Net Zero Reporting Requirements: Understanding Your Business Obligations

These regulations impact your reputation, operations and ability to win contracts. Committing to the green economy is a key way to ensure the future of your business.

You need to know which reporting rules apply to your business and how to prepare documents that meet the latest standards. Thousands of UK businesses are now required to complete detailed public reports, aligning with government targets and customer expectations.

By understanding your obligations and putting robust processes in place, you can streamline compliance and position your business as a leader in sustainability. Here, we cover everything you need to know about net zero reporting and how you can make the process accurate and streamlined.

Understanding net zero reporting requirements

Net-zero reporting is now a significant part of business compliance. You need to understand specific terms, legal roles and the main elements that make up these reporting rules.

Definition and scope of net zero reporting

Net-zero reporting means your business must show how it is working towards reducing greenhouse gas emissions to as close to zero as possible, with any remaining emissions balanced by removing the same amount from the atmosphere. This is done using a clear, consistent and science-based definition.

The reporting falls under the Streamlined Energy and Carbon Reporting Framework (SECR), which is the reporting mechanism net-zero emissions must be shared under. It covers all emissions, usually broken down into three scopes:

• Scope 1: direct emissions from your own operations.
• Scope 2: indirect emissions from the energy you use.
• Scope 3: all other indirect emissions from your value chain.

These requirements apply to businesses of a certain size or annual revenue, with specific rules set by your local regulators. To stay credible, you should use frameworks such as the Corporate Net-Zero Standard, set out by the Science-Based Targets Initiative.

Legal and regulatory obligations

You might be legally required to create and publish a detailed net-zero or carbon reporting plan. In the UK, for example, new rules mean businesses must set a clear path for meeting net-zero. These rules also require annual public reporting and apply to around 11,300 businesses currently.

Businesses must include clear numbers on absolute emissions, not just the intensity or efficiency. The information should be available to stakeholders such as customers, investors and regulators. Sector-specific criteria might apply depending on your industry.

Currently, businesses obligated to report under the SECR are considered "large companies", and there are two definitions of this. Firstly, SECR reporting applies for businesses:

• who are listed on the stock exchange (i.e. those that are quoted companies)
• that are defined as "large" by the Companies Act 2006
• limited liability partnerships (LLPs) who meet the criteria of "large"

On point two, the Companies Act 2006 definition of large covers businesses who have:

• a gross income of £36 million+
• a balance sheet of £18 million+
• over 250 employees.

Businesses who do not meet these criteria are not obligated to report their carbon emissions under the SECR, but they're encouraged to do so voluntarily. Providing your emissions data by choice offers benefits to your business, including a better brand perception if your organisation has measures in place to reduce or offset your emissions.

80% of consumers would be willing to pay more for sustainable products or to businesses committed to the environment, with more awareness of the impacts of climate change than ever before. That's why voluntarily reporting your own progress could make your business more appealing to both current and prospective customers and clients.

Key components of net zero reporting

To meet net-zero reporting requirements, you need to collect and share accurate data about your greenhouse gas emissions each year. This includes:

• all your business' global greenhouse gas emissions for the year, plus the previous year as a comparison
• the energy used to calculate your emissions data
• a minimum of one intensity ratio (a metric used to contextualise carbon output, such as tonnes of CO2 per square metre of space, per hundred products manufactured or per £1,000 in revenue)
• the actions you'll take to further reduce your emissions.

You'll need to explain the methods and assumptions used, and if possible, use independent verification for extra credibility.

Your business obligations and effective implementation

Meeting net zero reporting requirements involves a strong approach to planning, regular measurement and transparent communication. By actively engaging with both technology and stakeholders, you can evidence your business' commitment to regulatory compliance and the fight against climate change.

Establishing a net zero roadmap

To get started, your business needs a detailed net zero roadmap. This should outline clear steps for reducing your carbon footprint with measurable goals and deadlines.

Start by mapping out your entire value chain and identifying where your emissions come from. Engage stakeholders across supply chains, finance, operations and management. Be sure to include both direct and indirect emissions, which are known as scope 1, 2, and 3 emissions.

