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Carbon reporting saves money for businesses says study

Michelle Ward
30th November 2010
Research released today by Defra finds that voluntary reporting of greenhouse gas emissions is cutting costs and improving relationships for businesses.
Businesses that chose to report their greenhouse gas (GHG) emissions are seeing benefits says a Government-backed study released today, which may pave the way to mandatory emissions reporting.

The research, published by Defra, financial services firm PricewaterhouseCoopers (PwC) and the investor-backed Carbon Disclosure Project (CDP), surveyed more than 150 large companies and found that over 50 per cent said the benefits of GHG reporting outweigh the costs involved.

"I am pleased to see that the many companies already voluntarily involved in reporting GHG emissions are finding the process beneficial to their business and investors," said Lord Henley, Environment Minister. "I am also delighted to see that the act of reporting is encouraging attempts to reduce emissions."

Benefits to businesses
Businesses who participated in the research said the emission reports initiated board level interest in environmental issues and drove environmental change across the company and 72 per cent of companies surveyed said they now have a corporate climate change strategy designed to reduce GHG emissions.

"Reporting drives the action of measuring, helping companies to identify opportunities for emission reductions," said Joanna Lee, Chief Partnerships Officer at CDP. "It also helps companies set meaningful and achievable reduction targets, as well as advancing better risk management and increased awareness of new market opportunities."

Measuring emissions cost less than £50,000 for 65 per cent of the companies surveyed, and about 14 per cent of companies calculated energy cost savings of more than £200,000 a year as a result of carbon accounting initiatives. Against quantifiable business costs and benefits, 60 per cent of companies found there to be a net cost of reporting, but when considering wider benefits such as reputation and consumer awareness, 53 per cent of companies said there was a net benefit.

The reports were also found to be important in communicating environmental credentials to investors and encouraging investment.

Mandatory reporting
The next step is for Government to consider the results of the research and Henley said a decision will be announced by early next year. Industry leaders, however, are already calling for the introduction of mandatory carbon accounting rules.

"The CBI strongly supports emissions reporting because it helps businesses cut carbon effectively and demonstrate their commitment to green growth to investors," said Rhian Kelly, CBI head of Climate Change.

"As ministers consider whether to make carbon reporting mandatory, it is important that the Government takes the opportunity to simplify and align existing regulations, and ensure that any changes fit with international practices."

The UK's Climate Change Act includes a clause that allows the Government to impose mandatory carbon reporting on listed companies, but the rules were not enacted when the law came into force in 2008. In an open letter published earlier this week in the Financial Times, the Aldersgate Group and leading UK businesses urged Government to announce plans for the introduction of mandatory carbon reporting rules.

"One of the most urgent and important challenges we face is to decarbonise our economy while also fully exploiting the new jobs and business opportunities that will come from a green economy," the letter states. "Requiring companies to report their carbon emissions in a way that is consistent with international reporting standards would be an extremely useful tool to help deliver this."

Complexity of reporting
Companies said the distinction between voluntary and mandatory reporting is already blurred, however, with schemes such as CDP becoming semi mandatory. Many companies responding to the survey are also subject to the EU Emissions Trading Scheme or the Carbon Reduction Commitment (CRC), both of which require measurement and reporting of emissions.

"A standard, regulatory reporting regime would mean reporting could more accurately reflect the entire scope of a company’s risk profile and attitude and encourage much more widespread use of environmental information in investment decisions," said Alan McGill, partner at PwC.

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