Mandatory Carbon Reporting Leads to Challenges, Opportunities
The UK Government committed to reducing greenhouse gas emissions by at least 80% (from the 1990 baseline) by 2050 under the 2008 Climate Change Act. In order to encourage companies to become more energy efficient – and assess progress – the government has introduced public reporting of carbon emissions.
The direct benefits to companies from managing and reporting their environmental performance include lower energy and resource costs, improved understanding of exposure to the risks of climate change and the opportunity to demonstrate their management of environmental issues to investors, customers and other stakeholders. Many businesses are finding that environmental risks, such as volatile energy and commodity prices, are already material to their operations and supply chains – or are likely to become so. But where there is risk lies opportunity and environmental leaders are finding that early action to address such risks can lead to new business opportunities.
What do you need to know about mandatory reporting?
WHO? All quoted UK companies (i.e. UK incorporated and listed)
WHEN? The regulation will apply to company reporting years ending on or after 30 September 2013.
WHERE? Currently in the Director’s Report section of the Annual Report.
WHAT? Companies need to report on all Kyoto greenhouse gases (carbon dioxide, methane , nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride) resulting from the following activities, across global operations: combustion of fuel in premises, machinery or equipment operated, owned or controlled by the company; use of transport, machinery or equipment operated, owned or controlled by the company; operation or control of manufacturing processes undertaken by the company; fugitive emissions resulting from activities described; and purchase of electricity, heat, steam or cooling by the company (equivalent to GHG Protocol Scopes 1 & 2).
Companies are also asked to provide a ratio expressing annual emissions in relation to a quantifiable factor relevant to the company’s activities e.g. unit of revenue or volume of products sold (‘intensity ratio’). Whilst assurance is not a regulatory requirement, it is recommended as good practice. Defra’s Summary of Consultation Responses (June 2012) notes that third party data assurance is key to obtaining reliable and accurate data, important to allow investors to use the data to make investment decisions and protects companies from the risk of reporting inaccurate figures.
What are the key considerations for companies?
Q: Are carbon emissions the most material environmental risk for my business or should I monitor other environmental key performance indicators such as water, land use, waste and other pollutants?
Q: What are the most time and cost effective ways to measure, report and reduce my environmental footprint
Q: How can I report clearly and in a way that will improve our reputation with customers and stakeholders
Q: Which validation and assurance methods are most appropriate to ensure my reporting is compliant
Mandatory carbon reporting presents both a challenge and an opportunity for businesses. Against a backdrop of increasing natural resource pressures, fueled by population growth, companies that act now to develop resource efficient technologies and services will be the successful companies of the future.
Neil McIndoe is head of Environmental Finance for Trucost. Trucost can help you navigate the complex challenges and opportunities presented by natural resource constraints and intensifying environmental regulation with industry leading data, tools and insight that drive sustainable business. In addition to helping businesses develop practical and compliant reporting procedures, Trucost were the authors of the UK Government Guidelines on reporting of environmental KPIs in 2006. To find out more about the implications for your business – or how Trucost can help you succeed in the transition to a low carbon, resource efficient economy contact us.
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