Sector guide: how to reduce carbon in retail

UK governments are legally committed to reduce carbon emissions to ‘net zero’ – by 2045 in Scotland and by 2050 in England, Wales and Northern Ireland.

This means all businesses need to work out a net zero plan and reduce emissions as soon as possible.

The British Retail Consortium has set an industry target of net zero by 2040. This gives SMEs a starting point for deciding what they need to do and when.

Contents

  1. When you need to take action
  2. Measure your emissions
  3. Create a pathway to net zero
  4. Start by reducing your direct emissions
  5. Reduce supply chain and customer emissions
  6. Find funding and support
  7. Case studies

When you need to take action

Most businesses need to make significant changes to get on a path to net zero. You can take some actions right away for no or low cost while others take long term planning.

Many large retailers are committed to the British Retail Consortium’s Roadmap to reach net zero by 2040

This pathway has target dates for priority actions, starting with reducing direct business emissions. Logistics and supply chain emissions come later.

Important milestones on this pathway include:

By 2030

  • use 100% renewable electricity
  • use 100% zero carbon light commercial vehicles

By 2035

  • use 100% zero carbon last mile logistics
  • use 100% zero carbon heavy goods vehicles
  • use 100% LED lighting in buildings
  • use 100% low-impact refrigerants

By 2040

  • net zero for all retail products and services sold in the UK

Other representative organisations such as the National Farmers Union and Food & Drink Federation are also committed to net zero by 2040.

Future regulations and legal changes

While small businesses are not currently required by law to report or reduce emissions, a growing number of government regulations will affect retail operations.

These include:

  • 2022 – Plastic Packaging Tax from 1 April
  • 2022 – Future Buildings Standard uplifts from 15 June
  • 2025 – full Future Buildings Standard comes into effect
  • 2030 – no new sales of petrol and diesel cars and vans
  • 2035 – zero emissions for all new cars and vans

Measure your emissions

Most retail emissions come from the products you sell. 

According to industry estimates the carbon required to make, ship, use and dispose of products accounts for 75% of total retail emissions.

The remaining 25% is created directly from business activities such as powering company vehicles and buildings.

Start with calculating direct emissions

Measuring the carbon footprint of your business activities is an important starting point. These are known as ‘Scope 1’ and ‘Scope 2’ emissions.

To get started:

  1. Choose a ‘base year’ as a reference point, usually the last complete calendar or fiscal year for your business.
  2. Collect 12 months of usage data on electricity, gas, fuel and refrigerants.
  3. Input numbers into the Carbon Trusts’s SME Carbon Footprint Calculator

This will give you the amount of emissions created per year in kgCO2e – a measure of carbon dioxide and equivalent gases that contribute to global warming.

Add product emissions

For a complete accounting of your carbon footprint you need to calculate emissions created by the products you sell and add them to the kgCO2e from your business activities.

To do this you need to know how much carbon it takes to make, ship, use and dispose of your retail products. These are known as ‘Scope 3’ emissions. This category also includes carbon from activities like commuting, leased assets and investments.

Use the Greenhouse Gas Protocol’s Scope 3 calculator to get started. This helps estimate Scope 3 emissions based on the amount and types of products you sell each year.

You will need information such as the total weight of products and their material composition. Download a requirements spreadsheet to find out what data you need to get started.

Create a pathway to net zero

Once you have an idea of yearly emissions you need a plan to reduce them. 

Net zero by 2050 is the latest date to avoid the worst effects of climate change, so it makes sense to set an earlier target if possible.

Start with your ‘base year’ emissions and make a plan to cut them in half. Year over year reductions compound so you would need a:

  • 7% yearly reduction to halve emissions over 10 years
  • 13% yearly reduction to halve emissions over 5 years
  • 21% yearly reduction to halve emissions over 3 years

In this way you can make successive plans to halve emissions and approach net zero by a target date before 2050.

For remaining emissions that can’t be eliminated yet, buy carbon offsets (insert anchor link) from credible sources.

Free tools such as the SME Climate Commitment can help you set up a profile for your business and stay on track with ongoing reductions.

