A last minute report by the Department of Food and Rural Affairs (DEFRA) laid before Parliament explains why no regulations on carbon reporting by UK companies have been made before the 6 April 2012 deadline imposed by section 85 of the Climate Change Act.
In June last year we reported on the consultation by DEFRA on the introduction of mandatory greenhouse gas (GHG) emissions reporting for UK companies. The consultation was launched ahead of a deadline contained in section 85 of the Climate Change Act 2008 which required the Government to introduce legislation under the Companies Act 2006 governing GHG reporting by 6 April 2012 or explain to Parliament why it would not do so.
After years of reports, evidence gathering and a public consultation Ministers have still to make up their minds. On 27 March (the final day before Easter recess), the Secretary of State laid a one page report before Parliament which outlined why regulations have not been introduced: the punch line is that no decision has yet been made.
Last summer’s consultation contained four alterative propositions which would require varying degrees of effort from companies were they to be introduced. A lively debate ensued as to the best approach and DEFRA received no fewer than 2018 written submissions. Perhaps surprising to many was the support received from large businesses in favour of mandatory GHG reporting - a sector not known for its enthusiasm for greater regulation. Similarly the CBI and the Aldersgate Group, which represent a spectrum of UK companies, have both publicly backed mandatory GHG reporting, with the latter writing to the Deputy Prime Minister last week criticising the lack of progress on the matter:
“The introduction of mandatory GHG reporting would help to ensure greater accountability and transparency, create a level playing field and help enable investors and consumers to make meaningful comparisons. It would further encourage business, which is responsible for nearly a third of total UK GHG emissions, to manage and reduce its carbon footprint, leading to reduced energy costs, increased transparency and a greater understanding of material climate risks and opportunities.”
Many British companies already see the potential of reducing GHG emissions which often lead to lower operating costs. In 2009, 77% of FTSE 100 companies reported having an emissions reduction target. Furthermore, at a global level there is ever increasing pressure for companies to measure and report their emissions spearheaded by the likes of the Carbon Disclosure Project which is backed by the world’s most influential intuitional investors. With both companies and investors on board the argument has already been won but what firms and investors need now is clear policy signals. As we pointed out in our previous article, even large accounting firms such as PWC are gearing up ready for carbon reporting and all that is left is for the Government to put the correct policies in place.
No one, least of all investors and businesses, want a repeat of the swift and unexpected changes which were made to other parts of the UK’s green economy last year such as those made to the solar photovoltaic feed-in tariff regime. However, delaying policy decisions and announcements can be just as damaging.