On 20 June 2012 the Deputy Prime Minister announced plans for mandatory reporting of greenhouse gas (GHG) emissions for businesses listed on the London Stock Exchange. This is to take effect from April 2013 and is expected to impact around 1101 companies. The plan is to require GHG reporting in the directors’ report of quoted company annual reports.

The announcement follows consultation in 2011 on proposed GHG measurement and reporting requirements which in turn arose out of a positive obligation on the Government under Section 85 of the Climate Change Act 2008 (namely that the Government had to either make regulations requiring directors’ reports to include information about GHG emissions or explain why no such regulations would be made).

Voluntary reporting has been adopted for some time by many companies. The Environment Agency’s most recent report on environmental disclosures by quoted companies identifies that in 2009/10 annual reports, 22% were reporting in accordance with Government guidance. Clearly the Government does not feel that voluntary measures are adequate. The (updated) Impact Assessment accompanying this policy proposal states a number of reasons underpinning Government intervention. It is stated that “information about companies’ exposure to climate change-related risks is material information for all investors and other stakeholders; that provision of such information helps markets to function optimally; and government intervention can provide for a level of transparency and consistency, as is already the case for company financial information, which is not being achieved by individual private initiatives.” In particular it is considered that a company’s exposure to climate change related risks “is essential information for investors who wish to assess medium to long-term risks.”

It is envisaged that regulations will set a minimum level of reporting, requiring disclosure of a figure for global direct emissions and a base year and a relevant intensity ratio (e.g. emissions per £ turnover, per tonne production or other factor that is relevant to the particular business).

Next steps

The Government will consult on draft regulations before implementation (in April 2013).

Following implementation of the regulations for quoted companies, the Government will consider (in 2016) whether to extend the requirement to all large companies.

For access to our earlier Lawnow on the report laid before Parliament click here

For the Impact Assessment on the proposal (option 2) click here