The UK Department for Environment, Food and Rural Affairs has published a consultation document which seeks views on whether or not regulations should be introduced to make it mandatory for some UK companies to report on their greenhouse gas (GHG) emissions within the directors' report.
The consultation sets out four options: a voluntary approach and three mandatory approaches.
Option 1 - enhanced voluntary reporting
There are a number of companies already reporting voluntarily on GHG emissions. According to the Environment Agency over 60% of FTSE all-share companies refer to quantified figures on climate change or energy use within their business review but that still leaves a significant minority that do not. While still maintaining a voluntary regime there are several steps that could be taken to enhance take up - increased publicity of the benefits to brand awareness, increased outreach to businesses, increased collaboration with non-governmental organisations to increase demand for information by investors and other interested parties, promotion of sector specific voluntary agreements and bi-lateral agreements between government and target companies.
Option 2 - mandatory reporting for all quoted companies
This would cover about 1,100 companies and would effectively be a clarification of their reporting obligations under the Companies Act 2006. This option would not include large private companies.
Option 3 - mandatory reporting for all large companies
The existing companies act definition would be used with a view to ensuring that the UK companies which are likely to be the most significant emitters of GHGs are covered. DEFRA estimates that somewhere between 17,000 and 31,000 companies would be affected.
Option 4 - mandatory reporting for all companies whose UK electricity consumption exceeds a certain threshold.
This option aims to cover the largest energy users but would not include companies with low UK electricity consumption but high emissions from other activities such as transport or overseas activities.
The proposal in the consultation document is that all companies that are supplied with more than 6,000 MWh of electricity would be subject to mandatory GHG emissions reporting. At this level, it is anticipated that this would impact 4,000 companies.
As well as consulting on the reporting options, DEFRA is also interested to hear views on what should be reported. There are three ‘scopes' of GHG emissions recognised internationally:
Scope 1 - direct emissions from owned or controlled activities
Scope 2 - indirect emissions associated with an organisation's consumption of purchased electricity, heat, steam and cooling.
Scope 3 - other indirect emissions which are a consequence of the organisation's activities, for example business travel, emissions from out-sourced or contracted activities and emissions from the extraction and production of purchased material and fuels.
The current DEFRA guidance recommends that organisations report, as a minimum, their scope 1 and 2 emissions and encourages the reporting of significant scope 3 emissions. The consultation paper asks whether this range of reporting should be changed.
We would welcome your views on these major issues and any of the other questions raised in the consultation paper which is available from the DEFRA website. The closing date for responses is 5 July 2011.
Printer-friendly version