Define Carbon Footprint and Its Impact on SMEs

published on 18 December 2023

Most organisations would agree that carbon emissions have a significant environmental impact.

By understanding carbon footprints, SMEs can implement changes to reduce emissions and operate more sustainably.

This article explores the meaning of carbon footprints, their causes, and strategies SMEs can use to calculate, analyse, and lower their environmental impact.

Introduction to Carbon Footprint in SMEs

A carbon footprint refers to the total greenhouse gas (GHG) emissions caused directly and indirectly by an individual, organisation, event or product. It is measured in tonnes of carbon dioxide equivalent (tCO2e).

For small and medium-sized enterprises (SMEs), measuring and managing carbon footprint is becoming an important strategic priority for several reasons:

Defining Carbon Footprint and Its Importance

The carbon footprint concept relates to climate change and global warming. As SMEs conduct business activities like manufacturing products, heating facilities, transporting goods etc., these actions often depend on fossil fuels and lead to GHG emissions. More emissions trap heat in the atmosphere, contributing to climate change.

By measuring carbon footprint using tools like the EcoHedge Express software, SMEs can:

  • Identify major emission sources and reduction opportunities
  • Track and disclose emissions transparently to stakeholders
  • Strategise pathways to achieve net-zero emissions
  • Comply with environmental regulations and customer requirements

Thus a lower carbon footprint directly translates to lower business risk and higher sustainability.

Carbon Footprint and SMEs: A Strategic Overview

For SMEs, focusing on carbon footprint drives strategic advantages like:

  • Cost savings - Eco-efficiency measures cut utility, material and compliance costs
  • Competitive edge - Sustainable brands attract investors and environment-conscious consumers
  • Future-proofing - Transitioning earlier to a low-carbon business model builds resilience

Hence integrating carbon accounting tools like EcoHedge Express helps SMEs reorient operations, engage stakeholders and maintain access to emerging markets.

Measuring and lowering emissions is essential for SMEs to contribute positively towards urgent climate action.

What is a carbon footprint simple definition?

A carbon footprint refers to the total greenhouse gas emissions caused directly and indirectly by an individual, organisation, event or product. It is measured in tonnes of carbon dioxide equivalent.

Here is a simple definition of carbon footprint:

A carbon footprint is the total amount of greenhouse gases released into the atmosphere by the activities of a person or organisation.

Some key things to know about carbon footprints:

  • It includes carbon dioxide as well as other greenhouse gases like methane and nitrous oxide.
  • There are two types of emissions counted:
  • Direct emissions come from sources owned or controlled by the person or organisation, like emissions from their own vehicles or equipment.
  • Indirect emissions occur because of the electricity, goods and services used by the person or organisation. These emissions physically occur at the facility where energy was produced or goods manufactured.
  • Larger carbon footprints mean more greenhouse gas emissions, increasing contributions to climate change.
  • By measuring carbon footprints, individuals and companies can identify areas for reduction. This helps mitigate global warming.

So in short, a carbon footprint evaluates contributions to global climate change through quantification of greenhouse gas emissions from various activities. Tracking carbon footprints allows us to take responsibility for our environmental impact.

What is carbon footprint according to?

The World Health Organisation provides an official definition of carbon footprint. According to WHO, a carbon footprint measures the impact of activities on the amount of carbon dioxide (CO2) produced through burning fossil fuels. It is expressed as a weight of CO2 emissions produced in tonnes.

Specifically, WHO stated in February 2020 that:

"A carbon footprint is a measure of the impact your activities have on the amount of carbon dioxide (CO2) produced through the burning of fossil fuels and is expressed as a weight of CO2 emissions produced in tonnes."

In simpler terms, your carbon footprint is the amount of greenhouse gases released into the atmosphere from the burning of fossil fuels to support your lifestyle. This includes emissions from activities like transportation, electricity usage, manufacturing products you use, waste disposal, etc.

Tracking carbon footprints allows us to understand our personal and organisational contributions to climate change. It also helps identify areas to target emission reductions.

For businesses, measuring carbon footprint is becoming an important part of environmental sustainability efforts. It enables organisations to benchmark performance, demonstrate transparency, and make progress towards goals like carbon neutrality. Understanding carbon footprints also helps engage stakeholders and meet emerging compliance regulations around climate action reporting.

What is carbon footprint and how do you reduce it?

