RegulationCorporate GovernanceCalculating the true price of carbon reporting

Calculating the true price of carbon reporting

Exxon Mobil’s £2.7m fine for misreporting carbon is just the tip of the iceberg if companies don’t take carbon reporting seriously warns Peter Grant

Calculating the true price of carbon reporting

WE’VE ALL MISPLACED something, but I doubt many have misplaced £2.7m. On 15 February, Exxon Mobil was handed a £2.7m penalty for falling foul of the European Union’s Emissions Trading Scheme (ETS) guidelines. Exxon Mobil failed to report an additional 33,000 tonnes of carbon it generated last year, citing an ‘incorrect mapping of routings’.

Although this fine is a UK record emissions laws are now being vigorously enforced, sending a warning to other organisations falling under European jurisdiction. While Exxon is recovering from the latest embarrassment, is it likely we will witness similar reprimands if organisations fall foul of UK legalisation?

Under the tenure of the UK’s self-proclaimed ‘Greenest Government ever’, the coalition launched the 10:10 target in May 2010 in the hope encouraging companies to reduce emissions by 10% during 2020. At the time of its introduction, seemingly confident of achieving this aim, Chris Huhne wanted ‘real’ changes rapidly, and began adding further targets.

On 1 April 2010, the Government introduced the Carbon Reduction Commitment (CRC), which forces many companies to report and pay for energy related emissions. The CRC targets about 5,000 public and private organisations that are responsible for 10% of total annual emissions in the UK.

Companies need to manage and report their annual C02 emissions with many organisations still managing their reporting requirements using a wholly manual process based on spreadsheets. However, if accurate reports are not delivered before 1 April each year; penalty charges are incurred with offenders liable for a charge of £40 per tonne of misreported carbon. Whilst this is half as much as the EU-ETS scheme, if Exxon Mobile were part of the CRC it would still receive a fine of £1.35m – not a drop in the ocean.

To mitigate reporting risks, automating the accounting process means less time is wasted filling out endless spread sheets and limits human error from data collection, while more attention is spent on completing progressive tasks.
One customer estimated that in addition to an environmental director, without automation it would take nearly four months for two employees to process and analyse data just for CRC compliance, racking up business costs in a time of financial uncertainty. Post-automation however, that same customer only needs the director to oversee environmental data collection across its entire global portfolio.

However, it is not just financial penalties companies need to consider. David Symons, director of consultancy WSP Environment & Energy, believes the impact on corporate brand reputation far outweighs the original financial loss. For example the latest incident has added more damage to Exxon Mobil’s brand image, which is already associated with the 1989 Exxon Valdez oil spill.

However, despite brand vulnerability and financial penalties many companies are still unaware of the numerous national and multinational emission related legislation they must adhere to.

Companies should hand over at least some of the responsibility for data management over to a good environmental management system to keep ahead of the reporting requirements from different jurisdictions in the EU and the UK. If a company is calculating carbon manually, to save the pennies on investing in software, it should ask who would be accountable for the £2.7m bill if there is a reporting error?

Peter Grant is CEO of CloudApps

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