For most small businesses in India, carbon accounting sounds like something large corporations do to satisfy their ESG consultants. The reality is shifting fast. Whether you are a garment exporter in Tiruppur, a food processor in Pune, or a mid-sized IT services firm in Hyderabad, the pressure to measure and disclose your greenhouse gas emissions is no longer theoretical — it is arriving through your customer contracts, your bank’s lending criteria, and increasingly, through regulatory requirements.
This guide explains carbon accounting in the Indian business context — what the frameworks are, which regulations apply, and how a small or medium enterprise can get started without a dedicated sustainability team.
The Indian Regulatory Landscape: What Applies to You
India’s carbon disclosure requirements have historically been voluntary for most businesses, but that is changing. Here are the key frameworks an Indian SME needs to understand:
SEBI BRSR: The Listed Company Benchmark
The Securities and Exchange Board of India (SEBI) mandated the Business Responsibility and Sustainability Report (BRSR) for the top 1,000 listed companies by market capitalisation from FY 2022-23 onwards. BRSR requires companies to disclose Scope 1 and Scope 2 emissions, energy intensity, and water and waste data. From FY 2024-25, SEBI extended BRSR Core reporting with assurance requirements to the top 150 listed companies.
If your business is not listed, BRSR does not apply directly — but it matters to you anyway. Large listed companies are increasingly passing BRSR supply chain requirements down to their vendors and suppliers. If you supply to a BRSR-reporting company, expect to be asked for your emissions data as part of their Scope 3 calculation.
BEE and the PAT Scheme: Energy Intensity for Industry
The Bureau of Energy Efficiency (BEE) runs the Perform, Achieve and Trade (PAT) scheme, India’s primary mechanism for mandating energy efficiency improvements in energy-intensive industries. PAT covers designated consumers (DCs) in sectors including aluminium, cement, chlor-alkali, fertilisers, iron and steel, paper and pulp, petrochemicals, railways, textile, and thermal power plants.
If your business falls within a PAT-designated sector and meets the energy consumption threshold, you are already required to measure energy intensity, report to BEE, and achieve specified reduction targets. Carbon accounting sits naturally alongside this framework — energy consumption data you already collect for PAT is directly convertible to Scope 1 and Scope 2 emissions.
Carbon Credits and the Indian Carbon Market
India is developing a domestic carbon market under the Carbon Credit Trading Scheme (CCTS), notified by the Ministry of Power in 2023. The scheme is structured around the existing PAT framework and will allow entities to trade carbon credit certificates. While the market is still in early stages, its existence creates a financial incentive for Indian businesses to measure and reduce emissions — verified reductions can become tradeable assets. The green economy implications for Indian industry are significant.
Export Market Pressure: CBAM and Beyond
Indian exporters face a specific and urgent driver: the EU Carbon Border Adjustment Mechanism (CBAM). From 2026, imports of carbon-intensive goods — initially steel, aluminium, cement, fertilisers, electricity, and hydrogen — into the EU will require verified emissions data. Indian manufacturers in these sectors who cannot provide documented carbon content for their goods will face a carbon tax at the EU border, directly affecting their price competitiveness.
Even for sectors not yet in CBAM’s scope, global buyers — particularly European and US retailers in textiles, food, and consumer goods — are embedding supplier emissions disclosures into procurement criteria. This is no longer a future consideration; it is appearing in Request for Proposal documents today.
How to Start: A Practical Path for Indian SMEs
Indian SMEs face a practical challenge that large corporations do not: limited internal resources, fragmented data systems, and often no prior experience with environmental reporting. The approach below is designed for exactly this situation.
Step 1: Use Indian-Specific Emission Factors
One of the most common mistakes Indian businesses make is using global or European emission factors for their calculations. India’s energy grid has a significantly higher carbon intensity than most Western grids. The Central Electricity Authority (CEA) publishes annual CO₂ emission factors for electricity generation in India. For FY 2022-23, the national grid emission factor was approximately 0.716 kg CO₂ per kWh — considerably higher than the European average of around 0.25 kg CO₂/kWh. Using the wrong factor will substantially understate your Scope 2 emissions, undermining the credibility of your inventory.