A carbon footprint refers to the total greenhouse gas (GHG) emissions caused directly and indirectly by an individual, organisation, event or product. It is measured in tons of carbon dioxide equivalent (tCO2e) and encompasses all six greenhouse gases covered by the Kyoto Protocol.

For businesses, especially SMEs, the largest sources of emissions generally come from:

  • Energy use - heating/cooling buildings and powering facilities
  • Transportation - shipping goods and business travel
  • Purchased goods and services

To reduce their carbon footprint, SMEs can take actions like:

  • Switch to renewable energy sources - Installing solar panels or buying clean power helps eliminate emissions from electricity use. This has become more affordable over recent years.
  • Improve energy efficiency - Simple upgrades like LED lighting, smart thermostats and insulation can significantly cut energy waste.
  • Electrify vehicles - Replacing combustion engine company cars with electric vehicles powered by renewable energy eliminates tailpipe emissions.
  • Reduce business travel - Cutting back on flights and trips helps lower an SME's footprint. Consider video conferencing as an alternative.
  • Buy climate-friendly goods/services - Seek vendors with sustainability commitments to reduce supply chain emissions.

Accurately calculating emissions is the vital first step for SMEs to benchmark and track reduction efforts over time. User-friendly carbon accounting tools like EcoHedge software can simplify this entire process.

Overall, sustainability is becoming an imperative for businesses rather than just a nice-to-have. By understanding and shrinking their carbon footprint, SMEs can save on costs, meet stakeholder demands and contribute to tackling climate change.

What are the four main categories of carbon footprint?

When we think about our carbon footprint, it helps to break it down into categories based on the activities that drive emissions. The four main categories are:


The production, transportation, storage, and disposal of the food we eat all generate greenhouse gas emissions that contribute to climate change. For example, methane released from livestock like cows and fertilisers used to grow crops are major culprits. Reducing food waste and choosing more plant-based foods can help minimise your food-related carbon footprint.


All the products and services we purchase and use have embedded carbon emissions from raw material extraction, manufacturing, transportation, and disposal. The more we consume, generally the larger our footprint. Being an informed consumer by researching companies' environmental practices, buying quality goods built to last, and reducing overall purchases can reduce this impact.


Getting from A to B - whether by planes, trains, boats, cars, buses, motorbikes or bicycles - burns fossil fuels that warm the planet. Transportation accounts for 14% of global greenhouse gas emissions. Driving and flying less, switching to electric/hybrid vehicles, using public transport, biking and walking more can dramatically reduce your mobility footprint.

Household Energy

Heating and cooling buildings accounts for about 17% of greenhouse gas emissions globally. The main culprit is electricity from the burning of coal, natural gas and oil. Improving home insulation, upgrading to an efficient HVAC system, installing solar panels, using ENERGY STAR appliances and lighting, and simply conserving energy usage through behaviour change cuts energy-related emissions.


Understanding the Causes of Carbon Footprint in SMEs

Small and medium-sized enterprises (SMEs) contribute significantly to global greenhouse gas emissions through their business operations and supply chains. Understanding the key causes of carbon footprint for SMEs is an important first step to measuring and reducing emissions.

Direct Emissions: Energy Consumption and Processes

The most direct source of emissions for SMEs is from on-site energy consumption and industrial processes:

  • Energy use in facilities and offices - burning fossil fuels like natural gas, oil, and propane for heating, cooling, lighting, IT servers, machinery, etc. directly generates CO2 and other greenhouse gases.
  • Transportation fleets - the use of vehicles/trucks powered by gasoline or diesel leads to tailpipe emissions of CO2 and other pollutants. Regular maintenance can improve fuel efficiency.
  • Production processes like welding, casting, brick kilns, etc. often involve the burning of fuels which release emissions directly onsite. Upgrading to more energy efficient equipment can reduce energy needs.

Indirect Emissions: Supply Chain and Product Lifecycle

There are also many indirect sources of emissions which SMEs rely on but don't directly control:

  • Purchased goods & services - emissions are generated upstream in the supply chain for extracting raw materials, manufacturing products, and transporting them. Sourcing sustainable materials helps.
  • Waste disposal - methane emissions are created when organic waste breaks down anaerobically in landfills. Improved recycling and composting reduces waste emissions.
  • Product use phase - many products consume energy and resources while being used by customers, causing indirect emissions for SME manufacturers. Optimising energy efficiency features helps reduce these.
  • Business travel - flights, hotel stays, conventions, and other business travel lead to substantial emissions, even when booked via third-party providers. Limiting non-essential trips can avoid these.