Start by reducing your direct emissions

It often makes sense to start by reducing the carbon your business creates directly through powering buildings, equipment and transport.

In many cases there are no or low cost options that quickly pay back upfront costs. Government grants and schemes are also available to help.

Use less energy to heat and cool buildings

If you own your place of business (or have permission from the owner) there are several ways you can make energy efficiency improvements that reduce emissions.

According to the Energy Savings Trust the average SME can reduce its energy bill from 18 to 25% with efficiency measures and behavioural changes.

It makes sense to look at your heating, ventilation and cooling (HVAC) systems first. These account for 40 percent of an average SME’s total energy bill.

Measures range from setting temperatures lower and sealing draughts to investing in new insulation and equipment such as heat pumps. 

Visit our energy savings page for detailed guidance.

Improve lighting

Lighting accounts for 14% of the average energy bill for commercial buildings. This amount can often be reduced through low cost upgrades, maintenance and using natural light.

In retail lighting is particularly important to create a positive customer experience. Measures such as replacing older bulbs with LEDs and maximising natural light can bring commercial benefits aside from energy savings.

Visit our energy savings page for detailed guidance.

Make sure equipment runs efficiently

While the amount and type of equipment varies between retail businesses, it makes sense to check whatever machines you have are running efficiently.

This is particularly true if you have energy intensive equipment such as refrigerators or anything mechanical powered by motors and compressors.

Simple tips like installing PVC curtains over open display refrigerators or freezers can make a significant difference without harming customer experience.

Replacing older equipment, checking for leaks and doing regular maintenance can also make a big difference.

Visit our energy savings page for detailed guidance.

Switch to a green energy supplier

The fastest way to decarbonise the electricity your business consumes is to switch to a certified green energy supplier. Green energy rates can now match traditional ones. 

If you’re nearing the end of your business energy deal or you can switch deals without penalty, it makes sense to look into what’s available.

Visit our switch to renewable energy page for detailed guidance.

Produce your own energy

Retailers can also use renewable energy at their place of business by installing equipment such as solar panels, heat pumps and wind turbines. 

If you’re producing your own energy, long-term savings usually make up the upfront installation costs over time.

Go to our renewables page for more advice and to find grants, loans and tax benefits to help with upfront costs. 

You can also learn more about installing a heat pump, wind turbine, or solar panels.

Switch to electric vehicles

There is a growing range of zero or low emission EVs you can buy, rent or lease. Compared to petrol and diesel vehicles they have lower running and repair bills, and discounts are available to reduce upfront costs.

If you have a company vehicle or fleet, switching off petrol is one of the highest impact actions you can take to reduce direct emissions. You can also look for delivery services that use battery powered bicycles or vehicles.

Go to our electric vehicles page for more advice and to find grants and other financial benefits.

You can also find guidance on electric vans in particular.

Buy carbon offsets as a last resort

Following your pathway to net zero, emissions should be reduced as much as possible before you consider buying offsets. 

For emissions that can’t be eliminated, offsets let you pay for an equivalent amount of carbon to be decreased elsewhere. These may be necessary given the urgency of avoiding the worst effects of climate change.

If you buy offsets it is important to use verified products that genuinely reduce carbon. 

Visit My Carbon Plan for a list of offsets that fund carbon removal projects in the UK.

Reduce supply chain and customer emissions

Most retail emissions come from sources ‘upstream’ and ‘downstream’ of your business.

They can also be challenging to reduce because they are outside your business operations and come from assets you don’t own or directly control. 

Yet as suppliers and customers reduce their carbon footprints, there are more options for retailers to offer lower carbon products and ways of shopping.

Sell lower carbon products

It’s important to know which products create the most carbon and start there. This is easiest if you work with a supplier that can provide emissions data. 

After you figure out which products to target, you can:

  • ask suppliers about lower carbon options for similar products
  • look for small producers that have lower carbon production methods
  • join a buying group that can help procure green products

Retail products can take less carbon to produce, use and dispose of if they:

  • are transported shorter distances
  • avoid carbon-intensive roadway transport
  • are certified with sustainable standards such as the Forest Stewardship Council
  • are made of recycled or reused materials
  • have minimal packaging 

Partnering with other retailers and suppliers who are committed to sustainability can also increase your influence and ability to reduce supply chain emissions.

