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Mandatory company reporting of greenhouse gas emissions

London, UK: Only a month after lodging a report with Parliament noting that ministers needed more time to decide the matter, the UK Government has announced that the UK will be the first country in the world to have mandatory GHG emissions reporting by companies.

“What a difference a month makes,” says Douglas Campbell, at law firm, Shepherd & Wedderburn LLP.
“In May we noted that the Department of Food and Rural Affairs (Defra) had laid before parliament a report explaining why no regulations on greenhouse gas (GHG) emission reporting by UK companies had been made before 6 April 2012 – a deadline imposed by section 85 of the Climate Change Act.

“The Deputy Prime Minister announced at the Rio+ 20 Summit at the end of June that all businesses listed on the Main Market of the London Stock Exchange (approximately 1,800 of the world’s best-known companies) will have to report their GHG emissions from the start of the next financial year. The UK will be the first country to make it compulsory for quoted companies to include emissions data for their entire organisation in their annual reports.  Defra has yet to release draft regulations, but has confirmed that it will hold a further consultation before they come into force next year,” he says.

“What isn’t yet clear is the type and scope of data which will be required.  Some commentators have criticised the government for imposing what could be considered a further regulatory burden on companies which are already widely monitored.  However, others have been quick to point out that the vast majority of the companies in question already record (if not report) emissions data for corporate social responsibility and other regulatory purposes, such as compliance with the EU Emissions Trading Scheme or the Carbon Reduction Commitment.

“The chosen approach of introducing reporting obligations for quoted companies only has the benefit of imposing the lowest regulatory cost of the four options contained in DEFRA’s consultation paper, but could lead to some anomalous outcomes as AIM-traded and large unlisted companies will not be subject to the new reporting regime.”

The government’s intention is to introduce the new regulations from April 2013.  Their implementation and performance will be monitored over the first two years and they will be reviewed in 2015 before a further decision scheduled for 2016 on whether the reporting requirement should be extended to all large companies (whether quoted or otherwise).

“With only nine months before the regulations enter into force, there are already fears over the level of specialist knowledge now needed in the advisory sector and concerns regarding a lack of expertise in relation to GHGs (going beyond just carbon dioxide) have been raised.  However, as the last 6 weeks have shown, where there is a (political) will there’s a way,” Campbell says.