Businesses and accountants could see workload duplicated, and may be unprepared for assurance on reports
A LEADING BUSINESS CONSORTIUM has warned the introduction of mandatory carbon reporting could increase regulatory burden on businesses and accountants through duplication.
This week, the government announced large listed UK companies will have to publish greenhouse gas emission reports in the next financial year.
However, accountants and business groups are concerned the regulatory burden will add further costs to companies during a time of economic uncertainty.
The Confederation of British Industry has suggested the government remove the Carbon Reduction Commitment (CRC), which was introduced last year, to reduce the chance of duplication.
The CRC requires organisations, that spend more than £500,000 annually on energy bills to pay for and report on energy-related emissions.
Rhian Kelly, CBI director for business environment policy, said: “We have been calling for mandatory carbon reporting for some time. It is an important way to help businesses save money and emissions.
“To avoid unnecessary duplication, the government now needs to scrap the Carbon Reduction Commitment.”
Currently, large companies must report its carbon emissions under the Climate Change Act and the European Emissions Trading scheme, which could also lead to duplication.
However, PwC sustainability partner Alan McGill, who worked on the world’s first environmental profit and loss account for Puma, argued it may not create an increased workload.
“For many companies that are already reporting, this requirement shouldn’t be too much of an extra burden, but the timetable for financial reporting may be a challenge, and there are issues around coherence of reporting and materiality,” he said.
“Companies that aren’t already reporting may worry about the additional regulatory burden. But this isn’t just about reporting. It’s about setting targets and driving efficiency, which should save money, as well as carbon.”
However, McGill warned that “the immediate questions are whether it avoids duplication with other requirements (eg. the Carbon Reduction Commitment) and whether businesses can jump the hurdle in terms of accuracy of reporting against the deadline set for the next financial year”.
Concerns have also been raised that accountants are unprepared to audit or advise on mandatory GHG reporting. Usually, environmental reports are largely focused on carbon emissions. However, GHG takes into account all forms of harmful gases released into the environment.
“With only nine months to go before reporting becomes mandatory, accountancy firms must urgently address how they respond to this new requirement,” said Gary Davis, operations director at environmental accounting developer Ecometrica.
“GHG expertise, both in terms of measurement and audit, is scarce throughout the advisory sector and firms will need to ensure they have the capabilities and expertise to meet the new obligations.
“In deciding their future strategy, at the very least, firms will need a working knowledge of GHG accounting best practice, so they can advise their clients.
“Firms that decide to integrate such services into their current offering must also ensure they put in place Chinese walls between reporting and audit teams.”
Michael Izza, ICAEW chief executive, said he welcomed the decision and suggested the government use the Climate Disclosure Standards Board (CDSB) framework, which links carbon, risk and performance in financial statements, as the way in which companies should report.
The latest announcement is likely to affect about 1,800 companies in the UK.
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