Navigating Sustainability: Requirements and Actions for Carbon Reporting in the UK

Navigating Sustainability: Requirements and Actions for Carbon Reporting in the UK

As climate change accelerates, businesses and governments alike face increasing pressure to measure, report and reduce their environmental impacts. In the UK, stringent regulations have been established to ensure private companies play their part in the national effort towards sustainability. This article explores the requirements for carbon reporting and the broader climate action plan necessary to meet the UK's ambitious environmental targets.

Charting the Path: Understanding Carbon Reporting Requirements

The UK has implemented comprehensive guidelines to assist businesses in measuring and reporting their greenhouse gas (GHG) emissions. The Department for Environment, Food & Rural Affairs (DEFRA) provides a detailed guide designed to help businesses enhance their environmental performance while cutting costs.

Streamlined Energy and Carbon Reporting (SECR)

The SECR framework mandates that from 1 April 2019, all UK quoted companies must report their global energy use alongside their GHG emissions in their annual Directors’ Report. Additionally, large unquoted companies and large limited liability partnerships (LLPs) are required to disclose their annual energy use and GHG emissions.

Who Must Comply?‍

The SECR regulations apply to:

• UK incorporated companies listed on the main market of the London Stock Exchange, a European Economic Area market, or whose shares are dealt on the New York Stock Exchange or NASDAQ.

• Large unquoted companies incorporated in the UK required to prepare a Directors’ Report under Part 15 of the Companies Act 2006.

• Large LLPs as defined by the existing framework for annual accounts and reports based on sections 465 and 466 of the Companies Act.

While reporting remains voluntary for other companies, the government encourages widespread participation to foster transparency and accountability in environmental performance.

Conversion Factors and Reporting Tools

To facilitate accurate reporting, the government produces annual conversion factors to help businesses convert activities like fuel consumption and car mileage into equivalent carbon emissions. This ensures that all reported data aligns with UK-specific emission factors.

Addressing Other Environmental Impacts

Beyond GHG emissions, businesses are also encouraged to report on other significant environmental impacts, such as water use, air pollution, waste and biodiversity. Setting key performance indicators (KPIs) and targets can drive continuous improvement in these areas.

Practical Advice for Effective ESG Reporting

1. Conduct a Materiality Assessment: Identify key environmental impacts relevant to your business and stakeholders.

2. Gather Accurate Data: Implement systems to track and report energy use, emissions, and other metrics.

3. Follow Government Guidance: Adhere to DEFRA and SECR guidelines for accurate GHG reporting.

4. Engage with Experts: Consult with sustainability specialists like the Carbon Trust for best practices.

5. Set and Monitor KPIs: Develop key performance indicators to measure and improve environmental performance.

6. Communicate Transparently: Publish clear annual sustainability reports to build trust with stakeholders.

7. Review and Improve: Regularly update reporting processes and strategies based on performance data and feedback.

Conclusion: Towards a Sustainable Future

The UK's stringent carbon reporting requirements underscore the critical role of private companies and government action in tackling climate change. By adhering to SECR guidelines and embracing broader sustainability initiatives, businesses can significantly contribute to the national effort to achieve a greener, more resilient future.