A few years ago, carbon footprint reporting was something large corporations did voluntarily to demonstrate environmental commitment. Today, it is a mandatory annual obligation for qualifying UK businesses, an increasingly standard requirement in public sector procurement, and a growing expectation from investors, lenders, and supply chain partners.

The shift has happened quickly. The regulatory framework has expanded, the expectations of investors and boards have risen, and the organisations that have been doing this properly for several years now have a significant advantage over those still working out what they need to measure and how.

This guide provides a clear, practical explanation of what carbon footprint reporting involves for UK businesses: what Scope 1, 2 and 3 emissions are, who is legally required to report, what the reporting process involves, and how to build a foundation that serves both compliance and commercial purposes.

Section 1 - The three scopes of carbon emissions

Carbon emissions reporting uses a framework developed by the Greenhouse Gas Protocol, which divides emissions into three categories - or scopes - based on where they originate and how directly they are controlled by the reporting organisation.

Scope 1: Direct emissions

Scope 1 covers emissions from sources that are owned or directly controlled by your organisation. These are the emissions you produce directly.

Examples include:

• Natural gas combustion in boilers and furnaces on your premises
• Fuel combustion in vehicles owned or leased by your organisation (company cars, vans, HGVs)
• Diesel generators on site
• Refrigerant leakage from air conditioning and refrigeration equipment
• Process emissions from manufacturing activities

Scope 1 is typically the most straightforward to measure, because you have direct access to the data: gas meter readings, fuel card records, fleet mileage logs, and refrigerant purchase records.

Scope 2: Indirect emissions from purchased energy

Scope 2 covers indirect emissions from the generation of energy that your organisation purchases and uses. For most businesses, this means the emissions associated with the electricity you consume from the grid.

When you use electricity, you do not directly burn fuel - but a power station somewhere on the grid did. Scope 2 accounting allocates a share of those emissions to you based on how much electricity you used.

Scope 2 emissions can be calculated using two approaches:

• Location-based: using the average emissions intensity of the national grid for the periods you consumed electricity
• Market-based: using the emissions factor associated with the specific electricity supply you have purchased - relevant if you have a renewable energy tariff or Power Purchase Agreement

Organisations with renewable energy tariffs or PPAs may have significantly lower market-based Scope 2 emissions than location-based emissions. Both figures are typically disclosed in formal reporting.

Scope 3: Value chain emissions

Scope 3 covers all other indirect emissions that occur in your value chain - emissions that you do not directly control but that are associated with your business activities.

Scope 3 is the largest category for most organisations and the most complex to measure. It includes:

• Purchased goods and services (the emissions embedded in what you buy)
• Business travel not in company-owned vehicles
• Employee commuting
• Waste disposal
• Upstream and downstream logistics
• Use of products sold by your organisation
• Investments and capital equipment

Scope 3 is not currently required under SECR (see Section 2), but it is increasingly expected in voluntary disclosure frameworks such as CDP, TCFD, and investor ESG questionnaires. Many large organisations are beginning to require Scope 3 data from their suppliers as part of their own supply chain decarbonisation programmes.

Section 2 - Who must report carbon emissions in the UK

Streamlined Energy and Carbon Reporting (SECR)

SECR is the UK's mandatory carbon reporting framework for large businesses. It requires qualifying organisations to disclose annual energy consumption and carbon emissions in their Directors' Report (or equivalent annual filing).

Organisations must comply with SECR if they qualify as a large company or LLP under the Companies Act, meaning they meet two of the following three criteria:

• 250 or more employees
• Annual turnover of £36 million or more
• Balance sheet total of £18 million or more

All UK quoted companies must also comply with SECR, regardless of size.

SECR requires disclosure of:

• Total UK energy consumption in kilowatt hours
• Scope 1 and Scope 2 emissions in tonnes of CO₂ equivalent
• At least one intensity ratio (emissions per unit of a relevant business metric, such as per employee, per £ of revenue, or per square metre of floor area)
• A description of energy efficiency actions taken during the year
• The methodology used for calculations

Scope 3 is not mandated under SECR but many organisations include it voluntarily.

ESOS

ESOS (the Energy Savings Opportunity Scheme) is a separate but related framework requiring large organisations to audit their total energy consumption every four years. ESOS does not require carbon reporting in the same way as SECR, but the energy consumption data gathered for ESOS forms the foundation of accurate Scope 1 and Scope 2 reporting.

Organisations with both ESOS and SECR obligations benefit significantly from integrating the two processes - the data requirements overlap substantially, and running them as separate exercises is inefficient.

