UK companies set for mandatory greenhouse gas reporting

Plans to make greenhouse gas emissions reporting mandatory in the UK have been passed by parliament, bringing the new rules one step closer.

The changes to the UK Companies Act 2006 now require a ministerial signature before they come into force, though with Jo Swinson – the East Dunbartonshire MP who initially proposed the amendment to the act – set to sign off the changes, the Climate Disclosure Standards Board (CDSB) says no barriers should remain.

The reforms, which include requirements to report additional information on human rights issues and gender representation in the boardroom, are designed to ‘address concerns that over time many [annual] reports have become bogged down in corporate jargon, confusing in many parts for readers and lacking the clarity they should have in order for them to be effective and fulfill their purpose,’ noted a Department for Business, Innovation & Skills (BIS) press release in June.

The new rules will affect annual reports from October 1, 2013, though Lois Guthrie, CDSB’s executive director, says that, in practice, the law is already being enforced. ‘If your accounting year ends on or after September 30, 2013, you will have to report on a full year’s greenhouse gas emissions,’ she explains.

The UK won’t be the first country requiring listed companies to report on their greenhouse gas emissions, although the CDSB – a consortium working to promote climate change reporting – says ‘what makes these new amendments special is that they require the affected companies to report on their global emissions, thus giving a more comprehensive picture of the organization’s climate change performance.’

This is because, unlike legislation elsewhere, the changes to the Companies Act 2006 will apply to an entire corporate group, forcing firms to disclose emissions for the parent company as well as any subsidiaries, no matter where they are located, says Guthrie.

The changes will also see the introduction of a ‘strategic report’, which will apply to all companies and replace the previous ‘business review’, according to the Department for BIS. ‘The aim is to allow the company to tell its story, starting with the strategy and business model and the principal risks and challenges the company has faced,’ it says.

‘In order for shareholders to fully hold a company to account they need to have the right information to hand,’ says Swinson in a statement. ‘Annual reports are a key tool for shareholders to get a good understanding of how a company is performing, but [the reports] need to be produced in an open and transparent way.

‘This helps build the trust and confidence that shareholders, and the wider public, need to have in our top companies. By including additional information on human rights, gender representation and greenhouse gases, these changes can only strengthen that level of trust.’

Guthrie adds that the amendments will create a ‘level playing field’ by replacing the current voluntary greenhouse gas reporting rules with mandatory requirements that will be enforced by the conduct committee of the Financial Reporting Council.