The government is to make mandatory carbon reporting as flexible as possible for companies that have to do it, under new guidelines published for consultation yesterday.
But unfortunately, lack of compulsory standardisation will make it difficult to compare one company or sector's performance with another.
Regulation 4 of the draft legislation, announced by Lord Taylor of Holbeach, says that directors must state how company emissions are calculated, and Defra is encouraging them to use their own and DECC's guidance. (Ironically, the link to the guidance in the consultation document is broken; however, it can be found here.)
But companies can decide if they would prefer to use other standards or methodologies. There are a few to choose from: the WRI/WBCSD's, the international ISO 14064 standard, and the Climate Disclosure Standards Board’s Climate Change Reporting Framework. Some industry sectors also have their own guidance on measuring and reporting on greenhouse gas emissions. The legislation applies to quoted companies that are incorporated in the UK, with equity share capital listed by the UK Listing authority, that of another EU states or quoted on the New York Stock Exchange or NASDAQ.
The first reporting year is suggested to be a company’s first financial year ending after 6 April 2013, when it should be included in subsequent directors’ reports.
They will be required to “measure, or calculate, and report on" their annual carbon dioxide equivalent emissions, and their yearly progress in reducing them.
Both direct and indirect (fugitive) emissions must be listed, and those associated with transport as a result of company activities. All greenhouse gases are included: CO2, methane, hydrofluorocarbons, nitrous oxide, perfluororocarbons and sulphur hexafluoride. This basket of emission sources is based on the widely accepted World Resources Institute / World Business Council for Sustainable Development Greenhouse Gas Protocol.
The directors’ report must also state if relevant information included in the report was obtained as a result of the company’s compliance with Climate Change Agreements, the Greenhouse Gas Emissions Data and National Implementation Measures Regulations, or the CRC Energy Efficiency Scheme.
This allows them to avoid duplication of effort by simply copying over the same information into their report.
Companies can also choose what carbon intensity ratio they might apply to each individual fuel as long as they state what they are, although, again, they are “encouraged" to use the official conversion factors.
There are further flexibilities: a company could choose to amend its base year data, for example to aid comparison between different years despite changes in company structure; and it could choose to report company emissions on a different reporting year than the one covered by the report.
There is therefore considerable room for companies to arrange their reporting, should they so choose, so that it is not directly comparable with that of other sectors or companies. This will make it harder for the public, shareholders and investors to make objective assessments.
Defra has published no impact assessment along with the draft legislation.
Story: David Thorpe, News Editor