Carbon footprint reporting to become mandatory for UK listed companies from 2013
Is your company ready?
On 20 June 2012 the government announced that it would be mandating carbon reporting by quoted companies from 2013; it will then review the effectiveness of such reporting in 2015 before deciding in 2016 whether to extend the requirements to all large companies.
What is changing?
The Companies Act 2006 (Strategic & Directors Report) Regulations 2013 introduces a new requirement for UK quoted companies to report their global carbon footprint, amongst other associated disclosures, in the Directors’ report section of their annual report for financial years ending on or after 30 September 2013.
What is the opportunity?
Carbon emissions often cost more than companies realise; whether it is from building energy costs, carbon taxes, staff travel, vehicle fleet fuels and logistics, or under-utilised assets. Taking a strategic approach to managing these costs systematically across the organisation can bring significant operational cost reductions, while at the same time meeting the new regulatory requirement.
How well prepared is UK PLC?
"Only 22% of companies currently report a decrease in absolute emissions."
UK Carbon Reporting Survey (July 2013)
Deloitte recently examined how UK listed companies publicly reported their greenhouse gas emissions, or ‘corporate carbon footprint’, finding barely a third made the necessary disclosures of ‘scope’ and only 8% correctly disclosed their reporting boundary. These results suggest that many UK quoted companies have some way to go before they are ready to comply. For further details, and for our view of what good practice reporting looks like, please see our latest UK Carbon Reporting Survey.
What are the new disclosures in a nutshell?
UK quoted companies are defined in the Companies Act 2006 (s385) as UK incorporated companies with equity shares listed on the LSE (the main market) or admitted to trading on another EEA regulated market, the NYSE or NASDAQ. AIM listed companies are outside the scope of the new requirements. Note that the regulations will be reviewed in 2015 to decide whether the GHG emissions disclosures should be extended to all large companies from 2016 (turnover >£22.8m, balance sheet total >£11.4m, >250 employees).
From September, quoted companies will be required to:
- measure and report their global GHG emissions or ‘carbon footprint’ for emissions they are responsible for. These are defined as scope 1 (direct) emissions and scope 2 (energy indirect) emissions from sources that they own and/or control (as defined in the GHG Protocol).
- provide an intensity ratio, i.e. a ratio which expresses the company’s emissions in relation to a quantifiable factor associated with its activities (for example tonnes of CO2e per £m revenue or per full time equivalent employee). This normalises emissions to take into account a company’s growth and facilitates comparison over time and across different organisation sectors and products.
- disclose the basis for reporting (the calculation methodology used) and how the GHG emissions data has been consolidated with an explanation of any differences between the reporting boundary for GHG emissions and for the financial statements consolidation.