Carbon and Energy Reporting – changes coming into force April 2019

From April 2019, The Companies (Directors’ Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018 come into force and will apply to all financial year ends which start on, or after, 1 April 2019.

The new regulations are designed to replace the CRC Energy Efficiency Scheme (the CRC scheme) whereby roughly 4,000 UK companies were previously required to report their annual carbon emissions within their Financial Statements.

The government predicts that the new regulations will apply to roughly 11,900 UK businesses, including quoted companies, large companies and large LLP’s, and will require much further enhanced disclosures.

What is a large company?  In accordance with the definition in the Companies Act 2006, a company meeting two of the following conditions, in a financial year, is considered a large company:

  • Turnover: at least £36m
  • Balance sheet total: at least £18m
  • Number of employees: at least 250

Quoted companies will be required to report on their global energy use, the proportion of emissions and energy consumed in the UK and offshore areas. They will also be required to include a description on any measures taken to enhance energy efficiency. These requirements are in addition to the current requirements, in reference to greenhouse gas emissions.

The requirements of a large unquoted company, LLP or group differ slightly, in that these entities will need to report on their UK energy use, the associated greenhouse gas emissions relating to gas, electricity and transport, an intensity ratio and any energy efficiency measures taken.

There are two main exemptions available; firstly, if the entity is a subsidiary and the new information is reported within the parent’s Financial Statements and secondly, if an entity has consumed less than 40,000 kWh of energy or less in the UK, within the period reported upon. In relative terms, a ‘typical’ home uses between 5,000 and 30,000 kWh of energy a year for its heating, so it is likely that few companies will be able to benefit from this exemption.

The new regulations have certainly increased the efforts required in order to quantify the new disclosures. As such, the regulation does state that if obtaining the required energy and carbon information is not practical then the entity must state what information is not included within the report accompanied by a corresponding explanation.

Any information disclosed within the Directors’ Report or Energy and Carbon Report (for LLP’s) will be under the added scrutiny of auditors, therefore it is worth ensuring that supporting documentation is available and perhaps worth exploring a system which can capture this data.

For further information please contact Rebecca Dawson on 01904 464100.