For fuel combustion (Scope 1), use the emission factors from India’s Ministry of Environment, Forest and Climate Change (MoEFCC) or the IPCC’s default values for Indian sub-categories. For transport and freight, DEFRA’s conversion factors are widely used where India-specific data is not available.
Step 2: Prioritise Your Biggest Sources
Indian manufacturing SMEs typically find their largest emission sources in electricity consumption (Scope 2), diesel for generators and vehicles (Scope 1), and process heat from furnaces or boilers (Scope 1). Service businesses have a different profile: office electricity (Scope 2) and employee commuting (Scope 3) tend to dominate.
Focus your first inventory on the two or three sources that together account for the majority of your footprint. For most Indian manufacturers, this means electricity bills and diesel purchase records. Get those right first, document your methodology, and expand scope in subsequent years.
Step 3: Align With the GHG Protocol (Not Just BEE)
India does not yet have a single mandatory national standard for corporate carbon accounting equivalent to what the EU or UK have introduced. The GHG Protocol Corporate Standard remains the internationally accepted benchmark. If you are building an inventory for export-market buyers, supply chain disclosures, or net zero commitments, structure it to the GHG Protocol from the start — it will be recognised by buyers, auditors, and rating agencies globally.
BEE’s PAT framework and SEBI’s BRSR are broadly compatible with GHG Protocol principles, so aligning with GHG Protocol also covers your regulatory bases in India.
Step 4: Leverage Free Government and Public Resources
Indian SMEs have access to several free resources that are often underused:
- BEE’s energy audit resources — If you fall under designated consumer thresholds, BEE-accredited energy auditors can be engaged for subsidised audits. The energy data from these audits is directly usable in your carbon inventory.
- CEA annual CO₂ baseline reports — Published annually and available on the CEA website. Essential for accurate Scope 2 calculations.
- MoEFCC and UNFCCC India submissions — India’s national GHG inventory reports and UNFCCC submissions contain sector-specific emission factors useful for manufacturing and agriculture.
- SIDBI sustainability frameworks — The Small Industries Development Bank of India (SIDBI) has introduced green lending criteria that reward SMEs with demonstrated sustainability metrics, including carbon disclosures. Aligning your carbon accounting with SIDBI’s framework can improve your access to green finance.
Common Challenges for Indian SMEs — and How to Handle Them
“We don’t have reliable electricity meters by unit.” This is common in shared industrial estates or older facilities. Use a combination of your electricity bill total and a reasonable allocation methodology — floor area, production volume, or headcount. Document your allocation basis clearly.
“Our suppliers can’t give us emissions data.” In year one, use spend-based estimation methods: multiply your procurement spend by a sector-specific emission intensity factor. This gives a rough but directionally useful Scope 3 estimate. As your suppliers develop their own disclosures (driven by the same customer pressures you face), switch to primary data.
“We use rooftop solar — does that reduce our Scope 2?” Yes, but carefully. Electricity you generate and consume on-site from rooftop solar has a near-zero emission factor. If you are connected to the grid and export surplus, the accounting gets more complex. The GHG Protocol’s Scope 2 guidance covers market-based and location-based accounting methods — use the method your buyers or auditors specify.
The Business Case: Why Indian SMEs Should Act Now
Beyond compliance, there is a genuine business case for carbon accounting in the Indian SME context. Energy efficiency improvements identified through a carbon inventory typically pay back in one to three years. Businesses that can provide emissions data to buyers are winning contracts that competitors without this data are losing. Green finance — from SIDBI, from development finance institutions, and from ESG-oriented foreign investors — is increasingly available only to businesses that can demonstrate sustainability credentials.
Indian sustainable businesses that build this capability early, while it is still relatively rare in their sector, will have a meaningful first-mover advantage as the regulatory and market pressure intensifies. The sustainable development agenda in India is moving from aspiration to requirement — and carbon accounting is the foundation on which everything else is built.
Start with what you have. Electricity bills, fuel invoices, and a spreadsheet are enough to build your first inventory. Improve from there, year by year. That is how every credible carbon accounting programme in the world began.