Getting ready for mandatory carbon reporting

Yohan Hill

On 12 June 2013, the latest draft of amendments to the UK Companies Act requiring companies to include greenhouse gas emissions in their financial statements (also known as ‘Mandatory Carbon Reporting’ regulations) were laid before Parliament.

On the same day Defra released its latest round of official greenhouse gas conversion factors for company reporting. These conversion factors are a staple to anyone directly involved in carbon reporting process, however, over the years the increasing complexity of the guidance has sometimes led to confusion among users

The latest guidance from Defra is much improved in terms of clarity and usability. But there are big implications in terms of the next round of carbon reporting for UK publicly listed firms.

1)      Restating the baseline. The changes to guidance on the use of emission factors, particularly for purchased electricity from the grid, are such that most companies will be required to restate previous year’s carbon emissions data in order to ensure comparability of reporting.

2)      Stronger guidance on radiative forcing for air travel. This will mean that some companies may opt to incorporate this as part of their estimates of the impact of business travel on climate change. This will lead to almost a doubling of their existing Scope 3 carbon footprint. How companies address the climate change impacts associated with business travel will become a point of increased focus.

3)      Expanded Scope 3 reporting. In line with the general trend towards better segmentation and reporting of Scope 3 emissions, vis-à-vis the WRI Corporate Value Chain (Scope 3) Accounting and Reporting Standard, the latest Defra guidelines better enable companies to report indirect emissions in a clear and consistent way. These enhancements will encourage companies to better account for and report their Scope 3 emissions.

For more information on how Mandatory Carbon Reporting can impact your business contact us.

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