complying with uk ghg regulations: using cdsb's reporting framework

@CDSBGlobal

Andrea Smith Technical

Manager, CDP on secondment

to DEFRA

Lois Guthrie Execu<ve Director CDSB

David Harris Director of ESG

FTSE

Jonathan Shaw Senior Manager, Grant Thornton

UK LLP

Patrick Crawford Corporate

Engagement CDSB

Complying with UK GHG regula<ons:

Using CDSB's Repor<ng Framework

Thursday 25th July 2013

@CDSBGlobal


What is your primary discipline?

•  Finance •  Company secretary

•  Sustainability •  Other

Poll ques<on

The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013 Andrea Smith Technical Manager CDP

{  Campaign led by Aldersgate Group

{  Climate Change Act 2008

•  Guidance on GHG accounting/reporting

•  Consider mandatory reporting of GHG emissions “from activities for which the

company is responsible”.

{  Deputy Prime Minister announcement Rio+20

{ Timetable

GHG Regulation History

{ Change to Companies Act 2006

{ Annual report changes

{ Some reporting requirements removed; some added

{ Strategic report

{ Quoted companies

• Directors’ report - GHG emissions

• If of strategic importance → Strategic Report

{ http://www.legislation.gov.uk/ukdsi/2013/9780111540169/contents

Regulation overview

{ In the Directors’ Report//Strategic Report

{  Data for whole company - global

{  Applies to reports prepared in respect of financial years ending on or after 30

September 2013

{  The GHG reporting year may be different to the financial reporting year – but this must

stated

{  No verification requirement

Reporting of GHG emissions

When will my company have to start reporting?

Your usual financial year

Your first reporting year under the regulation

1 January to 31 December 1 January 2013 to 31 December 2013

1 April to 30 March 1 April 2013 to 30 March 2014

1 October to 30 September

1 October 2012 to 30 September 2013

{  GHGs in tCO2e from activities for which the company is responsible including •  the combustion of fuel •  the operation of any facility

{  GHGs resulting from the purchase of electricity, heat, steam or cooling by the company for its own use {  Comply or explain what is missing and why

{  State methodologies used

{  Give at least one emission intensity metric

{  Must repeat previous year’s data for these points (with the exception of first reporting

year)

Reporting of GHG emissions

{  Undertakings in consolidated financial statement are a reference point

{  If companies consider that reporting emissions from activities for which they are

responsible means that they will:

•  Not report on GHG emissions from certain operations covered by the consolidated financial statement; or

•  Report on GHG emissions from operations that are not included in this statement

they must make this clear

Reporting boundary

{  Companies can use the methodology\methodologies of their choice

•  ISO14064 – Greenhouse gases. Part 1 (2006)

•  WRI / WBCSD Greenhouse Gas Protocol: A Corporate Accounting and Reporting

Standard (Revised Edition)

•  UK Government GHG reporting guidance

•  Global Reporting Initiative Sustainability Reporting Guidelines

•  Climate Disclosure Standards Board Climate Change Reporting Framework –

Edition 1.1 October 2012

Methodology

Omissions

Report on all material emissions of the 6 Kyoto gases from direct sources and from purchased electricity, heat, steam and cooling.

•  May omit information if it has not been practical to obtain. Companies must state if they have omitted any material emissions - and why.

•  If you do not have the information necessary to meet the regulatory requirement in the first

reporting year, you must either:

•  provide an estimation instead, based on extrapolating data that you do have, or use generic data that is not specific to your company. You are required to disclose your methodology and this would form part of your methodology;

•  explain why you are unable to provide 12 months’ data

{  Conduct Committee of Financial Reporting Committee

•  Monitors compliance with the Companies Act 2006

•  Can order a company to revise a report

•  To date has resolved issues by agreement with companies & without recourse to court

Enforcement

{  One document: Environmental Reporting Guidelines: Including mandatory greenhouse gas emissions reporting guidance. { Three sections:

•  Chapter 1: Reporting environmental impacts in general - voluntary

•  Chapter 2: Mandatory GHG reporting

•  Chapters 3-8: Reporting specific impacts: water, waste, resource use, emissions to air,

land, water, biodiversity - voluntary.

•  https://www.gov.uk/measuring-and-reporting-environmental-impacts-guidance-for-

businesses

More information

www.cdp.net | @CDP

@CDSBGlobal

Jonathan Shaw Senior Manager Grant Thornton UK LLP

Advisor perspec<ve

@CDSBGlobal

CDSB’s Repor<ng Framework

Communica<ng Climate Change in Annual Reports


Patrick Crawford Corporate Engagement CDSB

@CDSBGlobal

Financial statements capture less than 20% of corporate risks (source: Eurosif, IIRC)

Increasing ESG reporAng requirements – UK, EU?

Increasing requirement to integrate ESG informa<on with financial repor<ng

Increasing impact of climate change on decisions and ac<ons by management, investors & other

stakeholders

Connec<ng Non-‐Financial and Financial Informa<on

@CDSBGlobal

The integra+on of climate change-‐related informa+on into mainstream corporate repor+ng.

