UK Government Urged to Cut Carbon Accounting Red Tape

Energy Systems Catapult calls for new UK carbon reporting office

The Energy Systems Catapult has proposed that the UK government establish a dedicated Carbon Reporting and Innovation Office to standardise emissions data and reduce the compliance burden facing businesses. The initiative would aim to cut through fragmented reporting requirements while improving the quality and comparability of carbon disclosures across the economy.

The proposal comes as UK businesses face growing demands for emissions data from investors, customers, and regulators. However, the current system requires firms to report similar information multiple times using different methodologies. This creates significant administrative costs, particularly for smaller organisations without dedicated sustainability teams.

According to the Energy Systems Catapult, the proposed office would sit within the Financial Reporting Council. It would focus on professionalising carbon accounting standards, building digital infrastructure to reduce repeated disclosures, and making emissions data more useful for decision-making. The organisation frames this as both a regulatory reform and an economic opportunity for UK businesses.

How the proposed office would operate

The Carbon Reporting and Innovation Office would require between 30 and 50 employees to operate effectively. The Energy Systems Catapult estimates an annual budget of £2 million to £5 million would be needed initially. Long-term funding would come from a levy on the carbon accounting sector itself, rather than general taxation.

The proposed rollout would take 12 to 18 months from approval to full operation. This timeline reflects the need to establish governance structures, recruit technical staff, and build the digital systems required to collect and distribute emissions data more efficiently. The office would not create new disclosure obligations for businesses. Instead, it would consolidate existing requirements and standardise the formats used for reporting.

Digital infrastructure forms a central part of the proposal. The Energy Systems Catapult envisages a distributed data exchange that would allow businesses to submit emissions information once, then share it with multiple recipients as needed. This would replace the current model where firms often prepare separate carbon reports for different audiences using inconsistent methodologies.

The office would also work to improve the professional standards applied in carbon accounting. Many businesses currently lack confidence in the accuracy of emissions data, particularly when it comes to supply chain emissions known as Scope 3. Better training, clearer guidance, and consistent verification processes could address this issue over time.

Compliance costs and the case for reform

Small and medium businesses face particular challenges with carbon reporting. Unlike larger corporations, they typically cannot afford specialist sustainability staff or expensive carbon accounting software. As a result, compliance becomes a significant drain on time and resources that could otherwise support core business activities.

The current reporting landscape requires businesses to provide emissions data in multiple formats depending on the audience. Public sector suppliers must comply with Procurement Policy Note 06/21, which requires carbon reduction plans and annual reporting. Companies seeking finance may need to provide environmental data to satisfy investor due diligence requirements. Meanwhile, customers in the supply chain increasingly request product-level carbon footprints using various calculation methods.

Each of these requests involves similar underlying data, but the formats and methodologies differ. Consequently, businesses spend considerable time reformatting and recalculating the same information. The Energy Systems Catapult argues this duplication serves no useful purpose and diverts resources from actual emissions reduction activity.

The proposal links directly to the government’s broader deregulation agenda. Ministers have committed to cutting £5.6 billion in regulatory costs during this Parliament. Therefore, reforms that maintain reporting standards while reducing administrative burden align with stated policy priorities. The Energy Systems Catapult suggests that better carbon data infrastructure could contribute to this target while simultaneously improving the quality of information available to decision-makers.

For businesses, standardisation would bring several practical benefits. Firms would spend less time preparing multiple versions of similar reports. Comparisons between organisations would become more meaningful, helping customers make informed procurement decisions. Moreover, investors would gain clearer insight into which companies are genuinely reducing emissions versus those simply presenting data favourably.

Carbon reporting requirements across UK businesses

• The Energy Systems Catapult proposes a Carbon Reporting and Innovation Office within the Financial Reporting Council to standardise emissions disclosures and reduce compliance costs for businesses.
• The office would require 30 to 50 staff and an annual budget of £2 million to £5 million, with long-term funding from a sector levy rather than general taxation.
• Implementation would take 12 to 18 months from approval, focusing on digital infrastructure that allows businesses to report emissions data once and share it with multiple recipients.
• The proposal addresses fragmented reporting requirements that currently force businesses to prepare separate carbon disclosures for customers, investors, and regulators using inconsistent methodologies.
• The initiative connects to the government’s commitment to cut £5.6 billion in regulatory costs this Parliament while maintaining environmental disclosure standards.
• Better standardisation would particularly benefit SMEs, which typically lack dedicated sustainability staff and find current compliance requirements disproportionately burdensome.
• The Energy Systems Catapult frames improved carbon accounting infrastructure as an economic opportunity that could help UK businesses attract investment and accelerate low-carbon technology adoption.

