How to build a net zero plan for a manufacturing SME

Why a plan is worth writing now

The UK is committed in law to net zero greenhouse gas emissions by 2050, under the Climate Change Act 2008 (2050 Target Amendment) Order 2019. That target places no direct duty on most small firms. The pressure reaches them through their customers, who count their suppliers' emissions as part of their own.

The British Business Bank's 2025 Net Zero Business Census surveyed 1,783 small and medium-sized enterprises (SMEs). In manufacturing and production, 16% had been asked for carbon data by customers or in tenders in the previous 12 months. Only 6% of manufacturing SMEs had set a net zero target.

Across all SMEs in the same census, 77% had taken at least one action towards net zero, most often on energy efficiency. Only 20% had measured any part of their footprint. Most firms are already doing something. Far fewer have measured where they start.

Step 1: name an owner and gather the records

Give one person responsibility for energy and emissions, with a few hours a month to do it. On a larger site, add someone from production, maintenance and finance. Those are the people who see the waste, fix it and approve the spending.

Then collect twelve months of records, ideally for your last financial year. Most of what you need is already in the office.

Step 2: measure your baseline

Your baseline is the footprint for one full year, the base year, that every later year is compared with. Start with your own operations. Scope 1 covers the fuel you burn and the gases you release on site. Scope 2 covers the electricity and heat you buy. If the terms are new, carbon accounting basics explains them from the start.

Each figure is worked out the same way: the amount you used multiplied by a conversion factor. For UK activity, use the greenhouse gas conversion factors that the Department for Energy Security and Net Zero (DESNZ) publishes each year. Pick the set that matches your reporting year, and write down which one you used.

Report electricity twice. The location-based figure uses the grid average. The market-based figure uses your supplier's own figure or renewable certificates. The Greenhouse Gas Protocol's Scope 2 Guidance asks for both, and a greener tariff changes only the second one.

Filling gaps in the data

Almost every first baseline has a missing bill or a faulty meter. Fill short gaps pro rata and mark the result as an estimate, so it can be replaced when the real data arrives.

1. 1Add up what you haveTotal the consumption on the bills you hold, and count the days they cover.
2. 2Work out a daily averageDivide the total by the number of days covered.
3. 3Fill the missing daysMultiply the daily average by the number of days missing, and add the result to your total.
4. 4Record the methodNote which months were estimated and how. If production in the missing months was very different, use the same months from the previous year instead, and check that year was a normal one.

Then take a first look at your value chain, Scope 3. For most manufacturers, purchased materials and freight are the largest parts. A rough first estimate is enough to show where to look, and you can improve it each year.

Step 3: find the hotspots and the quick wins

With a baseline in hand, rank your sources from largest to smallest. In most factories a few of them, often gas for process heat, electricity for motors and compressed air, and vehicle diesel, make up most of the total. Those are where the plan should start.

Walk the site out of hours, at night and at a weekend, and note everything still running. Plant left on with nobody using it is usually the cheapest saving on a site. Our guide to mapping a factory's energy use shows how to find where the energy goes, system by system.

Sort what you find into two lists. Operational changes, such as controls, maintenance, leak repairs and shift routines, cost little and come first. Capital projects, such as a new boiler, a heat pump or rooftop solar, come later, and cost less once demand has come down.

Step 4: set a target and write the action plan

A target gives the plan a destination. It should state the scope it covers (Scope 1 and 2 at least, and whether Scope 3 is included), the base year, the size of the cut and the year it will be reached. Pick a first milestone close enough to build a business case around, and far enough away to include your equipment replacement cycles.

If you plan to make the target public, our article on climate commitments compares the routes, including the Science Based Targets initiative.

Then turn the target into measures. For each one, record the likely saving in energy and emissions, the cost, who owns it and when it will be done. That list is what makes the target believable to a customer or a lender.

Time the large items with the natural replacement of your equipment, so the next boiler, compressor or furnace is a lower-carbon one. Putting them in the plan now gives you time to find the money, which our article on paying for low-carbon upgrades covers.

Some buyers also set the format. For central government contracts worth more than £5 million a year, Procurement Policy Note 006 asks bidders for a Carbon Reduction Plan in its set format.

Step 5: track and report every year

Recalculate your footprint every year on the same basis and compare it with the base year. Explain what moved the numbers: a new site, a new product line, a change in output or a cleaner electricity grid.

If production changes a lot from year to year, report emissions per tonne or per unit of output alongside the total. If your method improves, recalculate the base year and say so.

• Report the years that did not go to plan as well as the ones that did.
• Keep the bill or invoice behind every figure, so anyone can check it.
• Share results with the staff who made the changes. They are the ones who find the next saving.
• Review the action plan once a year and add the next measures.

How ESGen helps

The ESGen platform builds your Scope 1 and 2 baseline from electricity, gas, diesel, petrol and staff-car mileage records, using DESNZ conversion factors. It adds the upstream energy share of Scope 3 for you. You can set up each site and meter separately. Every figure keeps its bill in the evidence library and its working in a calculation log. See carbon assessment.

The platform has a Carbon Reduction Plan lens, and our team writes the plan with you. Where they apply, our team also prepares Streamlined Energy and Carbon Reporting (SECR) figures and reports under VSME, the voluntary EU reporting standard for smaller firms. Target-setting is work our team does with you rather than a platform feature. See ESG reporting.

ESGen helps prepare structured reporting evidence. No software makes a business compliant on its own, and we are not an energy auditor or an installer. To see what a baseline from your own bills looks like, book a demo.