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The UK Government will soon decide whether to make greenhouse gas emissions reporting mandatory in annual reports. Several high emitting FTSE 350 companies will need to improve the accuracy and transparency of their reporting.

The Climate Change Act 2008 requires the UK Government to make regulations under the Companies Act 2006 by 6 April to require directors' reports to include information about greenhouse gas emissions, or explain why it hasn't done so.

The Government's voluntary greenhouse gas (GHG) reporting guidelines advise companies to disclose emissions from operations (Scope 1) and purchased electricity (Scope 2) separately, in line with the GHG Protocol. Almost 3,000 companies under the CRC Energy Efficiency Scheme already have to report data on carbon dioxide emissions from energy use to the UK Environment Agency, and could face fines for inaccurate or incomplete disclosure. Firms could be fined £40 per tonne of CO₂ if emissions are incorrectly, with a margin of error of more than 5%. This is far higher than the cost of allowances that they will need to purchase for emissions under the scheme from April 2012, fixed at £12 per tonne of CO₂.

So how transparent are UK-listed companies on emissions? Trucost analysed the carbon footprints of companies in the FTSE 350, and reviewed their responses to the Carbon Disclosure Project (CDP)¹ information request to assess carbon reporting.

In 2011, 67% of FTSE 350 companies responded fully to the CDP's request, 2% fewer than in 2010. 49% of companies that answered the questionnaire fully made their responses public, also 2% fewer than in the previous year. Some of the companies that did not make information on their emissions public are high emitters. More than 50,000,000 tonnes of Scope 1 and 2 GHG emissions, measured in carbon dioxide equivalents are from companies with "private" CDP responses, as shown in Chart 1.

Chart 1: Levels of GHG emissions disclosed by FTSE 350 companies

Of the top 10 companies with the highest Scope 1 emissions relative to revenue, International Power and Shanks Group did not publicise their CDP responses; and Eurasian Natural Resources Corporation, Kazakhmys and EasyJet did not respond.

Kazakhmys does report CO₂ emissions not follow Government reporting guidelines on carbon reporting in its 2010 Annual Report, which does not include data on all six GHGs covered by the UN Kyoto Protocol.

Source: Kazakhmys plc Annual Report and Accounts 2010

Carbon data reported for 2009 are incomplete and inconsistent with the company's disclosure in its 2009 Annual Report (21.6 million tonnes of CO₂e). The latest figure for 2009 emissions only relates to copper mining operations. If the firm were to pay £40 per tonne for the missing 10.9 million tonnes of CO₂e, penalties for misreporting would total more than £4.3 billion. Kazakhmys is one of the top 50 UK companies by market cap - are large companies prepared for Government legislation requiring clear and accurate reporting?

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1 Trucost assessed companies' responses to the CDP's Investor Questionnaire

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