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In line with Verco’s recommendations through the consultation last year, the UK Government has decided to introduce regulations to require quoted companies to report their greenhouse gas (GHG) emissions in the directors’ report of company annual reports. To see details, please click here
Defra will now launch a public consultation on a draft statutory instrument to implement the policy set out in this response. Verco will continue to monitor this and report back to its clients.
Key requirements and implications of mandatory carbon reporting
1. Which companies will be subject to this change?
All quoted companies from 2013 (around 1,100 companies according to the Government impact analysis). The Government is committed to further increase the number of companies required to report their emissions and to improve the consistency of their reporting. It will decide in 2016 whether to extend mandatory reporting to all large companies (approximately 24,000 companies). All large organisations should be prepared for mandatory carbon reporting.
2. What organisational boundary will be applied?
Company law requires that companies report their GHG emissions on the same organisational basis as their financial report. Emissions from overseas activities will be included. The Government proposes that emissions should be reported on a global basis where appropriate.
3. Which greenhouse gases are covered?
The Government intends to require companies to report on all six GHGs covered under the Kyoto Protocol in CO2e. CO2e conversion factors are now more widely available e.g. from Defra/DECC (incorporating emissions from methane and nitrous oxide).
4. Which emission generating activities must be reported?
The regulation will require companies to report their material scope 1 and scope 2 emissions i.e. direct emissions from fuel combustion and indirect emissions from purchased electricity. The Government will continue to encourage voluntary reporting of significant scope 3 emissions, including business travel, waste and third-party product transportation. Scope 1 emissions also include fugitive gas emissions such as refrigerant leakage from air conditioning, and emissions from company-owned vehicle fuel – neither of which are covered under the existing CRC-Energy Efficiency Scheme.
5. Assurance and verification
There are existing audit requirements set out in the Companies Act. Section 496 of the Companies Act provides that the auditor must state in his report on the company’s annual accounts whether in his opinion the information given in the directors’ report for the financial year for which the accounts are prepared is consistent with those accounts. As the regulation will require GHG emissions to be reported in the directors’ report, they will be included in the scope of this audit requirement. Companies should state what method and tools they have used to calculate their emissions. The preparation of GHG accounts will need to be carried out independently of the auditor.
Verco’s experienced carbon accounting and reporting team is on hand to help you prepare for the reporting requirements. We help prepare carbon accounts for leading FTSE 350 and Global 500 companies. We help companies address and measure all six GHGs under the Kyoto protocol. We make sure all relevant emissions are covered and provide independent, expert assurance services.
Our online resource management and reporting software, Carbon DesktopTM helps over 1,000 users around the world reduce energy costs, manage carbon, and improve GHG reporting. This can help put you ahead of the timetable in terms of measuring, targeting and reporting the relevant GHG emissions and provide a dynamic footprint for cost and carbon management.
Please contact Andrew Prosser or call +44 (0)1225 812102 to arrange a free health check on the new GHG reporting requirements.
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