Voluntary frameworks

Beyond SECR and ESOS, a growing number of organisations are reporting under voluntary frameworks including:

• CDP (Carbon Disclosure Project) - widely used by listed companies and increasingly by large private businesses, particularly those in supply chains of listed companies
• TCFD (Task Force on Climate-related Financial Disclosures) - now mandatory for premium-listed UK companies and large asset managers; expected to extend further
• Science Based Targets initiative (SBTi) - requires organisations to set emissions reduction targets aligned with Paris Agreement pathways, covering Scope 1, 2 and 3

Section 3 - How to calculate your carbon footprint

Step 1 - Establish your organisational boundary

Before calculating emissions, you need to define which entities, sites, and activities are included in your footprint. For a single-site business this is straightforward. For organisations with subsidiaries, joint ventures, leased premises, or international operations, the boundary definition requires careful consideration.

The two main approaches are:

• Operational control: you report emissions from all operations over which you have operational control
• Financial control: you report emissions from all operations over which you have financial control

For SECR purposes, UK operations are the primary focus.

Step 2 - Gather consumption data

For Scope 1: collect gas meter readings, fuel card records, mileage logs for company vehicles, and records of any other direct fuel use. Refrigerant purchase and top-up records are needed for F-gas emissions.

For Scope 2: collect electricity consumption data from meter readings and supplier invoices, ideally at half-hourly resolution where available. Identify your electricity tariff to determine whether a market-based or location-based approach is appropriate.

For Scope 3 (if in scope): the data requirements vary by category but typically involve supplier invoices, travel expense records, waste disposal records, and logistics data.

Step 3 - Apply emissions factors

Emissions factors convert physical consumption data (kilowatt hours of gas, litres of diesel, etc.) into carbon equivalent emissions (kg CO₂e). The standard source for UK emissions factors is the Department for Energy Security and Net Zero (DESNZ), which publishes updated factors annually.

Using the correct emissions factor for the correct year is important. Using outdated factors or incorrect fuel-specific factors is one of the most common sources of error in carbon footprint calculations.

Step 4 - Calculate and review

Apply the relevant emissions factors to your consumption data to produce gross Scope 1 and Scope 2 figures. Review the outputs against the previous year for reasonableness - significant year-on-year changes should be explicable by known factors (site acquisitions, closures, major operational changes, or energy efficiency improvements).

Step 5 - Calculate the intensity ratio

SECR requires at least one intensity ratio. Common choices include:

• Tonnes CO₂e per employee
• Tonnes CO₂e per £1,000 of revenue
• Tonnes CO₂e per square metre of floor area
• Tonnes CO₂e per unit of output (for manufacturing organisations)

The intensity ratio allows year-on-year comparison that accounts for changes in the scale of the business.

Section 4 - Building a reporting process that works

The biggest practical challenge in carbon footprint reporting is not the calculation - it is the data gathering. Pulling together accurate, complete energy and fuel consumption data from multiple suppliers, multiple sites, and multiple internal record systems is time-consuming, and doing it retrospectively at year-end is significantly harder than collecting it continuously through the year.

Organisations that invest in consolidating their energy data infrastructure - whether through a platform like elexi or through a structured internal data management process - find that SECR preparation becomes a reporting exercise rather than a data assembly exercise. The emissions factors are applied to data that has already been collected; the report is a summary of information the organisation already holds.

This approach also supports more meaningful use of the data beyond compliance. If you have monthly Scope 1 and Scope 2 data available throughout the year, you can track progress against reduction targets in real time, identify trends before they become problems, and make procurement decisions informed by live emissions data rather than last year's annual average.

Section 5 - The connection to decarbonisation

Carbon footprint reporting is not an end in itself. Its commercial value is as the baseline from which reduction targets are set and progress is measured.

Organisations that treat SECR as a compliance exercise - producing the required numbers, filing them in the Directors' Report, and moving on - miss the opportunity to use that data to drive commercial decisions. The same data that satisfies SECR requirements can:

• Identify the highest-emission sites and activities for prioritised efficiency investment
• Inform procurement strategy by quantifying the emissions impact of contract structure choices
• Support net zero target-setting by establishing a credible, verified baseline
• Demonstrate progress to investors, customers, and regulators with evidence rather than assertion

As ESOS Phase 5 introduces formal net zero alignment requirements from 2031, organisations that have been building robust carbon data infrastructure through Phase 4 will be significantly better positioned than those starting from scratch.

The bottom line

Carbon footprint reporting for UK businesses is no longer optional for large organisations - it is a legal requirement, a commercial expectation, and an increasingly important indicator of organisational quality in the eyes of investors, customers, and regulators.

The organisations that do it well are not just complying. They are building a data infrastructure that informs better decisions about procurement, operations, and investment - and that positions them ahead of regulatory requirements rather than scrambling to catch up.

Not sure where to start with your carbon reporting?

Speak to our compliance team. We will review your SECR obligations, assess your data readiness, and help you build a reporting process that serves both compliance and commercial purposes.

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