Small and medium-sized enterprises (SMEs) are often the lonely kid in the corner of a room when talking about carbon accounting. That’s no fun. As governments target big corporations with mandatory environmental, social, and governance (ESG) reporting regulations, carbon accounting for SMEs easily gets lost in the mix. 

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A survey in the United Kingdom (UK) found nine out of ten small businesses don’t measure their carbon footprint. The cost of accounting and lack of information are often to be blamed. But to combat the climate crisis head-on (which should be top-of-mind for everyone), we need to involve SMEs. After all, small businesses make up 90% of the businesses globally! 

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If you’re the proprietor or leader of an SME, this article is your one-stop guide to carbon accounting. We’ll discuss why SMEs should care about determining their carbon footprint and how to do it. 

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Here we go.

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Is carbon reporting mandatory for SMEs?

Carbon reporting, which entails entities reporting their carbon or greenhouse gas emissions, helps businesses, cities, and countries understand the environmental impact of their activities. While most large companies are required to calculate and report this data, SMEs have largely been spared.

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In the European Union (EU), the Corporate Sustainability Reporting Directive (CSRD) almost exclusively targets ample corporations, both domestic and foreign. So far, small businesses aren’t required to report anything about its carbon footprint so long as they are not publicly listed. Listed SMEs will be subject to the CSRD for fiscal years starting on or after January 1, 2026.

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Although the regulations in the EU and many other parts of the world don’t target SMEs directly, they do so indirectly through Scope 3 reporting requirements. Regulations like the CSRD, which require companies to report emissions from their value chain, impact SMEs that work for large corporations. 

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For example, say you own a small cleaning business that provides services to a large corporation. Your client, who must report its indirect emissions, may ask you to conduct carbon accounting of your services and provide them with the data. No small feat for a cleaning business – especially if you’ve only just started to get customers. 

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Why should SMEs consider carbon accounting?

So, if carbon accounting isn’t mandatory for most SMEs, why should they care? Well, there’s an ethical angle to it and a monetary one. Here are some strong reasons to make the case for SMEs to take up carbon accounting, even if it is not required by law. 

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Voluntary compliance

Take the CSRD, for instance. While it doesn’t mandate reporting from SMEs, it encourages them to do so voluntarily. Voluntarily complying with regulations does two things: 

• It creates trust in your brand
• It prepares you for compliance should your business grow enough to come under the ESG reporting bracket (or if that bracket widens to include you)

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Accurate carbon target-setting

The most consequential benefit of carbon accounting is that it helps you set targets to reduce your carbon footprint. Again, we all have a part to play in the fight against global warming. And if you want to do your part and work on reducing your emissions, you will need accurate data.

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With the help of carbon accounting, you can set targets to reduce waste, energy consumption, and reliance on fossil fuels. Wins for everyone. 

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Satisfy customers and investors

If you think carbon accounting is simply about environmental responsibility, the next sentence will change your mind. A whopping 71% of European consumers want to buy sustainable products. Measuring your carbon footprint and making it public demonstrates your commitment to sustainability and can get that 71% interested in you. 

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Similarly, investors are increasingly considering ESG data when making investment decisions. That’s evidenced by the remarkable growth in ESG data markets. So, businesses that undertake ESG reporting have a better chance of securing investments.

Cost savings

Another economic benefit of carbon accounting is fuel and energy consumption cost savings. Accurate GHG emissions data can help small businesses develop strategies to become more energy-efficient or switch to clean energy. 

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How do you go about carbon accounting as an SME?

A little hesitation toward carbon accounting and ESG reporting from SMEs is understandable – there’s a lot to consider, and running a small business isn’t easy. And unlike large corporations, most SMEs don’t have the resources to invest in carbon accounting (here’s a little help) LINK. 

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That said, it’s simpler if you take the process one step at a time and work towards it over a longer time horizon. Here’s how you can embrace carbon accounting as an SME:

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Analyse preparedness

Carbon accounting is only helpful if it’s accurate. So, it all comes down to the data. The first step is to analyse how ready your business is in terms of available data. Do you calculate energy consumption? Do you have information on fuel usage, for example, for company vehicles?

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Knowing what data you have readily available and what data you may need to collect will give you a glimpse into your overall preparedness for ESG reporting. 

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Choose a carbon accounting standard

There are various frameworks used for carbon accounting. The GHG Protocol is the most widely used standard in the corporate world. You can also find industry-specific standards for carbon accounting. 

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The ISO 14064, another commonly used standard based on the GHG Protocol, has two parts, one for estimating the emissions and the other for reduction and removal. The verified carbon standard (VERRA) is a voluntary carbon standard based on ISO 14064 Part 2. The framework provides guidelines on how to designate different sources of emissions and how best to calculate or estimate them. 

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Designate an ESG manager

Carbon accounting and ESG reporting are gradually becoming core components of finance and accounting. So, it’s only logical to have dedicated personnel to oversee it. If you have the means for it, hire a specialist who oversees carbon accounting and is knowledgeable of ESG reporting requirements and standards. You can also designate an existing employee to undertake these tasks and include ESG management in their job scope. 

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Use the right tools

Lastly, invest in technology that helps you account for your carbon footprint. Accounting tools designed to process emissions-related data can simplify the process and produce reports that offer accurate insights. The tool you use should align with any applicable or voluntary reporting standards. 

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How can comundo help?

When it comes to carbon accounting for SMEs, energy consumption is a big part of the equation (Scope 1 and Scope 2 emissions as per the GHG Protocol). Accurately calculating energy consumption on company properties is incredibly important, and that’s where comundo comes in. 

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Our plug-and-play solution automates the process of calculating energy consumption on properties. As a result, your data is based on actual consumption figures, not estimates. Empowered with our state-of-the-art technology, you can optimise energy usage to reduce emissions and lower your overall carbon footprint. 

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It removes all the guesswork and gives you exact numbers on emissions so you can make the right decisions, satisfy stakeholders and be fully prepared if (when!) the CSRD comes for you. 

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