This change rolled out in the updated Companies Act 2006 (Strategic Report and Directors’ Regulations 2013, requires all companies listed on the London Stock Exchange to disclose their carbon (GHG) emissions within their annual Directors Report. This change came into effect from 1 October 2013. But why is emission reporting so important?
A new report from the Intergovernmental Panel on Climate Change (IPCC) outlined the key worldwide impacts of global warming. It showcased the global threat to natural systems which are currently bearing the brunt of climatic changes, and also how this will affect humans if left unchallenged. It looked for the first time at how the report is treating managing climate change as managing risk. Ed Davey, UK Energy and Climate Secretary, said of the report, “The science has clearly spoken. Left unchecked, climate change will impact on many aspects of our society, with far reaching consequences to human health, global food security and economic development.”
With this in mind, alongside the UK government’s commitment to reduce 80% of their GHG emissions by 2050 and the enactment of the Climate Change Act 2008, the key challenge is to ensure that all companies are aware of the need for this reporting and the benefits.
In the talk at the BEC Enviroseries Conference several commercial benefits for disclosing GHG emissions were discussed such as helping to manage business risk and cost saving on energy and fuel cost (estimates indicate that the savings could be around £460 mil over 10 years).
Quoting the UK Carbon Trust, “By making reporting mandatory, the UK government is pushing businesses to get ahead of the global curve. Climate change and resource scarcity are threats to the way we do business and the way we live. A new economic world order is asserting itself, where only the sustainable will survive.”
A recent report by the S&P stated that demand for climate bonds is set to double this year. Investors are becoming increasingly aware of the benefits of ‘green’ companies and asking for more transparency than ever in order to ensure that the companies they invest in share their personal values.
These regulations have made the UK the first country to set carbon disclosure as a legal requirement.