Understanding CO₂e: Why “Equivalent” Matters in CSRD
When small and growing businesses (SMEs) start calculating their greenhouse gas (GHG) emissions, they often encounter a confusing abbreviation — CO₂e. It stands for carbon dioxide equivalent, and it’s the universal way of expressing all greenhouse gases under one single measurement.
In the context of the Corporate Sustainability Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS), CO₂e is the key metric used to measure, compare, and disclose emissions across businesses of any size or sector.
This guide explains what CO₂e really means, why it matters, and how your business can use it to report clearly and consistently under CSRD or the simplified VSME Standard.
What Does CO₂e Mean?
CO₂e, or carbon dioxide equivalent, represents the combined warming effect of all major greenhouse gases (GHGs) expressed in terms of the amount of CO₂ that would have the same impact on global warming.
In other words, different gases have different global warming potentials (GWPs). CO₂e converts them into a common scale.
| Gas | Global Warming Potential (100 years) | Example Source |
|---|---|---|
| Carbon dioxide (CO₂) | 1 | Fuel combustion, electricity use |
| Methane (CH₄) | 27–30 | Waste, livestock, leaks from gas systems |
| Nitrous oxide (N₂O) | 273 | Fertiliser use, combustion engines |
| Refrigerants (HFCs) | 100–12,000+ | Cooling, air conditioning |
So, if a business emits 1 tonne of methane, it has the same impact as roughly 27 tonnes of CO₂ — that’s 27 tonnes CO₂e.
Learn how the GHG Protocol calculates emissions across all scopes →
Why CO₂e Is Used in CSRD and ESRS
The CSRD requires companies to report emissions in CO₂e to ensure that data is comparable across countries and industries. It also helps the EU measure total progress toward its climate targets, including the goal of net-zero emissions by 2050.
The ESRS E1 standard (Climate Change) specifically instructs companies to:
- Report GHG emissions in tonnes of CO₂e
- Cover Scopes 1, 2, and 3 following the GHG Protocol
- Include both location-based and market-based Scope 2 results where available
For SMEs using the VSME Basic Module (B3), the same rule applies — even simplified reports must show GHG emissions in tonnes of CO₂e.
See how to calculate location-based and market-based Scope 2 emissions →
How to Calculate CO₂e
- Collect activity data – such as fuel use, electricity consumption, or business travel.
- Find the correct emission factor – published by the European Environment Agency (EEA), IPCC, or your national environment agency.
- Multiply activity data by emission factor – the factor already converts the result to CO₂e.
Example:
1,000 litres of diesel × 2.68 kg CO₂e/litre = 2.68 tonnes CO₂e
You can repeat this for electricity (kWh), flights (km), or waste (tonnes) and then sum all results for your total footprint.
See how to report fuel receipts and invoices for CSRD compliance →
Why “Equivalent” Really Matters
The “equivalent” in CO₂e is what makes reporting consistent and fair. It ensures that:
- All gases are counted, not just CO₂
- SMEs can use one common unit across all data types
- Progress is measurable, even when businesses reduce non-CO₂ gases like refrigerants or methane leaks
Without CO₂e, comparing emissions between a manufacturer, a restaurant, and a software company would be nearly impossible.
CO₂e in Everyday SME Reporting
For small businesses, CO₂e simplifies climate reporting into one key figure. A typical VSME-compliant sustainability report might include:
- Total GHG emissions: 45 tCO₂e
- Of which Scope 1 (fuel): 20 tCO₂e
- Scope 2 (electricity): 15 tCO₂e
- Scope 3 (travel, waste): 10 tCO₂e
This breakdown meets the expectations of banks, investors, and corporate clients — without needing complex modelling.
Learn how to set science-based targets as an SME →
Frequently Asked Questions
Why can’t we just report CO₂?
Because CO₂ is only one of several greenhouse gases. Reporting in CO₂e ensures you include methane, nitrous oxide, and others that may have a much higher warming impact.
Do SMEs need exact measurements?
No — estimates using standard emission factors are acceptable for SMEs. The goal is consistency, not perfection. Update factors annually to keep your data reliable.
How is CO₂e verified?
Larger companies must obtain limited assurance under CSRD. For SMEs, verification isn’t mandatory, but keeping your data sources (bills, invoices, supplier info) helps build trust with clients and lenders.
Does buying green energy reduce CO₂e?
Yes — under the market-based method, certified renewable energy can reduce your Scope 2 CO₂e to near zero. It’s one of the simplest ways to show measurable climate action.
Learn how SMEs can benefit from renewable energy contracts →
Key Terms
- CO₂e (Carbon Dioxide Equivalent): Standard unit combining all greenhouse gases
- GHG Protocol: International standard for measuring and managing emissions
- Emission Factor: Conversion rate from activity data to CO₂e
- Scope 1, 2, 3: Emission categories under CSRD and ESRS
- VSME Standard: Simplified sustainability reporting standard for SMEs
Conclusion
CO₂e is the language that makes climate reporting universal — from multinational corporations to micro-businesses. By using CO₂e, SMEs can accurately show their total impact, track progress, and align with EU climate goals in a way that’s both credible and achievable.
Understanding the “equivalent” in CO₂e isn’t just technical — it’s the key to meaningful sustainability action and compliance under the CSRD. Start by converting your basic energy and travel data into CO₂e, and you’ll already be reporting like a pro.