UK will introduce mandatory carbon reporting from 2013

The Department for Environment, Food and Rural Affairs (DEFRA) has today announced that from April 2013 all businesses listed on the Main Market of the London Stock Exchange will have to openly report their levels of greenhouse gas emissions. The requirements will not cover private companies or those listed on the Alternative Investment Market.

Speaking at the Rio+ 20 Summit earlier today Deputy Prime Minister, Nick Clegg confirmed that the UK is set to become the first country to make it compulsory for companies to include emissions data for their entire organisation in their annual reports.

The introduction of the reports, which follows extensive consultations with leading businesses, will enable investors to see which companies are effectively managing the hidden long-term costs of greenhouse gas emissions.

Currently more than 30 billion tonnes of CO₂ are emitted globally each year. The UK has committed to cutting its carbon emissions to 50 percent of 1990 levels by 2025. DEFRA claims that reporting emissions is the first vital step for companies to make reductions, estimating that these measures will save four million tonnes of CO₂ emissions by 2021.

“Counting your business costs while hiding your greenhouse gas emissions is a false economy,” Clegg explained.

“British companies need to reduce their harmful emissions for the benefit of the planet, but many back our plans because being energy efficient makes good business sense too. It saves companies money on energy bills, improves their reputation with customers and helps them manage their long-term costs too.”

Secretary of State for Department of Energy and Climate Change, Edward Davey commented: “Energy efficiency is a no brainer. It saves money for businesses whilst cutting carbon to help us meet our climate targets. The introduction of mandatory reporting will build on the regulatory framework established by the CRC Energy Efficiency Scheme for the largest energy users.”

The majority of businesses responding to the consultation have been supportive of the change, with employer and environmental organisations including the CBI and the Aldersgate Group backing the move. In fact a recent survey of 153 major companies by Green Mondays found that 86 percent were in favour of a mandatory carbon reporting regime.

Rhian Kelly, CBI Director for Business Environment policy, said: “We have been calling for mandatory carbon reporting for some time. It is an important way to help businesses save money and emissions.

“Provided this is done in a sensible way, this announcement is to be applauded. To avoid unnecessary duplication, the Government now needs to scrap the Carbon Reduction Commitment.”

Meanwhile Secretary of State for the Environment, Caroline Spelman, said: “The discussions we’ve had with businesses show that they want to cut down their greenhouse gas emissions, and they want to be open and transparent about it. What they have asked for is a level playing field so that they can be fairly judged against one another, and we have delivered that today.

“Investors are now looking hard at the green credentials of businesses, and the reporting of green house gas emissions will give them vital information as they decide where to invest their money.”

Doug Johnston, Leader of Ernst & Young’s Climate Change and Sustainability Services practice in the UK, said: “The introduction of mandatory carbon reporting will be broadly welcomed. For most major companies, the introduction of mandatory reporting will not create an undue burden, as many are already voluntarily disclosing their carbon emissions. Companies recognise that what gets measured gets managed, and that there are clear opportunities to enhance value through managing and reducing emissions.

“However, there is also a clear need for simplification of the regulatory landscape for carbon reporting. UK businesses have long voiced concerns about undue burdens and overlapping objectives in the existing regulatory framework for carbon emissions. Companies will be hoping that the new requirements bring clarity to an area of business regulation that is widely recognised as playing a key role in how the UK responds to the challenge of climate change.”

Government is hoping that the introduction of the world's first mandatory requirements for emissions reporting will trigger other countries to adopt similar rules. The new regulations will be reviewed in 2015, before ministers decide whether to extend the approach to all large companies from 2016.