By understanding these key emission sources, SMEs can better focus reduction efforts on their largest climate impacts. The first step is conducting a carbon footprint assessment using emissions calculations or carbon accounting software to identify priority areas.

How to Calculate Carbon Footprint for SMEs

Calculating your company's carbon footprint is an important first step towards reducing your environmental impact and meeting sustainability goals. For small and medium-sized enterprises (SMEs), this process can seem daunting, but breaking it down into simple steps makes it more manageable.

Identifying Emission Sources and Collecting Data

The first step is conducting a carbon audit to identify all sources of greenhouse gas emissions from your business operations. Consider activities like:

  • Energy used - electricity, gas, fuel, renewable energy
  • Transportation - fleet vehicles, employee commuting, business travel
  • Waste - amounts generated, disposal methods
  • Purchased materials - paper, office supplies, packaging

Collect activity data like kilowatt-hours of electricity used or liters of fuel consumed annually. Suppliers may provide this information on invoices and statements.

Simple Carbon Footprint Calculator Tools for SMEs

Online calculators tailored to SMEs take the hassle out of estimating emissions. User-friendly tools like the Carbon Trust ask you to input your company's energy usage, transport, waste, water, and materials data to generate an estimate of tonnes of carbon dioxide released per year.

The EPA Center for Corporate Climate Leadership also provides a simplified Excel-based calculator for quickly modelling emissions.

Best Carbon Footprint Calculator Options for Accuracy

For more complex operations or greater accuracy, tools like Persefoni track emissions across your entire supply chain using a mix of activity, spend and supplier-specific data. The GHG Protocol offers industry-specific calculation tools for capturing all Scope 1, 2, and 3 emissions sources.

Paid sustainability software platforms like EcoHedge cater towards SMEs to automate data collection and provide customised carbon accounting suited to your business needs.

Analysing and Reporting Carbon Footprint Results

Once you have emissions figures, evaluate the largest contributors to identify reduction opportunities. Develop an emissions profile showing how much originates from electricity, travel, waste, etc. Express totals as tonnes of carbon dioxide equivalent (tCO2e).

Communicate results through a formal report for management and sustainability disclosures. Share highlights in employee and customer communications to showcase commitment towards net-zero.

Regularly update calculations to track progress over time. Calculate reductions compared to a baseline year and set emission reduction targets.

Following structured approaches simplifies carbon footprinting for SMEs. Leverage user-friendly tools and tap into expert guidance to accurately measure and communicate your company's environmental footprint.

Strategies for Reducing Carbon Footprint in SMEs

Reducing carbon emissions is crucial for SMEs to lower their environmental impact. Here are some effective strategies SMEs can implement:

Energy Conservation and Renewable Energy Adoption

  • Conduct an energy audit to identify areas for efficiency improvements
  • Install energy-efficient lighting, heating, ventilation and appliances
  • Switch to renewable energy sources like solar or wind power
  • Educate staff on energy-saving best practices

Waste Reduction and Recycling Initiatives

  • Set up recycling stations and composting bins
  • Eliminate single-use plastics and switch to reusable products
  • Adopt paperless processes by digitising documents
  • Donate, sell or repurpose used office furniture and electronics
  • Work with vendors to reduce packaging waste

Implementing measures like these can significantly cut carbon emissions from SME operations. Small changes can make a real climate impact when undertaken collectively across businesses. By leading sustainability efforts, SMEs can future-proof their organisation while demonstrating social responsibility.

Importance of Carbon Footprint Awareness in Business Decisions

Discussing how carbon footprint considerations can guide SMEs in making more sustainable business choices.

Incorporating Carbon Footprint in Corporate Strategy

Calculating and tracking an organisation's carbon footprint over time allows SMEs to set effective emissions reduction targets and integrate sustainability into long-term business plans.

Understanding the breakdown of Scope 1, 2, and 3 emissions through a carbon footprint calculator gives clarity on the largest sources of greenhouse gas emissions from company operations and supply chain. This enables SMEs to pinpoint areas to focus policies, procedures, and investments for maximum emissions reductions.