Offer products that can be resold, rented or repaired

One of the fastest ways to reduce indirect emissions is to shift to ‘circular economy’ products that can be used by multiple customers. 

This could involve offering:

  • rentals for infrequently used products
  • repair services
  • resale programs for products that can be refurbished

It is estimated that less than 10 percent of the global economy is currently circular. 

According to the Circularity Gap Report a shift to reuse could save up to 40 percent of the emissions caused by the creation and use of consumer products.

Use lower carbon logistics

Though logistics account for less than 10 percent of retail emissions, the desire to ‘buy local’ and reduce the distance products travel is a popular way consumers take climate action.

The type of transport used to move goods to retail outlets is also a factor. Sea, rail and even air freight are usually less impactful than traditional road transport. This could change in the future as HGVs and LGVs move toward cleaner fuels and electrification.

Retail SMEs can take action by encouraging suppliers to make deliveries in lower carbon ways, and using electric vehicles in their own fleets.

Go to our page on reducing the impact of transport for more advice.

Subsidise low carbon commuting

Fuel used by employees and customers to get to your business is considered an external source of emissions. Reduce this by offering incentives to take public transit, use an EV, walk or cycle to your business. 

This could include offering:

  • EV charge points in your parking lot
  • subsidies for employee transit passes
  • change and shower facilities for employees who cycle

Go to our page on reducing the impact of transport for more advice.

Get more detailed information

The British Retail Consortium has a guide to monitor, measure and reduce supply chain emissions (PDF).

The 1.5C Business Playbook also has a chapter on reducing value chain emissions (PDF).

Find funding and support

There are a growing number of support programs to help retail SMEs transition to lower carbon operations.

Find funding by UK region

Use our regional support page to find funding programmes in your UK region. 

Most provide matching funds or free expertise for energy efficiency upgrades, conversion to renewables or the development of green business products.

Get a discount on a low carbon heating system

Starting 23 May 2022 you can apply for a grant toward a heat pump or biomass boiler if you:

  • own your home or small non-domestic building
  • have an Energy Performance Certificate showing adequate insulation
  • are located in England or Wales

Check GOV.UK for full eligibility details.

Get a business rate exemption on renewable energy generation and storage

From April 2022 you can get a business rate exemption for eligible equipment used in onsite renewable energy generation and storage.

According to the Spring Statement you must be located in England and purchase:

  • solar panels, heat pumps or other onsite renewable technology
  • energy from low-carbon heat networks

Check GOV.UK’s guidance on business rate relief for full details when they become available.

Sign up for Green Street

Green Street is a website by and for retailers who want to take climate action. It has practical ways to get started and you can sign up for a free sustainability review of your business. 

If you become a ‘Green Street pioneer’ you also get access to:

  • the latest research on customer behaviour
  • free workshops from leading retailers
  • network with other local retail businesses

Join the BIRA buying group

The British Independent Retailers Association (BIRA) runs a buying group that helps members get better deals from suppliers. It can help you source green products and work with more sustainable suppliers.

Follow the retail roadmap to net zero

The British Retail Consortium (BRC) has published a detailed Climate Action Roadmap that sets binding targets to reach net zero total emissions in retail by 2040. 

BRC members can commit to meet the targets set out in the roadmap. You need to be able to measure your annual emissions and submit a report to the BRC. Contact climate@brc.org.uk to find out more.

Use the SME Climate Hub

If you make the SME Climate Commitment you get access to a customised tool for tracking and measuring your carbon. You need to commit to halving your emissions by 2030 and reaching net zero by 2050.

You can also use the site’s free information tools. This includes the 1.5C Business Playbook which gives practical advice to SMEs.

Ask your bank about green financing

A growing number of banks offer services that can help businesses get funds for carbon reduction projects. Ask your financial institution about green loans and other products designed to reduce carbon.

Case studies