Listed companies will be required to report emissions from next year, Government says

Speaking at the Rio+20 United Nations Conference on Sustainable Development, Deputy Prime Minister Nick Clegg said that the UK would be the first country to make it compulsory for companies to include whole organisation emissions data in their annual reports.

The plans have been approved by the majority of large businesses which responded to a Government consultation on emissions reporting, and could be extended to all large companies from 2016. The requirement will initially apply to London Stock Exchange-listed 'main market' companies, which include 1,800 of the world's best-known companies.

"British companies need to reduce their harmful emissions for the benefit of the planet, but many back our plans because being energy efficient makes good business sense too," Clegg said. "It saves companies money on energy bills, improves their reputation with customers and helps them manage their long-term costs too. Climate change is one of the gravest threats we face. The UK is leading the urgent action needed at home and abroad."

The UK has committed to cutting carbon emissions to 50% of 1990 levels by 2025, and estimates that mandatory reporting will reduce emissions by four million tonnes by 2021.

Under the proposed regulations affected companies will be required to report their emissions of greenhouse gases – including carbon dioxide, nitrous oxide and methane – in their directors' report. New  regulations will apply to all emissions from within the company's "organisational boundaries", including emissions from overseas activities where appropriate. Companies may break down emissions by geographical area if they choose to.

Mandatory reporting will create a "level playing field", according to Environment Secretary Caroline Spelman, allowing attempts by businesses to cut their emissions to be fairly judged against one another. "Investors are now looking hard at the green credentials of businesses, and the reporting of greenhouse gas emissions will give them vital information as they decide where to invest their money," she explained.

Business body the Confederation of British Industry (CBI), which this month called on the Government to replace its Carbon Reduction Commitment (CRC) with a mandatory reporting system, tentatively welcomed the announcement.

"We have been calling for mandatory carbon reporting for some time," its Director for Business Environment Policy, Rhian Kelly, said. "It is an important way to help businesses save money and emissions. Provided this is done in a sensible way, this announcement is to be applauded."

She reiterated the CBI's call to drop the CRC, in order to "avoid unnecessary duplication".

The CRC is a mandatory scheme aimed at improving energy efficiency and cutting CO2 emissions in large public and private sector organisations that are not caught by the EU Emissions Trading Scheme (EU ETS). CRC participants must measure and report on their emissions, and purchase allowances to cover their emissions. A Government consultation aimed at simplifying the scheme and reducing compliance costs for businesses closed this week. However, Chancellor of the Exchequer George Osborne vowed during his Budget speech in March, which was made prior to the publication of the consultation, to replace the scheme with a new environmental tax if the Department of Energy and Climate Change (DECC) is unable to find "significant administrative savings" as a result of the consultation process.