Microsoft Dynamics 365 Business Central offers robust capabilities for managing company processes and monitoring environmental data.

Reporting mechanisms and tools

Regular, accurate reporting is essential for compliance and maintaining credibility. Use digital solutions like Dynamics 365 Business Central to automate data collection and reporting across your business.

Implement a reliable reporting mechanism that supports climate risk assessment and aligns with voluntary standards where required. Many companies now publish a detailed carbon reduction plan or transition plan that includes progress reports, interim targets and actions taken.

Compliance and progress monitoring

Once you have a plan and reporting tools in place, monitor progress to ensure that you stay on track. Set up regular checks to review your performance against key metrics and interim targets.

Dynamic platforms, such as Microsoft Dynamics 365 Business Central, let you track and respond to compliance risks in real time. This adaptative approach means you can update your carbon reduction strategies as your business evolves.

Engage stakeholders by sharing progress updates and inviting feedback. A structured progress report should include achievements, lessons learned and any corrective actions planned. By maintaining clear records, you support internal accountability and can meet the growing demands of regulators and customers for action on climate change.

Using Dynamics 365 for net zero reporting

Meeting net zero and SECR reporting obligations doesn't have to be a time-consuming or business-interrupting process. With Dynamics 365 Business Central, the process of tracking, managing and reporting your environmental impact can be built into your existing workflows, helping you stay compliant and contribute to national net zero goals without the extra hassle.

There are a range of features in Dynamics 365 Business Central Sustainability that make meeting your reporting obligations -- or voluntarily reporting on your emissions -- simple and efficient.

Ledger entries form sustainability journals

The sustainability journals feature enables you to log energy usage and emissions through ledger entries. You can enter data manually or use formulas and input parameters to automate calculations, giving you full flexibility in how you record the information required for SECR and other net zero reporting frameworks.

Easily create standardised sustainability reports

Dynamics 365 makes it easy to generate consistent, standardised environmental reports. You can currently access three key report types: total emissions, emissions by facility and emissions by category, all designed to help you meet your compliance requirements under SECR and support your broader net zero strategy.

Dedicated role centre

Within your Dynamics 365 Business Central interface, the sustainability manager role centre provides a clear view of your environmental performance. Track daily and monthly emissions, measure progress against your interim targets and monitor your key KPIs, all in one place, and all aligned to support your SECR obligations and net zero goals.

Discover how Dynamics 365 helps you meet your environmental reporting requirements

This video walks through using Dynamics 365 BC Sustainability for tracking and reporting emissions in line with SECR and net zero targets:

https://www.youtube.com/watch?v=uan4dV9eVCA&list=PL1FESh9FqyhQMW97Xv5buXYEO-rVreXTc&index=1

Frequently asked questions

UK businesses face a range of clear legal and practical obligations in order to reach net zero. Understanding specific requirements, reporting steps and the consequences of non-compliance helps you meet your requirements.

How will net-zero pledges influence my business operations?

You will need to measure and reduce greenhouse gas emissions across your supply chain. These commitments often impact purchasing, manufacturing and logistics decisions.

Net zero strategies encourage operational changes, such as switching to renewable energy, improving energy efficiency and integrating sustainability into day-to-day processes.

Can you outline the key principles that should guide a company's net zero strategy?

A clear net zero strategy requires your company to set science-based targets for reducing emissions. It should cover all key greenhouse gases your business emits and address both direct and indirect emissions. As you move towards net zero emissions, you should outline your transition plans.

Transparency, credible data and regular progress reviews are vital. Your business climate action and reporting should align with the SECR requirements.

What does an effective net zero policy document for companies entail?

An effective net zero policy includes measurable goals and a clear timeline. It defines responsibilities across teams and provides steps for regular monitoring and reporting.

Policies should integrate with your broader sustainability objectives and engage both staff and suppliers to support emission reductions. Publicly reporting progress helps demonstrate your ongoing commitment.