Comments from ACCA
ACCA welcomes the opportunity to comment on the consultation paper and support the proposals to introduce mandatory reporting of corporate GHG emissions. It is imperative any commitment to mandatory reporting, and subsequent introduction of any GHG reporting regime, are done so as soon as possible. To prevent the tipping point of going beyond 2 degrees, the sense of urgency is acute. Coupled with this, delaying will give rise to making any reduction effort both more expensive and harder to implement.
Questions on the four options
1. Do you support Option 1 (enhanced voluntary reporting)?
ACCA does not support this option. The number of companies reporting would remain low, and the level of disclosures would not be at a satisfactory standard. This option would not hold companies to account for their actions in reducing GHG emissions, and would not, in our opinion, help the UK to meet its international commitments in respect of GHG emissions.
Improved consistency and completeness need a mandatory reporting environment. The issues are too urgent to give the opportunity to businesses to avoid regulations
There are some excellent voluntary initiatives such as the Carbon Disclosure Project (CDP), but more systematic reporting across a more substantial number of companies is required. Keeping reporting voluntary will lead to lack of comparability and standards in those few companies that do report.
2. There are various ideas (outlined in Option 1) for increasing the number of companies reporting on a non-regulatory basis, which do you prefer? Have you any other proposals to increase the number of companies reporting and the quality and consistency of reports on a non-regulatory basis?
We do not support the proposal that companies report on a non regulatory basis. Please see comments above.
3. Should corporate reporting of GHG emissions be made mandatory for some companies? If so, please explain.
ACCA believes mandatory reporting should be introduced. It is a fair and appropriate way for all companies to transparently demonstrate their efforts to reduce GHG consumption. The reporting process helps companies manage their emissions more efficiently, thus driving down costs, adding value and enhancing profits.
ACCA is a member of the Aldersgate Group, who were the leading voice for enabling powers in the Climate Change Act 2008 for mandatory carbon reporting. We agree with the Aldersgate Group that 'the administrative costs would be minimal for those who report anyway and help those who don't to identify significant cost savings and address more effectively material climate risks and opportunities. It would also create a level playing field, allowing investors, consumers and the media to make meaningful comparisons, thus driving further emission reductions.'
A growing number of businesses and organisations are supportive for mandatory carbon reporting. In addition to The Aldersgate Group (see above), the CBI has also been very active and supportive for mandatory carbon reporting. More recently 190 businesses, including ACCA, signed an open letter (on 13th January coordinated by the Cooperative) calling for mandatory carbon reporting.
4. If mandatory reporting is introduced, which would be your preferred Option: 2, 3 or 4? It would be helpful if you could explain your reason. Have you any suggestions for improving any of the regulatory options?
It should be noted that these options needn't be alternatives. We should move (even if not immediately) to a situation where any of these criteria should trigger the requirement to report.
However for the purposes of this consultation ACCA supports Option 3. Mandatory regulations should apply to all large companies. We note that setting disclosure rules for environmental factors by reference to economic size departs from the growing trend to classify businesses by their ownership (listed or unlisted) to determine the level of disclosure required. However, it is consistent with the more fundamental principle of informing those affected by the activities of the enterprise. It would also reflect the fact that the emission of GHG is an issue which Parliament has decided is important to society as a whole and not solely to the capital markets. Economic size represents the most effective analogue to all types of emissions and is the preferred compromise option where the purpose of the reporting is to inform society in general rather than investors. By focusing on large companies only, the increased cost to business resulting from GHG reporting will be kept proportionate to the benefits derived from more complete reporting.
We do not support Option 2 as too few companies, which had a significant carbon footprint, would be required to report. There are a number of non-quoted companies that are large consumers of energy and emitters of GHG emissions: these would not be included in Option 2.
We do not support Option 4 as this would again limit the number of companies that should be reporting, and focus on companies that were already reporting anyway via the CRC (as the threshold criteria are the same). It would also add a layer of complexity into the system with smaller companies having to prove their consumption.
For Option 3, we would support a staged approach if it made take-up and implementation easier. Given the Government's current re-think of the structure of narrative reporting, referred to in the consultation document, we would agree that a new reporting obligation should be introduced in a way which was consistent with that exercise.
The public sector also needs to be included and should be expected to report. Any mandatory framework should be consistent with international guidance. ACCA has been involved with the Climate Disclosure Standards Board (CDSB), who released their framework for carbon disclosures in October 2010.
5. Do you have any comments on the economic analysis in the impact assessment? In particular, do you think the costs and benefits for the different options are reasonable? Can you provide any further information which would help in estimating costs and benefits for the different options?
The seriousness of the situation with climate change and the potentially catastrophic results of emissions mean that conventional impact assessments are irrelevant and potentially will contribute to a continued piecemeal approach.
ACCA believes more focus and research must be done on the benefits rather than the costs. Defra is encouraged to contact active companies for their input into this part of the consultation, as they are best placed to answer this.
