At the Rio+ 20 Earth Summit this summer, Nick Clegg announced the Mandatory GHG Emissions Scheme. Is it relevant for your business? What do you have to do?
The Mandatory Emissions Reporting Scheme will become compulsory for approximately 1400 businesses listed on the London Stock Exchange, to measure and report their GHG emissions from April 2013. The UK is the first country to implement such a scheme, as another tool to help achieve ambitious carbon reduction targets of 50% by 2025 and 80% by 2050.
DOES IT APPLY TO ME?
Only to companies listed on the Main Market of the London Stock Exchange. In other words, a company that is UK incorporated and whose equity share capital is officially listed by UKLA; or is officially listed in an EEA State; or is admitted to dealing on either the New York Stock Exchange or Nasdaq. The scheme excludes non-UK registered companies, privately owned companies or companies listed on the Alternative Investment Market.
If you are unsure whether your company is a quoted company, you may wish to check with your finance director.
You may not be in this group, but you may still be interested in what it means for business, so read on.
WHAT AM I REPORTING?
The Mandatory Emissions Reporting Scheme requires companies to publish annual reports of greenhouse gas emissions to meet specified requirements. These include:
- All six Greenhouse Gases (GHGs) as defined by the Kyoto Protocol measured in CO2 equivalent.
- Both scope 1 (direct) and scope 2 (indirect emissions from purchased electricity, heat and cooling) emissions.
- Reporting of global emissions by listed companies and not just UK emissions.
HOW AND WHERE DO I GO ABOUT REPORTING?
How: Many companies are already voluntarily striving to reduce their GHG emissions. If you’re a WECC member, you’re already doing this and well prepared. However, if this is new to your business, or you require more information, DEFRA has provided a guidance report which you can find here. As we know from our experience in the region, WECC, it is important to be prepared for carbon reporting by ensuring you have the necessary systems, procedures and resources in place.
Where: Your GHG emissions should be reported in the Director’s report of the Annual Report and Accounts.
WHEN DO I HAVE TO REPORT?
The regulations are expected to come into force for reporting years ending after 6th April 2013. It is expected that emissions will be first reported in the 2013/2014 annual company reports.
WHAT’S IN IT FOR ME
Reporting GHG emissions allows your company to engage with your stakeholders around future climate risk and energy security. According to the Carbon Disclosure Project (CDP), 37% of companies are now reporting ‘physical risks’ from climate change such as extreme weather events. This shows an increasing trend by 17% from 2010.
WHAT IF I DON’T REPORT?
As yet, there has been no mention of enforcement rules applied to the Mandatory Emissions Reporting Scheme, however research by the CDP in their Global 500 Climate Change Report suggests that only a small proportion of Global 500 companies don’t presently report despite lack of enforcement.
Conversely, penalties have been given for the CRC Energy Efficiency Scheme for reporting failures (details here) and therefore such penalties cannot be ruled out for the future of the Mandatory Emissions Scheme.
SO WHAT ABOUT THE CRC?
Implemented in 2008, the CRC Energy Efficiency Scheme, aimed at businesses using over 6000 MWh of power a year, was the first attempt by government to start monitoring large non-energy intensive organisations, link in the cap and trade system and create Performance League Tables. It remains, though there is likely to be further simplification and adjustments to Performance League Tables so that leaders in different sectors can be more easily observed. Updates on the CRC Energy Efficiency Scheme can be followed through the Environment Agency.
For those wishing to contribute to the consultation on the draft regulation of the Mandatory Emissions Reporting Scheme, you can find the relevant information here. The closing date for the consultation is October 17th, 2012.