UK Carbon Reporting Requirements for SMEs

Current legal requirements for SMEs

No mandatory carbon reporting for most SMEs

If your business is a typical SME (fewer than 250 employees, turnover under £36million, balance sheet total under £18million), you are not currently required by law to report carbon emissions.

Exceptions – when reporting or disclosure may be required for SMEs

Supplying to UK Central Government: If bidding for government contracts valued at over £5million/year, you must produce a Carbon Reduction Plan covering:

• Scope 1, Scope 2, and specific Scope 3 categories (transportation, waste, business travel, employee commuting, downstream transport).

• This requirement comes via the UK’s Procurement Policy Note 006 (PPN 006), and applies regardless of company size.

• The UK government provides guidance, a template, and examples of reporting.

Qualifying as a ‘Large Company’: If your SME exceeds at least two of: 250 employees, £36million turnover, £18million balance sheet, you fall under the Streamlined Energy and Carbon Reporting (SECR) regime.

• Under SECR, you must report Scope 1 and Scope 2 emissions, plus an intensity ratio and energy efficiency actions. Scope 3 is voluntary but recommended, and there are consultations ongoing to potentially make reporting of at least some Scope 3 categories mandatory in the near future.

• SECR reporting is included in companies’ annual financial reports submitted to UK Companies House, so if you’re preparing to report for the first time you can browse examples of how other companies report against SECR on the Companies House website.

Expected and emerging requirements

Anticipated developments:

• • UK policymakers are exploring extending mandatory carbon (including Scope 3) reporting to a wider set of companies, including SMEs, likely within the next few years.

  • Current consultations suggest more stringent reporting, especially tied to the new UK Sustainability Reporting Standards (UK SRS), could apply to more SMEs soon (economically significant private companies).

Reporting requirements coming from your large clients

SECR for large companies

Large quoted and unquoted companies as well as large LLPs must legally report Scope 1 and Scope 2 emissions. Scope 3 reporting is voluntary for most, but increasingly expected by investors and regulators.

*Except if bidding for major government contracts, or exceeding ‘large company’ size thresholds.

Trickle-down expectation

As large organisations push to accurately report their own (especially Scope 3) footprint, they increasingly require suppliers (often SMEs) to provide emissions data and sometimes have Net Zero Plans or commitments.

Being able to provide this information can secure or strengthen commercial relationships.

On June 23rd, the UK SME Voluntary Emissions Standard was published by the SME Sustainability Data Taskforce. This is an effort to support UK SMEs in having one standard way to report their carbon emissions. The UK SME Voluntary Emissions Standard is still a draft and undergoing consultation.

Large corporates passing carbon reporting requirements down their supply chain are encouraged to adopt the UK SME Voluntary Emissions Standard to support this streamlining. We’ve created a simple free-to-download Excel template for the UK SME Voluntary Emissions Standard that large corporates can adopt with the SMEs in their supply chains.

Summary: Key UK SME carbon reporting obligations