‍Key regulations and voluntary schemes for carbon accounting

If you've ever felt overwhelmed by the sheer number of sustainability reporting frameworks, you're not alone. 

Even seasoned professionals find themselves navigating a confusing web of acronyms—GHG, SECR, CSRD, CDP, and more. 

Each framework or scheme seems to have its own set of rules and nuances. What makes it even trickier is that not all of these frameworks serve the same purpose. Some are mandatory regulations enforced by governments, while others are voluntary schemes that companies can join to bolster their sustainability credentials.

In this lesson, we’ll break down the key regulations and voluntary schemes, focusing specifically on those related to carbon accounting. Understanding these frameworks will help you make sense of how organisations measure, report, and manage their carbon emissions.

Standards: The Foundation of Carbon Accounting

Standards offer a framework to standardise how carbon emissions are measured and reported. Most regulations and voluntary schemes refer to one or more of these as a baseline for compliance or accreditation. Let’s explore three of the most widely recognized standards.

GHG Protocol: The Gold Standard

The Greenhouse Gas (GHG) Protocol is considered the “gold standard” for carbon accounting. Developed in the late 1990s, it provides a comprehensive framework for measuring and managing greenhouse gas emissions, dividing them into three categories: Scope 1, Scope 2, and Scope 3. It is the go-to standard for businesses worldwide and serves as the basis for most carbon accounting initiatives.

ISO 14064: Aligned with the GHG Protocol

ISO 14064 is an internationally recognized standard that provides structured, auditable guidelines for carbon accounting, closely aligned with the GHG Protocol. First introduced in 2006, it is often used by companies seeking certification and offers a more detailed, standardised approach to GHG reporting.

PCAF: Tailored for Financial Institutions

The Partnership for Carbon Accounting Financials (PCAF), launched in 2015, is specifically designed for financial institutions to measure the carbon emissions of their portfolios. It has gained traction as financial institutions increasingly face scrutiny over the environmental impact of their investments.

Regulations: Mandatory Carbon Reporting Requirements

Governments have introduced regulations to enforce mandatory carbon reporting for businesses of specific sizes, locations, or industries. Here are some of the key ones:

SECR (UK)

Introduced in 2019, the Streamlined Energy and Carbon Reporting (SECR) regulation mandates large UK companies to report their energy use and carbon emissions annually. This applies to companies meeting specific size thresholds (e.g., over 250 employees, turnover above £36 million).

PPN 06/21 and NHS Carbon Reduction Plan (UK)

The Public Procurement Notice (PPN) 06/21, introduced in 2021, requires suppliers bidding for large government contracts to submit a carbon reduction plan aligned with the UK’s net-zero goals. Similarly, the NHS Carbon Reduction Plan pushes for suppliers in the healthcare sector to meet strict carbon reporting standards.

CSRD (Europe)

The Corporate Sustainability Reporting Directive (CSRD), adopted in 2021, mandates that large companies in the EU report on a wide range of sustainability metrics, including carbon emissions. It applies to businesses with more than 250 employees or large turnover and balance sheet totals.

SFDR (Europe)

The Sustainable Finance Disclosure Regulation (SFDR) targets financial institutions in the EU, requiring them to disclose how sustainability risks, including carbon emissions, are integrated into their investment decisions.

Digital Product Passports (Europe)

The Digital Product Passports, part of the EU’s circular economy agenda, require companies in certain sectors (e.g., electronics, textiles) to provide detailed environmental data, including carbon footprints, for their products.

Voluntary Schemes: Going Beyond Compliance

While regulations set minimum standards, many companies choose to participate in voluntary schemes to demonstrate leadership in sustainability. These schemes often focus on carbon reduction, environmental impact, or broader ESG (Environmental, Social, Governance) criteria.

CDP: Carbon Disclosure Project

Launched in 2000, the CDP focuses on environmental transparency, asking companies to disclose data on carbon emissions, water use, and deforestation. Over 18,000 companies participate, and some large corporations require their suppliers to report through CDP.

GRI: Global Reporting Initiative

The Global Reporting Initiative (GRI) was established in 1997 and covers a broader range of ESG issues, not just carbon. More than 10,000 organisations use the GRI standards for sustainability reporting across various sectors.

SBTi: Science-Based Targets Initiative

The Science-Based Targets Initiative (SBTi), introduced in 2015, focuses on setting and validating corporate carbon reduction targets in alignment with the Paris Agreement. It helps businesses ensure their carbon reduction goals are in line with global climate targets.

B Corp: Holistic ESG Accreditation

Becoming a B Corporation is a prestigious certification for companies committed to ESG principles, including carbon reduction. Introduced in 2006, B Corp certification covers a wide range of sustainability topics, and more than 6,000 companies globally have earned this accreditation.

EcoVadis: ESG Accreditation with a Broad Scope

Founded in 2007, EcoVadis provides businesses with an ESG rating based on their performance in areas like environmental impact and labour practices. Over 100,000 companies use EcoVadis ratings, often at the request of large clients or partners.

IIGCC: Investor-Focused Scheme

The Institutional Investors Group on Climate Change (IIGCC) is an organisation for investors, helping them align their portfolios with climate goals. Founded in 2001, IIGCC provides guidance on how to reduce the carbon impact of investments, pushing the financial sector toward net-zero alignment.

Key Takeaways

Sustainability reporting may seem complex, but understanding the different frameworks and their purpose helps make the landscape clearer. Here are the key takeaways from this lesson:

1. Standards like the GHG Protocol, ISO 14064, and PCAF provide the foundation for carbon accounting, offering clear guidelines on how emissions should be measured and reported.
2. Regulations such as SECR, CSRD, and SFDR enforce mandatory carbon reporting based on the location, size, and sector of a company. These are non-negotiable and require compliance.
3. Voluntary schemes like CDP, GRI, and B Corp allow companies to go beyond the minimum requirements, positioning themselves as sustainability leaders. Although voluntary, they can be a critical part of business strategy, often required by clients or investors.

By breaking down sustainability frameworks into these three categories, you can better understand which ones apply to your business and how they contribute to the global effort of carbon reduction.