Mandatory carbon reporting: what you need to know

FTSE-listed companies will have to report their carbon emissions from next year

You have until October  17 to comment on the draft Regulations for Mandatory Greenhouse Gas Reporting or as they are to be formally known as: ‘The Greenhouse Gas Emissions (Directors’ Reports) Regulations 2013′.

They are, thankfully, concise and brief; just three pages. The accompanying consultation document (which is rather longer) does not follow the conventional Q & A format. This is somewhat surprising and makes it difficult to determine what changes  Department of Environment, Food and Rural Affairs (Defra) would, at this stage, be willing to entertain.

On the assumption that little will change, here are my answers to some frequently asked questions:

Who is covered?

Any company that is UK incorporated and whose equity share capital is officially listed on the main market of the London Stock Exchange; or is officially listed in an EEA State; or is admitted to dealing on either the New York Stock Exchange or the exchange known as Nasdaq.

When will the regulations come into effect?

Either April 6 2013 or October 2013. The Government is still deciding. The latter date has the benefit that it will coincide with new BIS regulations dealing with other changes to company reporting.

Companies will need to report in the first full company year after the regulations come into force. However, it would certainly be sensible to start sooner so as to test data collection systems, QA procedures and maybe establish an early baseline.

What accounting and reporting methodology do I need to use?

The draft regulations allow the use of any established methodology for the measurement of Scope 1 and 2 GHG emissions. The following must be included:

• the combustion of fuel in any  premises, machinery or equipment  operated,  owned or controlled by the company
• the use of any means of transport, machinery or equipment operated, owned or controlled by the company
• the operation or control of any manufacturing process undertaken by the company

All must include fugitive emissions, for example from leakages or other releases.

All the following greenhouse gas types must be reported using carbon dioxide equivalent units: carbon dioxide, methane, hydrofluorocarbons, nitrous oxide, perflurorocarbons and sulphur hexafluoride.

The definition of Scope 1 and 2 emissions is that contained within the international Greenhouse Gas Protocol.

Notable exclusions include land use change and supply chain, or Scope 3 emissions, although the Government has recognised the importance of these and is committed to reviewing the regulations inside of five years.

Although no methodology is preferred, a mention is made of the two most popular standards; ISO 14064-1 and the GHG Corporate Accounting and Reporting Protocol as well as the Defra-supported CDSB Framework and Defra’s own accounting and reporting guidance. Interestingly, companies can also use any sector-specific guidance they wish.

What else must appear in the annual company report?

As well as reporting overall emissions split by scope, the total must also be expressed as one or more intensity ratios. For example, emissions per £m turnover or employee. The company is free to choose whatever intensity ratio(s) it wants.

In addition, the emissions from the first reporting year must be repeated in subsequent annual reports to highlight any changes. There is provision to re-state this baseline year if there are good reasons for doing so (for example, the structure of the company changes).

If you have any further questions or comments about mandatory GHG reporting, please write them in the comment box below and will endeavour to answer them.