Rio+20 Sustainability Action – UK Carbon Regulation Announcement ImplicationsDate: 03/11/2014 in General
The landmark announcement by the UK government last week at the Rio+20 conference is the first of its kind to make it mandatory for companies to report their greenhouse gas emissions.The directive applies to approximately 1600 companies listed on the London Stock Exchange with the future potential of expanding to all large companies in the UK when it is reviewed in 2015.
Some are probably asking why this announcement is so critical.
The directive increases the number if LSE-listed companies reporting on their emissions from 400 to 1,600 with the potential of significantly increasing the figure to 24,000 in 2016. Most importantly, before we even get that far, the introduction of mandatory carbon measurement and management for listed companies and sectors lagging behind is significant in itself, however it is likely to indirectly influence others currently not included in the directive. Simply because they will not want to stay behind competitors who are reporting under the new regulations.
Nick Clegg stated that the directive is part of a move to encourage and support companies ‘to measure and so to begin to manage their impact of on the environment in a bid to improve their environmental performance and reduce their stress on the natural world’. This command approach makes sense because it is obvious that current voluntary disclosure mechanisms do not necessarily accelerate carbon reductions. For example the CDP reported last year that only 44% of the companies who responded to its Global 500 survey have decreased their absolute emissions.
What’s more, as and when the new directive gains momentum in achieving significant results in terms of carbon management and reduction, it provides strong substantiation, to all of those still requiring it, of the superiority of regulation over voluntary schemes when it comes to making a difference. To make considerable impacts - regulation is required - but it is also important to highlight the fact that without voluntary schemes such as the CDP this directive would simply not have been implemented. In this the CDP have been in a clear leadership role for the private sector in driving forward GHG reporting. In late July CA and CDP will host a webinar showing FTSE 350 firms how to report GHG emissions without entailing excessive cost.
It also makes financial sense for businesses to report and reduce their carbon emissions. The directive will mean that greenhouse gas management will now be part of organisational risk and opportunity assessments. Recent UK reports suggest 75% of FTSE 100 companies they have worked with have collectively generated £3.7 billion in cost savings from implementing carbon reduction measures.
If you or your organisation requires any further help with reporting your emissions or managing your organisation emission reduction please do not hesitate to get in contact with one of our advisors.