26 Jul 2018
By Rebecca Beeson, Associate Director – Sustainability, Turley
In June, the Committee on Climate Change (CCC) published their 2018 Progress Report to Parliament; although UK emissions continue to fall, decarbonisation in the power sector is propping up emission reductions and masking worrying trends in other sectors.
Buildings were highlighted as an area of particular concern, with temperature-adjusted emissions increasing by 1% this year, contrasting with the 3% annual reduction in emissions required from all sectors in order to meet the 2050 target set in the Climate Change Act.
With this in mind, we welcome the publication of BEIS’s recent response to the Streamlined Energy and Carbon Reporting (SECR) consultation, which for the most part agrees with the consultation response the BPF Sustainability Committee submitted in January.
You may remember that back in 2015, HM Treasury and the then Department for Energy and Climate Change (DECC) ran a consultation on reforming the business energy efficiency tax landscape. What followed was the announcement in the 2016 Budget that the Carbon Reduction Commitment (CRC) would be abolished in 2019, to be replaced with an increase in the Climate Change Levy (CCL), and a ‘single effective reporting framework incorporating the most effective elements from the range of existing reporting schemes’.
Whilst the increased CCL on energy bills definitely reduces the administrative burden associated with CRC, the detailed evidence packs, audits, significant fines, and threat of prison raised the profile of energy and emissions at Board level in a way that an extra 0.14 to 1.06 pence on a kWh probably won’t.
Whilst it won’t have quite the same effect, requiring companies to include information in Annual Reports raises the profile of energy and emissions, and extending reporting requirements to large unquoted companies could help to normalise the practice and aid better decision-making.
As of 2019, in addition to the circa 1,200 quoted companies covered by Mandatory GHG Reporting, approximately 10,700 additional unquoted companies defined as ‘large’ will also be required to disclose (as well as around 230 LLPs) and it is likely that a number of BPF members will be amongst the new participants as a result of turnover and balance sheet criteria.
For quoted companies, nothing really changes, other than a requirement to now include a disclosure on global energy use.
In the spirit of streamlining, it would make more sense if the requirements for large unquoted companies were the same as for quoted companies, and this is what our response stated; BEIS have adopted a slightly different approach and it is unclear at this stage how this fits in with existing guidance for determining emission boundaries and materiality – further guidance will be published in due course.
Following the work of the Task Force for Climate-related Financial Disclosure (TFCD) last year, the consultation sought views on whether in the long-term any of the TFCD voluntary disclosures should become mandatory within Annual Reports. Whilst we think it’s currently too early to include mandatory TFCD reporting, there is strong momentum behind the TFCD and qualitative disclosures relating to the overall approach of an organisation to climate change would be a useful addition in understanding climate risk. For now, disclosure will be limited to retrospective performance, although some of the issues around clarity and transparency and reporting will be considered when developing the SECR guidance.
The only mystery relates to implementation – it is the intention to introduce the framework in 2019, but there is no detail on when or how. Given that many companies are now a few months in to the financial year, will they be required to report on 2017/18 emissions – or will the first reports be required in 2020? Either way, those who think they might be caught by the requirement should start making preparations now.