For example, switching portions of a company fleet to electric vehicles, installing solar panels, improving waste management programs, and sourcing from low-emissions suppliers can significantly lower an SME's carbon footprint. If sustainability is made an integral part of the corporate strategy with emissions targets tied to executive incentives, it often leads to innovative solutions and impactful, organisation-wide changes.

Stakeholder Engagement and Transparency

Proactively communicating sustainability efforts like carbon footprint tracking and reduction initiatives helps SMEs meet rising stakeholder expectations around ethical practices and environmental stewardship.

With transparent annual emissions reporting and regular stakeholder calls focused on an SME's roadmap for improving the environmental footprint, companies can strengthen relationships with customers, investors, partners, employees and local communities. This builds brand reputation and trust.

Many funding agencies now require verified evidence of carbon footprint calculations and plans to address climate impact before approving loans and grants. So accurately tracking and disclosing emissions gives SMEs an advantage in accessing capital to support growth objectives.

Overall, an SME that understands its carbon footprint and engages stakeholders around improvement plans signals it is managing future risks, open to feedback, and committed to sustainability.

Case Studies: SMEs Reducing Their Carbon Footprint

Companies of all sizes are taking action to reduce their carbon footprints. Small and medium-sized enterprises (SMEs) often face greater challenges in this area due to limited resources. However, with some innovative thinking and smart investments, significant progress can be achieved. Here are two case studies of SMEs that successfully cut emissions:

Energy Sector Case Study: SME Innovations

A small solar panel installation company implemented several emission-reduction initiatives:

  • Installed solar panels on their office roof to power operations with clean energy
  • Purchased an electric company car for local transportation instead of a gas vehicle
  • Switched to digital document storage to eliminate paper use

These simple changes helped the SME slash its energy consumption and carbon footprint dramatically. The company shared its sustainability success story with customers to boost its brand image too.

Manufacturing Sector Case Study: Process Efficiency

A manufacturing SME producing plastic goods minimised waste by analysing its production inefficiencies. By optimising its processes, the company reduced plastic scrap by over 60%.

Additionally, they invested in energy-efficient equipment, automated high-emission tasks, and changed product delivery routes to lower fuel consumption. Through targeting inefficiencies, the company decreased carbon emissions without hurting productivity.

The success of these SMEs highlights the possibility for small companies to make a proportionally large sustainability impact. With thoughtful planning and a commitment to improvement, carbon footprints can be lowered through innovation.

Conclusion: Integrating Carbon Footprint Management in SMEs

Carbon footprint refers to the total greenhouse gas emissions caused directly and indirectly by an individual, organisation, event or product. It is increasingly becoming an important metric that businesses need to measure, understand, and reduce over time. This is especially crucial for small and medium-sized enterprises (SMEs) as sustainability becomes vital for growth.

In this article, we explored what carbon footprint means for SMEs, why it matters, and key strategies to calculate and mitigate emissions. Here is a recap of the main points:

Recap of Key Strategies and Tools

  • Measure carbon footprint using online calculators or dedicated software to get a baseline. Focus on emissions from operations, supply chain, transportation, energy usage.
  • Understand the sources of emissions using methods like a greenhouse gas inventory. Identify low hanging fruits to reduce footprint.
  • Set emissions reductions targets in line with climate science and net zero goals. Offset hard-to-abate emissions if needed.
  • Engage employees through campaigns to limit business travel, save energy, reuse and recycle. Incentivise sustainable choices.
  • Partner with green suppliers and logistics providers to reduce supply chain footprint.
  • Consider lifecycle emissions of products and move toward circular models to lower impact.

Final Thoughts on the Future of Carbon Footprint in SMEs

As stakeholder activism and extreme weather events continue to highlight climate change risks, tracking and disclosing carbon footprint is becoming imperative for SMEs. Those taking early action will gain sustained competitive advantage.

Automated and affordable carbon accounting solutions are making footprint reporting easier, allowing SMEs to identify and capitalise on emission reduction opportunities. Ambitious target setting aligned with climate science is key to thriving. Strategic partnerships and employee engagement will also drive the sustainability agenda at SMEs.

Overall, integrating carbon footprint management is not just an environmental issue but makes business sense for SMEs aiming for ethical growth. The continuing shift toward stakeholder capitalism and ESG metrics is bound to accelerate emissions focus in SMEs this decade.

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