Questions on the requirements of mandatory reporting, if introduced
6. Do you agree that a company should specify which approach it is using to set its organisational boundary?
Yes, we do support the disclosure of the approach adopted in setting organisational boundaries as it allows a more transparent and consistent comparison between companies.
7. Do you agree that a company should (where possible), report on all their emissions within the chosen organisational boundary, including those that occur in their operations overseas? If you don't agree, can you explain which emissions you think a company should report?
ACCA agrees that a company should report on both UK-based and overseas emissions. Only then will investors, other shareholders and stakeholders gain a true picture of the company's carbon footprint and commitment to reducing it. Without the need to report emissions from overseas, business and operations could be moved or outsourced to appear more favourable.
As overseas operations and businesses should be included, any guidance must be consistent with international reporting standards.
8. Do you agree that, if it isn't possible for a company to report on all emissions within their organisational boundary (because of data problems, etc), then a company should clearly state the extent to which it has been able to report?
ACCA agrees that companies should clearly state any gaps and omissions, and explain accordingly. This will reduce any possible claims to being misled. Companies should also indicate how data will be improved, and by when.
9. Do you agree that companies should be required to measure and calculate emissions from the six GHGs covered by the Kyoto Protocol?
Yes, ACCA believes that companies should be required to measure and calculate emissions from the six GHGs (CO2, CH4, N2O, HFCs, PFCs, SF6) covered by the Kyoto Protocol, and as specified by the Greenhouse Gas Protocol Initiative of the World Resources Institute/WBCSD.
10. Do you agree that companies should be required to measure, or calculate, and report on all their Scope 1 and Scope 2 emissions? If not, which emissions do you think a company should measure, calculate and report and why?
ACCA agrees that companies should report on all their Scope 1 and 2 emissions. We also believe that companies should begin to consider measuring and reporting on their Scope 3 emissions.
11. Do you think that companies should be required to measure and report on any of their Scope 3 emissions (in addition to Scope 1 and 2)? If so, can you specify which ones you think should be required?
ACCA released a report in May 2011, stating that the measurement and reporting of Scope 3 Greenhouse Gas (GHG) emissions needs to be much more comprehensive and prevalent. The report, The Carbon We're Not Counting: Accounting for Scope 3 Carbon Emissions, asserts that global businesses will find it increasingly difficult to evaluate the nature, extent and value of GHG-associated risks and opportunities without high quality Scope 3 information. ACCA is concerned that none of the many regulatory or voluntary accounting and reporting programmes require Scope 3 accounting and reporting.
ACCA believes that Scope 3 emissions should begin to be measured and accounted for – with business travel being managed at a minimum. By omitting them the datasets remain incomplete, and our much-needed transition to a low carbon economy will be slower. The report recommends that:
governments, intergovernmental agencies and other standards and policy setters should consider making Scope 3 mandatory as it is currently voluntary
Scope 3 information and analysis should begin to be brought into the investment and appraisal process.
For some companies, Scope 3 can be the major/primary source of emissions, and for many companies they form a significant quantity. In light of this, and in light of the need to ascertain a complete and comprehensive (as well as comparable) picture of GHG emissions, companies should begin to consider measuring and reporting on their Scope 3 emissions.
12. Do you agree that companies should specify in their directors' reports, the company's total annual amount of GHG emissions in CO2e broken down by direct emissions (Scope 1) and indirect energy (Scope 2)?
Yes, ACCA agrees with this proposal. It will help directors take responsibility and more interest in the company's GHG emissions, as well as inform report users about the performance and commitment of the company.
13. Do you agree that companies should specify an intensity ratio?
Yes, ACCA believes this could be helpful in some cases, but the focus should be on absolute emissions data.
14. Should companies specify a base year when they report their annual emissions?
Yes, ACCA believes this can only be helpful.
15. Is there any other information which you think a company should report?
Companies should also report:
- absolute and normalised figures
- any targets or explanations why targets have not been met
- explanations to clarify changes in performance data since previous year
- the company's approach to managing their carbon emissions
- move towards accounting for outsourcing and imports/ exports
ACCA advises Defra refer to the CDSB Framework as well as WRI/WBCSD GHG Protocol, as these are the generally accepted frameworks for carbon and emissions reporting.
16. If reporting is made mandatory, should companies be obliged to seek some kind of assurance or verification on their emission report? If not, could you explain your thinking?
Absolutely. ACCA is very supportive of assuring the information and data in the emission report. The assurance process and public statement enhances the credibility of the information and builds trust with the company's stakeholders. It should be noted, however, that spot checks might need to be undertaken in the meantime until adequate expertise builds up.
17. Is internal verification of greenhouse gas emissions sufficient, or should external third party assurance be sought? If the latter, should it be limited or reasonable?
ACCA's preference is external reasonable assurance, with qualifications if required.