22 August 2013
Practice Group:
Environmental, Land
and Natural
Resources
Climate Change and
Sustainability
Corporate/M&A
Greenhouse Gas Reporting for UK
Quoted Companies
By Sebastian Charles, Paul Tetlow and Penelope Davey
The Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013
These new regulations will come into force on 1 October 2013 and are part of the Government’s
proposals to simplify and strengthen company reports. The regulations will require quoted
companies to report on Greenhouse Gas (GHG) emissions and environmental matters for financial
years ending on or after 30 September 2013. The new GHG reporting requirements will send a
positive message to industry and clients that UK quoted companies are playing their part in
reducing carbon emissions.
Is my company required to report?
The definition of a quoted company includes companies that are UK incorporated and officially
listed on the main market of the London Stock Exchange, or officially listed in a European
Economic Area or admitted to dealing on the New York Stock Exchange or NASDAQ in the
United States of America. Other companies not affected by these regulations are encouraged to
report voluntarily.
When does my company have to start reporting?
The new regulations apply to financial years ending on or after 30 September 2013. Depending on
your company’s financial year, it may be required to report on emissions occurring before the
regulations were made. If you do not have the information necessary to meet the regulatory
requirements in the first reporting year, you must either provide an estimate or explain why you
are unable to provide the required data and identify the steps you are taking to acquire the
information.
What does my company have to report?
Greenhouse Gas Emissions
The directors of a quoted company will be required to include within their directors’ report the
annual amount of emissions of all six GHG (carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride) in tonnes of carbon dioxide
equivalent from activities for which that company is responsible (including the combustion of fuel
and the operation of any facility). Directors will also be required to report on the annual amount of
GHG emissions resulting from the purchase of electricity, heat, steam or cooling by that company
for its own use. Quoted companies are not required to report on GHG emissions originating from
inputs into the company (ie emissions from the supply chain) or outputs from the company (ie
emissions from the company’s products when they are used by their customers).
Although there is no prescribed methodology for calculating these GHG emissions within the new
regulations, the directors’ report must include the methodology used and at least one intensity
Greenhouse Gas Reporting for UK Quoted Companies
ratio which expresses the quoted company’s annual emissions in relation to a quantifiable factor
associated with the company’s activities (e.g. sales revenue or floor space).
After a UK quoted company’s first reporting year, it must report the GHG emissions data from its
previous year’s report alongside its current year’s figures in order for trends in emissions to be
compared.
Environmental Matters
The directors of a quoted company will also be required to prepare a strategic report for each
financial year which must include such information about environmental matters (including the
impact of the company’s business on the environment and information about any policies of the
company in relation to those matters and the effectiveness of those policies) as is necessary to
understand the company’s business.
What are the sanctions for non-compliance?
Any directors of a company who fail to prepare a strategic report or who approve a strategic report
which does not comply with the requirements of the Companies Act 2006 may be liable on
conviction of such an offence to pay a fine.
There are a number of legal and practical issues that need to be considered when complying with
these regulations which may present particular challenges for UK quoted companies that operate
in multiple jurisdictions. Our experience in advising clients on complying with similar
requirements (e.g. the CRC Energy Efficiency Scheme in the UK) makes us well placed to advise
clients on this new GHG reporting requirement.
Should you require any further information about any of the matters contained within this alert or
any advice on how these reforms may impact your business please contact the authors or your
usual K&L Gates contacts.
Authors:
Sebastian Charles
Paul Tetlow
Penelope Davey
sebastian.charles@klgates.com
+44 (0)207 360 8205
paul.tetlow@klgates.com
+44 (0)207 360 8101
penelope.davey@klgates.com
+44 (0)207 360 8156
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