Supply chain pressures and procurement requirements

Carbon reporting has moved from a voluntary corporate responsibility exercise to a commercial necessity for many businesses. This shift reflects growing pressure from multiple directions. Customers want to understand and reduce emissions across their supply chains. Financial institutions increasingly factor climate risk into lending and investment decisions. Furthermore, public sector procurement now explicitly requires carbon reduction plans from suppliers.

Procurement Policy Note 06/21 exemplifies this trend. Introduced in 2021, it requires suppliers bidding for government contracts above £5 million to demonstrate their approach to reducing carbon emissions. Businesses must publish a carbon reduction plan showing their current emissions, reduction targets, and the measures they will implement. Many private sector organisations have adopted similar requirements for their own suppliers.

This means a manufacturing business supplying both public and private sector customers might need to prepare carbon disclosures for each major customer, plus separate reports for their bank or investors. If methodologies differ, the same emissions data must be recalculated and presented multiple times. For smaller firms with limited resources, this becomes a barrier to competing for contracts or accessing growth capital.

The Energy Systems Catapult argues that inconsistent data also undermines the market for low-carbon innovation. Businesses developing new technologies or processes struggle to demonstrate their environmental benefits clearly when carbon accounting methods vary. Investors find it harder to compare opportunities and assess claims. As a result, capital may not flow efficiently to the most promising solutions.

Standardised reporting would make it easier for businesses to demonstrate their environmental performance credibly. Supply chain emissions represent the largest component of most organisations’ carbon footprints. However, calculating these Scope 3 emissions requires data from suppliers, who may not measure or report their own emissions consistently. Better infrastructure and clearer standards could improve data quality throughout supply chains.

What standardisation means for business planning

The proposed office would not eliminate carbon reporting requirements. Businesses would still need to measure and disclose their emissions. However, the process would become more efficient and the outputs more useful. This matters because carbon reporting increasingly influences business decisions rather than simply documenting past performance.

Many organisations now use emissions data to identify cost-saving opportunities. Energy consumption represents both carbon emissions and a direct cost to the business. Therefore, better data can highlight where efficiency improvements would deliver financial returns. Similarly, understanding supply chain emissions helps businesses identify which suppliers or materials contribute most to their carbon footprint, informing procurement decisions.

Investors and lenders increasingly request emissions data as part of their risk assessment processes. Financial institutions recognise that climate-related risks can affect business performance and asset values. Companies with high emissions intensity may face higher costs as carbon pricing expands or regulations tighten. Consequently, firms that cannot provide credible emissions data may find it harder to access capital on favourable terms.

The Energy Systems Catapult suggests that better carbon accounting infrastructure could position the UK as a leader in this growing field. As emissions reporting becomes mandatory in more jurisdictions, demand for reliable methodologies and digital systems will increase. UK businesses and service providers could export expertise and technology developed through improved domestic standards.

For businesses considering their next steps, the proposal signals that standardisation is likely coming regardless of this specific initiative. The direction of travel points towards more consistent and comparable emissions reporting. Therefore, organisations should focus on improving the quality of their underlying emissions data rather than simply meeting minimum disclosure requirements. This preparation will pay dividends as standards evolve and stakeholder expectations increase.

Official guidance and reporting frameworks

Businesses looking for current guidance on carbon reporting should refer to several authoritative sources. The UK government publishes annual greenhouse gas conversion factors that provide the standard methodology for calculating emissions from energy use, transport, and other activities. These factors ensure consistency when businesses measure their carbon footprints.

The Financial Reporting Council oversees corporate reporting standards in the UK, including sustainability disclosures. The FRC website provides information on current requirements and guidance for larger companies subject to mandatory climate reporting. The Energy Systems Catapult proposes that the new carbon reporting office would operate within this existing regulatory structure.

For public sector suppliers, Procurement Policy Note 06/21 sets out the specific requirements for carbon reduction plans when bidding for government contracts. This guidance explains what businesses must include in their submissions and how emissions should be calculated and reported.

Businesses can also access support through our compliance services, which help organisations navigate carbon reporting requirements and prepare the documentation needed for tenders and regulatory disclosures. As reporting standards evolve, having reliable systems in place becomes increasingly important for maintaining competitiveness and meeting stakeholder expectations.