Carbon reporting for LATCOs
Carbon reporting is not new, and its not just a LATCO requirement. However, what makes this topical is the increased focus on climate change and the expectations from a wide range of stakeholders to see these disclosures in the accounts. There are numerous voluntary frameworks on climate reporting. The most prominent of these initiatives is […]
Carbon reporting is not new, and its not just a LATCO requirement. However, what makes this topical is the increased focus on climate change and the expectations from a wide range of stakeholders to see these disclosures in the accounts.
There are numerous voluntary frameworks on climate reporting. The most prominent of these initiatives is the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
It is therefore worth being aware of the mandatory current disclosure requirements even if your organisation is currently not required to report.
For reporting periods starting on or after 1 April 2019, large companies, quoted companies, and large LLPs, who have consumed, more than 40,000 kilowatt-hours (kWh) of energy in their reporting period were required to comply with streamlined carbon and energy reporting requirements (SECR).
The 2018 Regulations require large unquoted companies to include energy and carbon information within their directors’ report, for any period beginning on or after 1 April 2018. For LLPs, the associated disclosures must be included in a new Carbon and Energy report which will form part of the annual report.
Is my LATCO large?
The requirements at this stage only relate to quoted entities or ones defined under the Companies Act as large.
The current size limits are:
Turnover of more than £36m, Balance sheet total of more than £18m, More than 250 employees
Those that meet at least two of these criteria qualify as large.
The criteria need to be met for two consecutive years, except for a LATCO in its first year of incorporation, which only needs to meet the criteria in that incorporation year.
Note that any ‘other income’ (such as rental income and other gains) is not included in turnover for this purpose.
Another common mistake is to use the net asset position for the balance sheet test. It is important to note that the balance sheet total is the total of all assets in the balance sheet without any deductions.
In calculating the average employees, this is not the number of full-time equivalents or similar. Companies Act 2006 does not differentiate between part- or full-time employees.
This means any part-time employees are given the same weighting as if they were full-time.
How to calculate?
The Gov.UK website has several pages of useful guidance in this area to help you calculate the required disclosures.
- Guidance on how to measure and report your greenhouse gas emission
- Small business user guide: Guidance on how to measure and report your greenhouse gas emissions
- Greenhouse gas reporting: conversion factors 2021
In addition to the climate-related disclosures, all companies need to ensure that they have assessed the current or future impacts of climate change and these are reflected appropriately in their financial statements. Examples would include the valuation of assets, and the assumptions used in impairment testing and depreciation rates.
SECR is part of the governments drive to reach net zero and reporting is a way to get companies thinking about their energy and carbon in a similar way that they do their finances.
SECR disclosures gives prospective customers or investors a new tool with which to evaluate companies and for this reason many eco-friendly companies have chosen to disclose voluntarily in their accounts and/or on their website. Others have chosen to disclose simply because they feel it’s the right thing to do.
Whatever your thoughts on this increased disclosure, It is expected that the disclosure requirements going forward are only set to increase for all companies.