Mandatory carbon reporting update

Consultation to be launched

It’s the proposed piece of legislation that just won’t go away. After the previous government put it on the back-burner, the coalition has confirmed that it will launch a consultation this month on whether or not to introduce mandatory carbon reporting for UK businesses.

The Department for Environment, Food and Rural Affairs (Defra) says the consultation will look at options “from voluntary through to mandatory reporting”. The consultation will last eight weeks.

Why is it back on the table?

The government has to keep mandatory carbon reporting under consideration by law. The Climate Change Act 2008 (CCA) states that mandatory carbon reporting for listed companies must be implemented by April 2012 or the government has to explain to Parliament why it hasn’t happened.

Note. Mandatory carbon reporting would force companies of all shapes and sizes to include data on the amount of emissions they have produced as part of their annual report. This would have to be produced every year, in the same way that the financial regulator demands company accounts to be reported.

Uncertain future

The concept of forcing companies to disclose their non-financial impacts has been around for years. However, it has never been properly enforced because successive governments have been worried about the backlash it may receive from disgruntled businesses.

One of the pledges made by the coalition is to cut the regulatory burden on business - and this is another regulation that many MPs believe is unnecessary. Interestingly, the traditionally anti-regulation body, the CBI, has voiced its support for mandatory reporting. Like many other policy decisions, the government is delaying making a decision and will consult on the issue instead.

So is it likely to happen?

The fact that the CCA includes a stipulation to implement mandatory carbon reporting means it is likely to happen at some point. However, it’s not a done deal.

Note. The government delaying its decision suggests a lack of certainty among MPs - and an about-turn would not be surprising.

Tip. For the time being, this isn’t something that you need to worry about. If the government does make the call to bring in mandatory reporting, it’s not going to happen overnight.

Note. Even if it does come in, the indicators are that it’s going to affect bigger companies and large energy users only.

Some are already doing it

More and more large businesses are reporting for a range of different reasons - to improve their reputation, prepare for regulation or to better understand the location of their biggest impacts.

For these companies, mandatory reporting would not be the end of the world as most of them have the resources to cope with the burden of further carbon regulation.