From April 2019 all large UK companies will report on energy use and carbon emissions

Back in January of this year, Elmhurst provided a response to the government consultation ‘Streamlined Energy and Carbon Reporting’. We received the government response yesterday and are pleased to hear that much of the information we submitted has been considered and taken on board for the new reporting framework set for 2019.

Since 2013, all Quoted Companies in the UK have been required to measure and publish details of their Scope 1 and 2 Emissions in their Annual Report to demonstrate a commitment towards reducing their energy use and emissions in line with the government plan to improve energy efficiency by 20% by 2030.

Claire Perry (Minister of State for Energy and Clean Growth) highlighted that the government acknowledged that the current reporting policies can create complexity and administrative burden on companies, whilst also reinforcing that reporting is valuable (what gets measured gets managed).

Therefore, according to the new rules announced yesterday by the BEIS, from April 2019, large UK companies will need to publicly disclose and report on their energy use, energy efficiency actions, and carbon emissions. The definition of large companies will now include all quoted companies regardless of size and turnover, and unquoted companies (with at least 250 employees or annual turnover greater than £36m and annual balance sheet total greater than £18m).

The government agrees with Elmhurst, and other respondents, that mandatory reporting is important, should align with best practise in the UK and internationally, and should build on the existing ESOS framework. They have also acknowledged our opinion that an extended mandatory reporting framework is likely to drive a behaviour change in business, by highlighting awareness of energy efficiency, and increasing transparency for investors, in the same way we have seen the MEES legislation take effect.

We are particularly pleased to hear that the government is to strengthen the connection between the new streamlined energy and carbon reporting, and the existing ESOS framework. ESOS provides the opportunity for companies energy use to be audited on a four year basis, with recommendations for improvements highlighted by a Lead Assessor. Linking this to annual reporting on energy use and carbon emissions will enable companies to demonstrate the implementation of ESOS recommendations and prove their commitment to reducing their environmental impacts.

According to the government impact assessment on the changes to the framework, the new package of measures is likely to create savings of £20m per year in administration costs for businesses. It is likely to cause a short term increase in capital costs resulting from the uptake of energy efficiency measures, though Elmhurst views the initial capital cost as a starting block to the long term investment in improving energy security which is particularly important under the current uncertainty of BREXIT.

Elmhurst were, however, disappointed to learn that exemptions to the streamline energy and carbon reporting regulations will be brought in where it is considered impractical to obtain the necessary information, or if directors feel that publishing the information would be seriously predujucial to the interests of the company. Whilst we recognise there will always be occasions where it is not reasonable or practical to comply with regulations, in the best interests of the businesses, we feel the wording of the exemption may be considered ambiguous and will be based on subjective decisions rather than an objective and factual basis, which may potentially open up loop holes for non –compliance.

To conclude, Elmhurst were largely pleased by the announcement for the changes to a streamline energy and carbon reporting strategy, and encouraged by the widening of the scope as the country works to move towards our carbon reduction and energy efficiency targets. We are particularly satisfied to hear the government have acknowledged our call for equivalent obligations to be placed on the public sector to demonstrate their commitment and to ensure the private sector do not bear the full costs of the reduction commitment.

The government have now announced a call for evidence on what additional policies or regulations might be needed to ensure the targets are met, requesting for industry and stakeholder opinion on ideas surrounding the strengthening of building regulations, boosting incentives for green manufacturing processes, and increasing access to green finance.

Organisations have until 26^th September to respond. Elmhurst welcomes the call for evidence and will be responding in due course.

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Read the Government’s Response here:  https://www.gov.uk/government/consultations/streamlined-energy-and-carbon-reporting

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Article Published: 20th July 2018