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Before any element of a business can be effectively controlled, it needs to be properly understood. For greenhouse gas emissions, this means monitoring and recording either the emissions, or the processes that produce them. It should come as no surprise that organisations around the world are increasingly being required by law to monitor and report their carbon emissions. Last year’s Climate Change Act introduced a pathway for mandatory carbon accounting in the UK and as a first step, required government by 1 October 2009 to publish guidance on the calculation of Greenhouse Gas (GHG) emissions. This guidance will assist with the reporting of these emissions and it emerged on cue at the end of September. A review will now follow, to be carried out by December 2010, to evaluate the contribution that GHG reporting is making towards achievement of the government’s climate change objectives. Assuming the contribution to be a positive one, by April 2012 we can expect new regulations under the Companies Act to make reporting mandatory. Similarly, the US Environmental Protection Agency has recently finalised a rule that will require power plants, large industrial facilities and car manufacturers to start monitoring their GHG emissions from January next year, with annual emission reports from March 2011 Why is all of this significant? Well, some consistency of approach is badly needed in this area, because there are many ways an organisation might choose to calculate the impact of its operations on the environment. The size of an organisation’s carbon footprint calculated on some basis or other has captured the imagination in recent times, often as no more than a green branding exercise. Some have argued for carbon ‘neutrality’ on the basis of a narrowly defined accounting exercise and an offset scheme which barely stands up to close scrutiny. We also have a European emissions trading scheme which captures larger emitters and the power sector. The freshly renamed CRC Energy Efficiency Scheme also begins soon, covering many smaller businesses and public sector organisations. Whilst both these regulatory schemes entail reporting of emissions, neither covers an organisation’s whole activity. UK companies can expect mandatory carbon accounting in due course, so there are many advantages to following this new guidance and getting to grips with the process before it becomes a compliance issue. Of course, whilst the key focus is reducing carbon emissions, the twin benefit is the impact of energy efficiency in reducing energy bills. Furthermore, businesses are increasingly being required to show their commitment to carbon reduction as part of their customers’ procurement processes. In current times, are any more reasons required for an organisation to begin counting its carbon? For further information please contact: Andrew Whitehead, Partner
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