By Michael Gifford, Head of Operations & Delivery Partners and Morgan Jones, Standard Certification Manager
The government recently announced that it will be introducing Mandatory Carbon Reporting (MCR) for all UK incorporated 'quoted' companies (as defined under the Companies Act 2006) to take effect from October 2013. The Consultation on the regulations has now closed and Defra have indicated that final guidance will be published in January 2013. Our best view on what is likely to be required is set out here.
First, the company will have to report the carbon footprint of its global operations 'for which the company is responsible' and has 'control' over. This will include reporting on all six of the Kyoto regulated greenhouse gases (GHGs) in tonnes of CO2 equivalent. These will have to be included in the directors' report of the annual report and accounts. Companies will need to report an absolute footprint, as well as a carbon intensity, using a benchmark such as turnover or a measure of output. No particular GHG accounting methodology is set out, but many will elect to report against the widely used and internationally recognised WRI/WBCSD Green House Gas Protocol.
Those that already report GHG emissions will see there is some overlap with existing reporting, including regulatory mechanisms such as the Carbon Reduction Commitment Energy Efficiency Scheme (CRC), Climate Change Agreements and European Union Emissions Trading Scheme, as well as voluntary mechanisms such as the Carbon Disclosure Project and the Carbon Trust Standard. However, there are significant differences in some of the data requirements and, before the regulation comes into force, companies should check that their footprint data is fit for purpose.
For many, the new scheme brings advantages. Measuring GHG emissions is the first step towards their management. This will enable energy costs to be reduced. For example, changing lighting to more energy efficient sources will reduce carbon emissions and save the company money over time. MCR will also enable leading companies to differentiate themselves and go beyond mere compliance, enhancing their corporate reputations by making robust positive claims about the action they have taken and plan to take.
Some face the set-up cost of measuring and reporting for the first time. Directors will have to sign off on the numbers and will need to ensure they have adequate systems and procedures in place to gather and report the data consistently. This may mean that companies choose to have their footprint verified by an independent third-party to avoid the reputational risk of misreporting. They may also risk damaging their corporate reputation by making visible their poor carbon performance.
When it comes to carbon reporting companies will broadly fit into one of the following three groups:
- Those who do not measure or report GHG emissions
- Those that measure but do not disclose GHG emissions
- Those that measure and report
With less than a year until reporting emission becomes mandatory, each of these groups should be taking immediate action to prepare for the introduction of MCR. The first step is to establish if the company is liable to comply with the regulations, and secondly to review whether the GHG footprint data is fit for purpose. Companies need to ensure that their footprint data will be ready in time to meet the expectations of the annual reporting cycle and publication dates. The data required for the first year of reporting should be being collected now.
The Carbon Trust is able to help organisations measure and certify their carbon footprint and guide them through the forthcoming MCR regulation. The Carbon Trust's experience of corporate carbon footprinting and certification means that it can help you understand how carbon reporting can deliver significant cost savings, enhance corporate reputation and provide new revenue opportunities.
Find out more about our carbon disclosure audit service.