Quoted companies have been required to report on energy and carbon usage since 2013, but now large unquoted companies are also required to report on their carbon and energy use in the director’s report of their financial statements. The reporting requirements between quoted and unquoted businesses are different, but with the government’s target of being carbon neutral by 2050, the expectation is that reporting energy usage will filter down to smaller entities before too long. Smaller companies can voluntarily make the disclosure now if they wish to. Whilst this may seem like yet another disclosure requirement, non-financial reporting can be an opportunity for companies to tell a positive story and make some operational changes.
This is an opportunity for companies to explain what steps they are taking to reduce their energy consumption and carbon footprint; where companies are able to report reductions, year on year, this is a positive story to tell.
The increased scrutiny upon energy reporting analyses should also help businesses benefit from a better understanding of their energy usage and where potential cost savings that can be made.
Investors increasingly expect companies to consider sustainability. Where energy and carbon usage is reported, it provides an indicator of a company’s commitment to reduce its carbon footprint. This may have an impact upon the valuation of companies, including smaller privately owned businesses, as it could influence an investor’s assessment of where a company might be on their journey to becoming carbon neutral and meeting sustainability targets.
A reputation for reduction
The reporting of a reduced carbon footprint can be taken as a public commitment that a company is focused on mitigating climate change. Increasingly, consumers are considering climate impact when making their purchasing decisions, choosing to interact with companies that have a good reputation for reducing their energy usage and carbon emissions.
Employees will also benefit from being associated with a responsible employer, which may well help with retention of team members.
In short, being a climate change champion could result in a more sustainable and profitable business.