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A Pathway to Carbon Reduction for SMEs: Measuring and Target Setting

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A recent survey by Lloyds Bank found that 77% of small businesses do not have a plan to reduce their carbon footprint. This is not because #SMEs don’t see the importance of dealing with the adverse impacts of #climatechange. Far from it.

As our dear friend Freda Obeng-Ampofo of KAEMA said “I see the incorporation of #ESG practices as an opportunity for small businesses to shine. I see it from the lens of stewardship. How am I intentionally incorporating ESG [practices] into my day-to-day operations. We may not have it all together, but every little certainly helps to reach that global goal!”

However, as the Lloyds survey and our own relationship with SMEs shows, SMEs face barriers including the costs involved in implementing carbon reduction plans, lack of information about how best to go about doing so, and competing priorities.

That’s why we are committed to simplifying sustainability for SMEs and helping them implement the most pragmatic and cost-effective carbon reduction (and other ESG-related) actions.

In our first piece in this series, we talked about why carbon reduction is important for SMEs and provided easy to understand definitions for related terms and concepts.

After our first article we were rightly challenged about whether our focus on SMEs in more industrialised countries was relevant to those in emerging economies – and specifically SMEs in Africa. In response, our second article explored whether, given the constraints African SMEs faced and their glaring absence at decision-making tables, it was fair to require that they adopt carbon reduction plans. We concluded that it was, but with the caveat that they focus on setting realistic targets and on implementing affordable carbon reduction opportunities.

In this article, we cover initial steps SMEs can take to develop carbon reduction plans. As we commented in our piece on African SMEs, we will do our best to make recommendations that are broadly applicable.

1. Measure your carbon footprint as an SME: The first step in any carbon reduction strategy is to measure your carbon footprint. This allows you to see where most of your emissions are coming from and to prioritise areas for improvement.

To calculate your carbon footprint, you’ll need to collect activity data. The main categories of activity data for SMEs are often:

  • Utilities: You will need your electricity and gas usage in kWh. This information can be found on your bills and/or through meter readings. If available, smart-meters and sub-meters are great tools as they show real-time energy use and energy use at an appliance-level.

  • Staff commuting: You will need information on the number of staff who commute into the workplace including their mode of transport and miles travelled. This information could be collected by sending a survey out to staff.

  • Travel/Transportation: This information relates to the number of miles travelled/the amount of fuel purchased for company-owned and company non-owned vehicles.

  • Homeworking: To understand the emissions produced by homeworkers you’ll need information on the number of employees working from home each week. If you want more accurate results, you could also send out a survey asking staff questions about how much energy they use during a working day and, where applicable, whether they have a green energy tariff.

  • Hotel Stays: You’ll need information on the location of hotels and the total number of nights.

  • Waste: This is calculated in tonnes of general waste, tonnes of recycled waste, and tonnes of food waste. If you don’t know your waste in tonnes, carbon calculators will often allow you to estimate your waste based on how many bins are in your premises, their size and how many times you empty them.

  • Products and Services: An estimate for this section is often made using expenditure data on food and drink purchased for employees, stationary expenditure, furniture expenditure, electronics expenditure, water bill, and so on.

You should aim to collect data for at least 12 months. This means your business can account for seasonal and business changes that occur over the year.

It’s also important to remember that the more data you have the more accurate your carbon footprint will be. So, although it sounds a pain, it’s worth putting in the effort to collect the data initially.

A carbon footprint is measured in tonnes of CO2 equivalent (tCO2e). To get this figure, your activity data is converted into its CO2 equivalent. Some governments produce annual conversion data that contains all the CO2 equivalents you could need. You can access the UK Government’s here. We believe this data can also act as useful guide for non-UK companies.

Once you have the data, it’s a simple equation:

GHG emissions = activity data (e.g., electricity used in kWh) x emission conversion factor

There are tools available that will do these calculations for you. Triplo ESG has developed a free carbon footprint calculator that is simple to use. The carbon calculator provides you with a detailed breakdown of your emissions from different sources and scopes. The results enable you to identify the areas where you can make the biggest carbon reductions.

Triplo’s tool will also measure your carbon footprint in both absolute terms (i.e., your total emissions) and per employee or annual revenue terms. Over time, this will allow you to see how your footprint has changed relative to your annual growth.

Example of a breakdown of an SMEs’ carbon footprint

2. Setting carbon reduction targets for SMEs

Once you have an understanding of your emissions, you can then set targets for reducing your carbon footprint.

Here are some things to consider when setting your targets:

  • Targets should be ambitious but realistic: We encourage you to aim for Science-Based Targets. The Science Based Targets initiative (SBTi) defines science-based targets as those that “are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to 1.5°C above pre-industrial levels”.

For SMEs, the SBTi has two pre-defined targets to choose from.

The first option is to reduce scope 1 and scope 2 GHG emissions by 50% by 2030 from a 2018 (or more recent) base year, and to measure and reduce scope 3 emissions.

The second option is to reduce absolute scope 1 and scope 2 GHG emissions 30% by 2030 from a 2018 (or more recent) base-year, and to measure and reduce scope 3 emissions.

The SBTi does not require SMEs to set targets for their scope 3 emissions, unlike larger companies.

As a reminder Scope 1 emissions are your direct emissions, for example from company owned vehicles, manufacturing processes); Scope 2 emissions are your indirect emissions, for example electricity you purchase to power your lights; and Scope 3 emissions are non-owned indirect emissions, that is emissions from your supply chain such as business travel and end-of-life treatment of sold products.

  • The type of target: Your targets can include setting absolute targets, such as reducing your total emissions by a certain percentage, as well as targets for specific activities such as halving business travel emissions.

  • Break down your targets down into yearly targets and milestones: It’s recommended that you aim to halve absolute emissions every ten years. This would mean a 7% year-on-year reduction. If you wish to set more ambitious targets, consider what this would break down to annually. For example, having your emissions in five years will mean a 13% reduction each year and halving in three years will mean a 21% reduction rate per year.

  • Targets should include a base year and a target year: The base year is the year against which GHG reductions are tracked – it’s often the first year you start measuring your carbon footprint. For the target year, the SBTi encourages companies to set mid-and long-term targets ending in 2030 and 2050.

We cannot emphasise enough that whatever targets are set, they must be realistic, in terms of resources – human and financial – and the time needed to achieve them.

The adverse impacts of climate change are real and critical, and need to be dealt with urgently. However, it is of zero benefit to be pushed into certain targets that cannot and will not be met or that will break the bank of your business.

In the article that follows, we will give examples of cost-effective carbon reduction initiatives for SMEs.

In the meanwhile, use Triplo’s free carbon footprint calculator to measure your carbon footprint. You might be pleasantly surprised by what you find but, more important, the results will give you a firm basis to put in place your carbon reduction plans.

Written by Rosalind Kainyah MBE, an authority on Sustainability and responsible business with over 30 years of combined legal, international, executive and board level experience, and Helen Stickler, Co-Founder of Triplo ESG


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