The Government has published draft regulations that would require quoted companies, large unquoted companies and large limited liability partnerships (LLPs) to make additional disclosures in relation to their energy consumption and efficiency.

The new regulations, if approved, will apply to financial years beginning on or after 1 April 2019.

Quoted companies

Quoted companies (see article above) are already required to state their annual greenhouse gas emissions (in carbon dioxide equivalent (CO2e)) in their directors’ report. That statement must cover emissions resulting from activities for which the company is responsible (including fuel combustion and operating facilities) and from buying electricity, heat, steam or cooling for the company’s own use.

Quoted companies must also state a suitable “emissions ratio”.

The new regulations would extend the regime to include the following additional information:

  • The annual quantity of energy consumed (in kilowatt hours (kWh)) from these activities.
  • The proportion of the emissions and consumption figures that relates to activities in the UK.
  • Any measures the company took to increase its energy efficiency.

The report would also need to disclose equivalent information for the previous financial year. If the company prepares a group directors’ report, it would include information for its entire group instead.

Large unquoted companies and large LLPs

The regulations would create a separate regime for large unquoted companies and large LLPs.

For this purpose, a company or LLP would be large unless it satisfies at least two conditions in a financial year. Those conditions are turnover of £36 million or less, balance sheet total of £18 million or less, or not more than 250 employees. Similar thresholds would apply to group reports.

The directors’ report would need to state the following items. (LLPs would state this information in a new and separate “energy and carbon report”.)

  • Emissions (in CO2e) from activities for which the company is responsible. Unlike for quoted companies, this would be limited to gas combustion and consumption of fuel for transport.
  • Emissions resulting from buying electricity for own use (including transport).
  • The annual quantity of energy consumed (in kWh) from those activities.
  • The methodology used to calculate these figures.
  • Any measures the company or LLP took to increase its energy efficiency.
  • A suitable emissions ratio.

Unlike for quoted companies, the report would state only figures relating to activities in the UK, and the company or LLP would need to provide the information only to the extent it is “practical” to obtain it.

However, as with quoted companies, the report would also state the equivalent figures for the previous year, and, if the company or LLP prepares a group report, would include group-wide figures instead.

Exemptions

A company (whether quoted or not) or LLP would not need to disclose the information above if:

  • its annual energy consumption was less than 40,000 kWh for the year in question;
  • disclosure would be “seriously prejudicial” to its interests; or
  • it is a subsidiary undertaking and the information is included in its parent undertaking’s directors’ report (although this is unlikely to apply to many quoted companies).

Practical implications

The proposed regulations covering wider reporting requirements, but the principal driver behind them is the abolition of the CRC Energy Efficiency Scheme. An order has been made to provide for the formal closure of the CRC Scheme at the end of the current compliance reporting phase on 31 March 2019.

The new reporting regime would be much simpler for businesses to process than the CRC Scheme. For businesses that currently fall within the CRC Scheme, therefore, the proposed regulations will potentially relieve an administrative burden.

By contrast, the lower threshold of 40,000 kWh means that many businesses that were not caught by CRC Scheme or other previous energy reporting regimes may well find themselves needing to report on emissions and energy usage for the first time.