Objec<ve

When?

•  January 2007: Launched at World Economic Forum, Davos, managed as a special project of CDP

Climate change informa<on in CDP

disclosure

CDSB’s

Framework

Annual Report

Members •  “Big 4” accountants,

ACCA, ICAEW … •  GHG NGOs e.g. GHG

management ins<tute, Carbon Tracker, TCR

•  Investors, e.g. Investor Group on Climate Change, Ceres

•  Business, e.g. WBCSD, BT, WEF

•  Standardize climate change-‐related repor<ng for fair and transparent markets

Why?

The need for CDSB’s Repor<ng Framework

@CDSBGlobal

CDSB’s ReporAng Framework • Integrates exis<ng regula<ons rather than crea<ng new standards

• Complements the CDP process

• Communicates management’s assessment of climate change in annual reports

• Connects Financial and non-‐financial informa<on; harmonizing with exis<ng accoun<ng and na<onal standards

• Conformance with the Framework is a means of compliance with UK greenhouse gas regula<ons


@CDSBGlobal

Communicating Climate Change “Reporting from the principle of communication rather than compliance.“ Hermes EOS Investors

CDSB’s Repor<ng Framework in Prac<ce

@CDSBGlobal

A stepping stone to producing integrated reports

CDP InformaAon request

CDSB Guidance CDSB’s ReporAng Framework

THE DATA THE LENS THE HELP VISIBILITY

Mainstream Report


@CDSBGlobal

PuOng it into pracAce 1. DeterminaAon: Decide what to report 2. PreparaAon: Gather clear, consistent, complete Informa<on 3. PresentaAon: Ensure disclosure is clear 4. Review: Check accuracy and ensure relevance


@CDSBGlobal

Summary of requirements 2.30 Disclosures shall be clear and Straigh7orward 2.32 Informa<on shall … explain the links between the organiza<on’s strategy … and climate change impacts. 2.36 Organiza<ons shall disclose performance measures … to manage the business and ... against climate change-‐related targets 2.41 Disclosures shall be consistent with the associated financial statements of the organiza<on…


@CDSBGlobal

DETERMINATION – Decide what to report • Iden<fy the needs of your investors regarding climate change • Reflect the Board’s assessment of the impacts of climate change on the company’s financial performance • Appraise your current business model regarding climate change risks, opportuni<es and challenges • Review regulatory and compliance obliga<ons


@CDSBGlobal


Requirements on DeterminaAon 2.3 An organiza<on shall determine the disclosures to be made under the CCRF according to the categories of disclosure content that are of value to investors and a process that involves a thorough assessment of how climate change has actually affected or has the poten<al to affect the organiza<on’s strategic objec<ves.

@CDSBGlobal


PREPARATION: Gather clear, consistent, complete informaAon • Provide clarity on the repor<ng period and repor<ng boundaries

• Iden<fy relevant standards, protocols and policies

• Analyse material issues posed by climate change

• Consider the relevant <me scales for past results and future prospects

• Include a Statement of Conformance with CDSB’s Repor<ng Framework

@CDSBGlobal


Requirements on PreparaAon 2.12 Disclosures shall be made on a consistent basis and shall include the informa<on that is necessary to maximize its value to investors.

@CDSBGlobal

PRESENTATION: Ensure disclosure is clear • Ensure informa<on is relevant and useful for investor decision making

• Use simple language, with enough context and assump<ons

• Discuss the link between climate risk and company prospects

• Ensure presenta<on allows easy year-‐on-‐year comparisons

• Segment informa<on to focus investor analysis

• Use climate change measures to show progress against targets


@CDSBGlobal


Requirements on PresentaAon 2.26 Disclosures shall be presented and communicated so as to make them useful for investors.

@CDSBGlobal

REVIEW: Check accuracy and ensure relevance • Check the content against the expecta<ons of steps 1, 2, and 3 • Ensure the final report has a rigorous internal review and sign-‐off • Align other company communica<ons with the mainstream report • Share the report with selected external stakeholders to invite their perspec<ve


@CDSBGlobal

CDSB’s ReporAng Framework • Complements the CDP process

• Communicates management’s assessment of climate change in annual reports

• Connects Financial and non-‐financial informa<on; harmonizing with exis<ng accoun<ng standards

• Conformance with the Framework is a means of compliance with UK greenhouse gas regula<ons

• Download CDSB’s Repor<ng Framework and Guidance from www.cdsb.net/Framework


@CDSBGlobal

David Harris Director of ESG FTSE

Investor perspec<ve

@CDSBGlobal @CDSBGlobal

Patrick Crawford Corporate Engagement [email protected] Tel: +44 (0) 7770 382256 Skype: patrickcrawford

www.cdsb.net

@CDSBGlobal

Climate Disclosure Standards Board

facebook.com/CDSBGlobal

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