Carbon (Ac)Counts

In this exclusive blog, planning expert Mitch Cooke analyses new legislation requiring large UK businesses to disclose their Greenhouse Gas (GHG) emissions.In this exclusive blog, planning expert Mitch Cooke analyses new legislation requiring large UK businesses to disclose their Greenhouse Gas (GHG) emissions.

From 6th April 2013, the UK Government will adopt new legislation (the ‘Greenhouse Gas Emissions (Directors’ Reporting) Regulation’) under the Companies Act, requiring all companies listed on the main market of the London Stock Exchange (LSE) to disclose their Greenhouse Gas (GHG) emissions. The legislation is likely to require a statement of performance to be issued to the LSE alongside the main corporate accounts at the end of each financial year. What this means is that alongside standard investment metrics there will be a new set of carbon metrics which are likely to allow for comparison and valuation within all sectors.

Although two thirds of FTSE 350 companies currently disclose details of their GHG emissions, there are still a large number of companies that may be left exposed and unprepared to report against these requirements.  For the property industry in particular, the classification of emissions can be complex especially when, in the likes of a tenanted building, the energy bill payer may not have much influence over the energy use within the asset. The Carbon Footprint of a portfolio can therefore justifiably be separated into landlord and tenant’s energy use but to accurately measure this may require some investment on part of the Landlord. An investment in metering equipment may not seem essential, especially in the challenging context of many high street retailers entering administration, but to doing this now will avoid a potential devaluation or desegregation of a well operated business based on the actions of its customers. Further, the reporting requirements will extend beyond the emissions from buildings; it will need to consider other sources of emissions from transport, waste, and other operational/process activities.

The UK Government is keen for the legislation not to result in further regulatory burden; therefore, reporting can use data collated from other schemes such as the Climate Change Agreement, EU Emissions Trading Scheme and the Carbon Reduction Commitment. Mandatory reporting will enable investors to assess how affected companies manage their carbon liabilities, by driving efficiency savings, manage risk and capitalise on opportunities. With shareholders increasingly requiring information on environmental performance, those companies that do not have the correct procedures in place, or have corporate-level buy-in risk losing out against those that are more well-prepared.

SME’s should also take note and look at what larger organisations are being asked to and prepare appropriately. What goes up always comes down.