones. So whether you’re revamping your home office or replacing manufacturing equipment, buying pre-owned goods could stop them from going to landfill and help to reduce your business’s carbon footprint.

Use the cloud

If you still keep paper accounting records, there’s never been a better time to switch to cloud-based software such as FreeAgent. Not only can it help you cut down your paper use, but keeping digital records is also a key requirement of the government’s Making Tax Digital (MTD) initiative. This will affect many more small businesses from April 2022 when the scope of MTD for VAT will expand to include all VAT-registered businesses. Want to see FreeAgent for yourself? Take a 30-day free trial today.