Mandatory Reporting of Greenhouse Gases What do you need to know? CRA Whitepaper
Mandatory Reporting of Greenhouse Gases What do you need to know?
Table of Contents Page 1.0
Introduction .........................................................................................1
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Requirements of the Regulations ......................................................2
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Establishing the Organisational Boundary .......................................3
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Data Sources .......................................................................................4
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Methods ...............................................................................................5
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Options ................................................................................................6
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Conclusions.........................................................................................7
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Where can you find out more?...........................................................8
Mandatory Reporting of Greenhouse Gases What do you need to know?
1.0 Introduction CRA has prepared this short whitepaper on options for developing a greenhouse gas (GHG) accounting and reporting process to meet the requirements of “The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013” (the Regulations). These regulations require qualifying companies to include in their annual report a detailed report of their GHG emissions. There are various options for this, suitable for different circumstances and delivering a range of benefits.
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Mandatory Reporting of Greenhouse Gases What do you need to know?
2.0 Requirements of the Regulations The Regulations require GHG emissions data to be included in annual financial reports published from October 2013. Specific requirements include: • • • •
• • •
Reporting emissions of the six Kyoto GHG classes – carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride; Scope 1 (direct GHG emissions from the organisation) and Scope 2 (indirect emissions from the use of electricity) emissions must be reported; Transparency is a requirement, but not the method of reporting; Existing data developed for compliance with the current EU Emissions Trading Scheme (EU ETS), Carbon Reduction Commitment and Energy Efficiency Scheme (CRC) and Climate Change Agreements (CCAs) can be used; The report must include an ‘intensity ratio’, using a financial or activity factor; Emissions must be reported in tonnes of carbon dioxide equivalence; and The emissions data reported in the first year must be reported in subsequent years to allow comparison.
Organisations have the flexibility to use or develop an accounting and reporting method to suit their circumstances. Where they already report emissions data for regulatory purposes or as a voluntary disclosure, the existing method can be used, provided it conforms to the requirements of the Regulations.
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Mandatory Reporting of Greenhouse Gases What do you need to know?
3.0 Establishing the Organisational Boundary In order to develop an organisation-wide GHG inventory, it is necessary to establish the boundary for data collection. An organisation required under the Companies Act to produce a financial report will have defined its organisational boundary for this purpose. The same boundary should be used for the GHG inventory.
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Mandatory Reporting of Greenhouse Gases What do you need to know?
4.0 Data Sources Many large companies are already reporting emissions data for electricity and natural gas, to comply with the CRC. Some industrial sectors are also required to participate in the EU ETS or CCA for specific processes and sites. These data can be used for at least part of the organisational inventory. Office-based organisations are unlikely to participate in the EU ETS or CCA but, dependent on the scale of electricity consumption, may be required under the CRC to report carbon dioxide emissions data for natural gas and electricity consumption. This will provide a substantial proportion of the data needed, but it is likely that additional data also will be required for: •
• •
Other GHGs not included in the CRC, principally: o Nitrous oxide and methane from CRC energy sources, o GHGs from non-CRC fuel combustion (heating oil, for example), and o Refrigerant gases released from air conditioning systems; Overseas operations; Direct emissions from activities not covered by the CRC (for example, owned road vehicles).
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Mandatory Reporting of Greenhouse Gases What do you need to know?
5.0 Methods In most cases, emissions from office-based activities should be estimated by collecting activity data and applying emissions factors. For example, metered natural gas consumption is a form of activity data, to which an emission factor (kilogrammes of carbon dioxide equivalence per kilowatt hour of gas consumed) is applied. The Department for the Environment, Food and Rural Affairs (Defra) provides guidance on the use of activity data and a comprehensive set of emission factors. Defra’s guidance, which is based on the globally-applicable Greenhouse Gas Protocol for organisational reporting, is comprehensive and helpful. In addition to explaining the use of activity data and emission factors, it also provides guidance in establishing data collection processes and ensuring data quality.
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Mandatory Reporting of Greenhouse Gases What do you need to know?
6.0 Options Developing a GHG inventory can be time-consuming and, other than enabling compliance with legislation, on its own delivers no other benefit. However, using the data to target energy reduction can result in substantial cost savings and deliver reputational benefits. The international standard ISO 50001 sets out a specification for developing an energy management system, with requirements for identifying and quantifying energy consumption, setting targets for energy reduction, ensuring staff are trained to implement energy-efficiency measures and monitoring and reporting savings. A management system of this type requires resources to implement effectively but should be more than self-financing. Many companies have adopted ISO 14001, for environmental management systems (EMS). This embraces not only energy management, but all resource consumption and waste management, and offers greater savings through tackling these other areas of expenditure. The benefits of ISO 14001 are widely recognised, and include, in addition to cost reduction, reputational enhancement, reduced operational risk, enhanced relationships with regulators and other stakeholders, and staff motivation.
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Mandatory Reporting of Greenhouse Gases What do you need to know?
7.0 Conclusions Establishing a process for developing a GHG inventory is time-consuming, but the collection process can be streamlined by utilising data gathered for other compliance purposes. Government and other sources provide extensive guidance for GHG inventory development, and these should be utilised to ensure that a robust and reliable process is established. In order to manage data collection and also drive improvement in energy efficiency and cost reduction, an energy management system could be implemented. Alternatively, forwardthinking organisations increasingly are implementing environmental management systems, to take advantage of the benefits of wider environmental improvement.
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Mandatory Reporting of Greenhouse Gases What do you need to know?
8.0 Where can you find out more? For further information on the forthcoming mandatory greenhouse gas reporting requirements, and the implications for your business, please contact Nigel Leehane on nleehane@cra.co.uk or 0115 965 6700.
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