Isra-Mart srl:Counting carbon cuts costs, says Defra

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Companies that voluntarily report greenhouse gas emissions are cutting costs and improving business relationships, according to government-backed research published today that will fuel further calls from industry for new mandatory carbon accounting rules.

The research, published jointly by Defra, financial services firm PwC and the investor-backed Carbon Disclosure Project, surveyed more than 150 large companies and found that over half believed the benefits arising from greenhouse gas reporting outweighed the costs entailed.

About 14 per cent of respondents quantified energy cost savings of more than £200,000 a year as a result of carbon accounting initiatives; significant savings given two thirds of those surveyed spent less than £50,000 on measuring emissions.

The report, which also drew on focus group findings and detailed interviews with senior executives, said the process of measurement and reporting had introduced pressure at boardroom level for executives to tackle climate change, reduce carbon emissions, and achieve energy and operational savings.

This pressure resulted in nearly three quarters setting reduction targets linked to their emissions measurement and reporting programme. Long-term decisions were also improved by the quantifiable data on climate change risks generated through carbon accounting initiatives, while enhanced environmental credentials attracted outside investment, according to the firms surveyed.

"Those businesses that publicly report on their greenhouse gas emissions are more ambitious and likely to want to become carbon leaders, moving beyond achieving legal compliance towards low-carbon leadership," said Martin Baxter, executive director of policy at the Institute of Environmental Management and Assessment.

Environment minister Lord Henley said he was pleased that reporting was cutting costs and emissions, but stopped short of confirming whether or not the government will introduce mandatory reporting next year.

"The next steps for government will be to consider the findings of the report. We'll be announcing a way forward in early 2011," he said.

Last week, some of the UK's largest companies wrote to secretary of state Caroline Spelman to demand that large firms be legally obliged to measure and report on their emissions.

Today's report reveals that legislation may be necessary to drive universal adoption of carbon reporting, noting that while 62 per cent of FTSE-listed companies provided data on climate change or energy use in their 2009-2010 annual reports, 78 per cent are still failing to report data on their greenhouse gas emissions.

Baxter said the government now had the evidence base to make reporting on greenhouse gas (GHG) emissions mandatory.

"Government needs to act now to introduce mandatory GHG reporting to ensure that UK businesses gain the benefits from embedding sustainability into their corporate strategy," he said. "Mandatory reporting is essential as it will create a consistent and clear framework to enable businesses to plan and benefit from GHG emissions reductions."

Alan McGill, a partner at PwC, said mandatory reporting would enable businesses to better identify risks and opportunities.

"A standard, regulatory reporting regime would mean reporting could more accurately reflect the entire scope of a company's risk profile and attitude and encourage much more widespread use of environmental information in investment decisions," he said.