Mandatory reporting of greenhouse gas emissions by UK companies

The UK Department for the Environment, Food and Rural Affairs has determined that  all quoted companies should be measuring and annually reporting on greenhouse gas (GHG) emissions

Mandatory reporting for quoted companies

Defra has determined that from 2013 all “quoted companies” will be obliged to report on GHG emissions in their directors’ report. The definition set out in section 385 Companies Act 2006 will be used, which captures companies whose securities are included on the Official List of the UKLA, listed in an EEA state or admitted to dealing on either NYSE or Nasdaq.

This definition therefore specifically excludes companies admitted to trading on AIM and similar trading platforms.

No approved reporting methodology

Defra fails to address the burning need to determine a single approved methodology and standard against which

GHG emissions are to be reported. The measurement of GHG emissions is an inexact science, and a clear, transparent and standard basis of reporting for corporate should be developed.

To establish a clear, consistent and practical reporting methodology will require a separate project involving a wide range of stakeholders, including Defra, the Financial Reporting Council, the EU institutions and the United

Nations Framework Convention on Climate Change, and will require consistent application: this requires international engagement and cooperation. GHG emissions reporting will, in time, become another element of general corporate reporting.

Comment

It is useful that Defra accepts that some reporting should be on a “comply or explain” basis where there is a genuine absence of information, reflective of the overriding principle behind the UK Corporate Governance Code, the key document governing board and corporate behaviours. It is interesting to note that, notwithstanding other initiatives from Government and supervisory bodies to “cut clutter” in annual reports and to divide out a strategic report from the directors’ report, a new GHG reporting requirement will again increase the volume of the back end of the directors’ report for quoted companies.

Edward Craft