DEFRA’s Consultation on GHG Reporting

Posted on June 8, 2011 by

The Department of Environment, Food and Rural Affairs (DEFRA) launched a consultation on what methodology to be adopted under which UK companies would report their GHG emissions. In other words, should GHG emission reporting be made mandatory for certain UK companies.

UK companies will play a major role in meeting the country’s legally binding climate change commitments. The Consultation acknowledges that GHG measurements are required if there is to be any concrete reduction.

While no decisions have been made so far, DEFRA’s consultation is seeking opinions on the following options:

  1. enhanced voluntary reporting
  2. mandated for all quoted companies
  3. mandate for all large companies; or
  4. mandate for all UK companies consuming electricity above a certain level.

Enhanced voluntary reporting

This is the least stringent option with no liabilities attached to reporting and non reporting companies. It is a useful tool for experimenting and enhancing the current steps taken by the businesses such as increasing the awareness of the benefits received from reporting.

Mandate for all quoted companies

This option relies on modifications made to section 416(4) of the Companies Act 2006 and applies to companies that are required to produce a directors’ report as part of the company’s annual report and accounts. This mandate would cover around 1,100 companies listed in the London Stock Exchange but would exclude large private companies.

Mandate for all large companies

This option also relies on changes made to section 416(4) of the Companies Act 2006. It requires that any company that fulfills the criteria contained in the act with regards to its size (measured through turnover, number of employees, etc), such a company will have to report GHG emission. DEFRA estimates that this will cover about 17,000 to 31,000 large companies.

Mandate for all UK companies consuming electricity above a certain level

Another option is that any company that consumes electricity more than a preset threshold, of half-hourly metered electricity in one year, should report their GHG emissions in their directors’ report. This option will cover the largest energy consuming companies. However, it has been argued that certain large emitters may escape where they emit GHGs from other activities, such as transport or emissions from overseas activities.

While there are issues on whether to adopt voluntary or mandatory reporting, Environment Minister Lord Henley argues that the UK had already seen mandatory reporting and many companies had benefitted from it and hence it is logical that others should want to join in reporting their GHG emissions.

Another concern raised by the business community is that unlike financial reporting that has had a long time to evolve, GHG reporting is new and has no experience to draw from. It will still take some time before the reporting procedures are standardized. Until that time, various accounting firms are experimenting with mock-up reports based on what they consider might be included in the emission reports.

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