Tuesday, 26 July 2011

On Mandatory GHG Reporting

A new report by The Aldersgate Group has found that Defra has overestimated the cost and underestimated the benefit of mandatory GHG reporting for businesses. The Aldersgate Group supports option 3 in the government's consultation on this issue, mandatory GHG reporting for large businesses. But the report by Adelphi concludes that the Impact Assessment conducted by Defra overestimates the cost by £4,600m and underestimates the benefits by up to £980m. The consultation closed on 5th July, but the government's decision won't be published until the autumn.

My personal view on mandatory GHG reporting is that it makes good sense, both as a valid metric for evaluating company performance and also as a mechanism for sensitising CFOs to the issue. But it needs to be made simple to comply, and not add significantly to an organisation's costs or administrative overhead. Scope 1 and 2 emissions should not be too difficult to report on: the data is readily available from fuel bills, the financial value of which are already factored in to the financial accounts. Extrapolating the emissions data should not add significantly to the reporting burden.

However, scope 3 emissions are an entirely different matter.For the vast majority of organisations, scope 3 emissions relate to services for which the energy consumption constitutes a scope 1 or 2 emission for the supplier of the service, therefore double counting is a significant risk. And the most common origin of scope 3 emissions is public and outsourced transport. The huge amount of effort involved in collating emissions data for these journeys is entirely disproportionate to the value of the data, since the carbon efficiency of the transport operator is outside the organisation's control.

In my view there is no reason why any publicly quoted company, public sector body or organisation that submits financial accounts to Companies House should not be required to report, but only on scope 1 and 2 emissions. It may not be sophisticated, but it is sufficient - and the less burdensome we can make the reporting, the more positively businesses will look upon the insights the data delivers.

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