Should my business have a carbon budget?

Net zero is a hot topic at the moment, with companies across all industries under increasing pressure to reduce their carbon footprints. While there are a range of ways to work towards this goal, one effective method is to create a carbon budget.

What is a carbon budget? 

A carbon budget is the maximum amount of greenhouse gases (GHGs) a company can emit over a specific period. The government sets one, so it makes sense for businesses to do the same. This strategic approach helps organisations set, track and achieve emissions reduction targets in line with their net zero goals.

Think of it like a financial budget; just as companies allocate money to different departments, a carbon budget allocates emissions across business units, projects, or operations. The goal is to stay within the ’emissions allowance’ while continuing to grow – sustainably.

The benefits of a carbon budget 

Climate accountability: It provides a clear framework for aligning corporate actions with science-based climate targets. 

Risk management: Helps identify carbon-intensive operations and mitigate regulatory, reputational and financial risks. 

Customer confidence: Demonstrates a proactive approach to sustainability, which is increasingly valued by customers. 

Operational efficiency: Encourages innovation and efficiency by spotlighting areas where emissions (and often costs) can be reduced.

How to implement a carbon budget 

When creating a budget, it’s important to make sure it’s realistic. Here’s a step-by-step guide to building a carbon budget within your company: 

1. Measure your baseline emissions 

Start with a comprehensive GHG inventory, which should cover:  

• Direct emissions (e.g., company vehicles, on-site fuel use) 
• Indirect emissions from purchased electricity
• All other indirect emissions (e.g., supply chain, business travel) 

This might seem daunting, but many companies offer this service, as well as funded training available should you wish to do it in-house. Check with your local council to see what’s on offer.  

2. Set your carbon targets 

These can be set internally based on your company’s own carbon goals or by using frameworks like the Science Based Targets initiative (SBTi) to define emissions reduction goals that align with climate science.  

3. Allocate the budget 

Distribute the total emissions allowance across departments or business units. This can be based on historical emissions, revenue or operational size and activities.  

For example, for a manufacturing facility, the production line may have a greater allowance than the office due to a much greater energy demand. 

4. Integrate into decision-making 

Incorporate carbon costs into project planning, procurement and investment decisions. Could you amend your supply chain to improve your carbon savings? Or maybe better manage transport and deliveries for an upcoming project? Or better still, invest in solar and storage to take control of your carbon emissions through energy generation.  

5. Monitor and report progress 

Track emissions periodically and adjust strategies as needed. Transparent reporting builds trust and accountability. Make sure everyone involved knows the impact they are having.  

Engaging employees in carbon budgeting 

For carbon budgeting to truly be successful, employee engagement is crucial. But there are many practical ways to bring your team on board: 

1. Make it personal 

Help employees understand how their daily actions impact the company’s carbon footprint. This can include commuting, energy use and business travel. Use relatable examples and encourage reflection. 

2. Create green champions 

Identify and empower sustainability ambassadors across departments to lead initiatives, share knowledge and inspire others. Green leaders are team leaders!  

3. Gamify the process 

Introduce challenges, leaderboards or rewards for teams that reduce emissions or suggest innovative low-carbon solutions. If using rewards, why not make them low carbon to further push the sustainability message?

4. Offer training and resources 

Provide workshops, webinars and toolkits to educate staff on carbon budgeting, climate science and sustainable practices. There are many free online resources available and companies who specialise in delivering training. Carbon Literacy training is a great way to educate your team with a better understanding of carbon.   

5. Celebrate successes 

Recognise milestones. Whether it’s a department hitting its carbon target or an employee-led initiative that made a difference, be sure to shout about it.  

6. Encourage bottom-up ideas 

Have a suggestions box for sustainability improvements or an easy process of communication.  Often, the best ideas come from those closest to the work! 

Working together towards a low-carbon world

Carbon budgeting isn’t just about ticking boxes, it’s a smart way to drive innovation, build resilience, and lead in a low-carbon world. As rules get stricter and expectations grow, companies that make carbon budgeting part of their everyday operations and get their teams involved will be in a much better position to succeed. 

Contact our team for more information on how your company can work towards a greener, more sustainable future.